Business Process Outsourcing

According to a study by the Information Services Group (ISG) the demand of outsourcing of IT systems and business processes in medium-sized companies has been increasing. Frequently outsourced services are usually:

  • Finance and accounting
  • Payroll
  • Recruiting
  • Company pension
  • IT

What is BPO?

But what exactly is Business Process Outsourcing (BPO) and where is the difference between BPO and common outsourcing?

BPO describes the externalization of business processes. In contrast to common outsourcing which focuses on supportive processes, BPO means outsourcing primary value chains. BPO has two main characteristics:

  • The BPO service providers oriented towards strategic goals of their customer.
  • Services are customized and good business relationships are a priority (“one-to-one approach”).

Advantages

There are several reasons in favor of BPO, for example:

  • Focus on core activities
  • Save costs
  • Increase quality
  • Access to specialized knowledge
  • External innovation impulses
  • Transfer of business risks to a BPO service provider

Disadvantages

Even though there is a possibility of saving money, sometimes BPO is not worth it because of:

  • Dependence on outsourcing partners
  • Loss of control due to shifting of business processes to external parties
  • 50% of IT projects fail
  • Project selection, project management and project monitoring are ineffective

In general, standardized processes which are the same or at least very similar in every company qualify well for outsourcing.

 

3 Types of BPO:

There are three types of Business Process Outsourcing:

Internal: Shared Service Center (SCC)

The SCC is an in-house company representing the interface between different departments providing services for all of them. Usually, a SSC operates autonomously.

Internal-external: Joint Venture between a company and a service provider

A Joint Venture is a cooperation between a company and a BPO service provider. Both parties contribute with their corresponding competencies which in the best case are complementary. Due to the lack of clear areas of responsibility there is a risk of both companies blaming each other for mistakes.

External: Complete outsourcing

The company hands over full control and responsibility to a service provider. On the one hand, a lot of the above-mentioned advantages are possible, on the other hand, several risks and dependence on the service provider may emerge.

How to outsource successfully

In order to outsource successfully, a company should know/have:

  • The market and its costs and quality
  • Expertise in negotiation in order to determine requirements, evaluations and elaboration of proposals
  • Good judgement about the provider’s quality

 

Especially in a foreign country BPO often represents an easy way to comply with local norms and legislation without expensive training. WMP Mexico Advisors is your local BPO partner and takes care of your:

  • Accounting
  • Reporting & Controlling
  • Payroll
  • Fiduciary Company Management
  • IT Support

Our partner Acensblue is happy to help you with recruiting and HR questions.