In a world where the economy is constantly changing, many companies are now looking for ways to cut costs and improve efficiency. As such, this is the sole reason why they often outsource various business processes to third-party service providers, commonly known as Business Process Outsourcing or BPO, for short.
A global report stated that with a total value of $245.72 billion in 2021, the BPO market is increasing at a steady rate. Furthermore, with the growing adoption of the key players’ strategies, it is expected to rise over the projected horizon of an 8.3% compound annual growth rate (CAGR) by 2027. The surge is a logical consequence of businesses tapping the avalanche of successful BPO Outsourcing and its benefits, like IT Outsourcing and work-life balance.
Considering how BPO can help your business maximize growth and expand across specific horizontal and vertical markets, it is crucial to know the different types of BPO services and what outsourcing partner best fits your business. So, how do you know which one is right for you? Do not fret! We’ll run through it one by one, so let’s get started.
The Two Categories of BPO
But first, there are two categorizations of BPO types—location-based and service-based.
Let’s delve into the details of each type to understand better and get the most out of a potential outsourcing partnership for your business.
Types of BPO
1. Location-Based Outsourcing
Offshore BPO
Offshore is the most common type of business process outsourcing. It involves contracting a company’s non-core functions to an external service provider in a different country.
Among all its benefits, affordability is the biggest plus of offshore. Partnering with an offshore BPO can reduce companies’ operating costs by up to 50%. This is because labour rates in countries like the Philippines are much lower than in North America and Europe. In addition, many offshore providers offer a menu of services that can help businesses streamline and automate their operations, which further reduces costs.
Offshore BPO providers also have the latest technology and tools and highly skilled professionals who can help you improve the quality of your products or services. Doing so can free up your team to focus on more critical tasks and thus, improve the overall efficiency.
Nearshore BPO
Unlike offshoring, nearshore outsourcing entails utilizing the services of a BPO provider close to your own in the same country or region. For instance, a company in the United States may collaborate with a supplier based in Colombia or another Central American nation.
Some of its advantages include the proximity factor. By locating near your target market, you eliminate or at least minimize the need for expensive long-distance communication and logistics. It helps reduce turnaround times and increase customer satisfaction rates.
Nearshore providers also share your cultural values and business practices, making establishing trust and rapport easier. Additionally, they have firsthand experience with the local market, so they understand the unique challenges and opportunities.
Cost is another significant advantage of Nearshore BPO. In most cases, it’s more affordable to outsource services to an organization in the same time zone than to send work offshore.
Onshore / Domestic BPO
Onshore is a type of BPO in which you hire a service provider based in the same country as your business. Some companies use it to provide services close to the consumer, while others use it to provide a more personal touch with their customers.
A shared language and culture is an advantage of domestic BPO. It is often a good choice for companies seeking top-notch customer service. Callers are apt to have a better experience when communicating with someone who naturally understands their language and culture. Thus, it results in increased satisfaction levels among customers.
Local BPO
A local BPO is a business process outsourcing that is based in the same city as its clients or a short drive away. This type of BPO provides services such as customer service, telemarketing, data entry, and other back-office functions. Local BPOs are often used by small and medium-sized businesses that do not have the internal resources to handle these functions themselves. It can also be more expensive than its offshore counterparts, but many businesses feel that the extra cost is worth it for the peace of mind and improved communication that comes with working with a local company. Moreover, being close to your place of work means you can quickly drop in for site visits to monitor the quality of output firsthand.
2. Service-Based Outsourcing
ITES (Information Technology Enabled Services)
ITES outsourcing is a BPO that delivers services remotely through information and communication technologies. Some examples of ITES are data entry, document management, customer support, technical assistance and help desk systems.
It also allows even small companies to have access to cutting-edge technological tools and systems and enjoy its advanced benefits without the need to invest a large amount of capital.
KPO (Knowledge Process Outsourcing)
KPO is a type of BPO where a hired partner outsources knowledge-based activities. Its services include research, analysis and development, content design, process improvement, and more.
Most companies use KPO to gain advanced expertise on complex business processes. As a result, it tends to be more pricey than the standard BPOs, but rest assured that you only pay what you receive without sacrificing the quality of KPO experts working for your business.
LPO (Legal Process Outsourcing)
LPO outsourcing is when a BPO provides support to law firms and corporate legal departments by performing some or all of the services: legal research, contract review, due diligence, intellectual property (IP) management, and litigation support.
Working in a legal setting needs careful consideration because even a little margin of error can cause enormous consequences. Outsourced legal processes are also less likely to delay or omit important information from the paperwork you must file to get a case moving forward. And that is why many businesses resort to an LPO for their legal work.
RPO (Recruitment Process Outsourcing)
RPO Outsourcing is a BPO where RPO providers have the resources and expertise to find the best candidates for your company quickly and efficiently. In addition, they have access to a large pool of talent, which can help you find the perfect candidate for your job opening.
Their service can help improve your hiring process, develop job descriptions, identify key qualifications, and create screening criteria. Partnering with a capable RPO partner can strengthen your business’ workforce with qualified candidates.
Conclusion
How to pinpoint the best BPO service for your business? Well, there are many benefits when partnering with a business process outsourcing (BPO) provider. And to maximize the potential of such a partnership, it needs double effort to understand which type of provider best suits your needs and budget. For example, do you need customer support, data entry, or both? Once you know what services you need, you can start narrowing down your options. Of course, it will depend on your business’s specific context and clientele. Similarly, the type of service required, whether process outsourcing (LPO), ITES or something else, can vary depending on different contexts.
However, when looking for a business partner that provides BPO services, it is essential to find the perfect one. More than the commendable services and convenient location, the ideal partner should have relevant industry experience and be focused on your best interests.
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