Business process outsourcing (BPO) is a strategic initiative undertaken by businesses to contract out their non-core or back office activities to third party providers with the goals of reducing costs and freeing up core employees to focus more on revenue-generating or mission-critical activities.
BPO can encompass almost any business process, from finance, accounting, order entry, call centre to HR, hospitality and IT services. BPO is not just for large organisations; it also benefits SMEs and organisations looking for process efficiencies, giving them access to expertise and resources they may not be able to afford to maintain in-house.
BPO can be conducted on an on-site, off-site/onshore or off-site/offshore basis, depending on the type and scope of the activity being outsourced.
Business Process Outsourcing
BPO can replace any activity that requires manual human intervention and is ideal for outsourcing non-core business processes such as payroll, data entry, and mailroom services.
While these tasks are essential for an organisation, they do not generate revenue. Outsourcing them to a third party that can perform them at a lower cost saves money, in addition to freeing up internal resources for other priorities and increasing operational capacity for core business processes.
Existing under the broader umbrella of business process outsourcing is managed services, a subset of BPO that involves the outsourcing of services, rather than tasks. A managed services model can be used to support areas such as internal logistics, business infrastructure, and executive hospitality.
Common services that can be outsourced include;
- Corporate services, including mailroom and courier services, print room, and process exception management.
- Executive hospitality services, which may involve assisting business partners, prospective clients and other visitors to the company’s premises through tasks such as reception, front of house services, concierge, and catering.
- Records management, including maintaining and managing electronic and hard copy document records, digitising records, and reviewing records to retain for legal compliance.
- Supply chain management, which may involve taking care of procurement and managing an organisation’s supply chain, including testing suppliers, identifying alternative purchasing options, conducting ongoing monitoring, and delivering regular reports.
Managed services are often undertaken in conjunction with digital transformation, digitisation, and automation (including robotic process automation, or “RPA”) initiatives. A strategic managed services partner like Converga will use both quantitative and qualitative data to identify business efficiency opportunities and develop appropriate implementation plans.
Broadly speaking, taking advantage of managed services allows businesses to:
- Reduce the costs of non-revenue generating activities
- Leverage expertise and infrastructure without the associated overheads
- Free up employees to concentrate on core activities
- Outsource the management and risk of an operation through SLAs
The managed services section above touched on outsourced document services in the context of records management. However, several other opportunities exist in this realm, including:
- Digital mailroom – a digital mailroom service involves digitising all mail that arrives to a business’ PO box and sending it through to the business as a digital record and in a specific workflow system.
- Document processing – improve your process efficiency with a document processing solution. This service includes form automation using Intelligent Document Recognition (IDR) software, Optical Character Recognition (OCR), application processing, high volume scanning, and more.
- Information management – without an information management system, you would not be able to take full advantage of the other document services offered. Information management allows you to securely store your documents in any format, and ensures searchability of those documents.
- Workflow and exception management – this type of workflow management would include the flow of information and tasks that aligns with your digital mailroom, document processing and other business rules.
Document services are essential for any business that relies greatly on documentation to inform and drive their business forward, such as insurance companies (eg the processing of policy documents, forms, etc), government services (which require detailed records to ensure transparency and accountability), the healthcare sector (patient records) etc.
Organisations with substantial accounting requirements may benefit from outsourcing invoicing, accounts payable, and accounts receivable functions.
Take the example of PlaceMakers, New Zealand’s largest supplier of building materials and hardware. Because the company receives more than 100,000 invoices each month on average, it initially required a team of 15 people to spend their days opening mail, checking invoices and manually keying in data.
By implementing a Procure 2 Pay solution involving a private inbox, mail scanning and automated matching by header, purchase order number, and line item, the team was able to reduce full-time staff and free up employee time for additional responsibilities. Accuracy and visibility also improved, driving immediate operational cost-savings with minimal CAPEX required.
Organisations desiring even greater savings on their non-core processes may consider outsourcing them, not just to an outside provider, but to one that offers offshore sourcing capabilities with favorable exchange rates. Countries such as the Philippines, India, South Africa and Fiji all have well educated, English-speaking workforces that can provide BPO services without the high labour costs.
As an example, the workforce in the Philippines – where Converga’s offshore operations are based – is 98% tertiary qualified. This is dramatically better than the market average of 30%. As the 3rd largest English speaking country in the world it is also the #1 destination for offshoring voice services.
Companies seeking to take advantage of these benefits have two options: they can set up their own operations, or they can work with established offshore providers. Hosting their own operations may offer more control, but it can also involve significant overhead costs associated with building out a local office, hiring and training local talent, providing local management, and paying not just salaries, but ancillary benefits as well.
Working with an established offshoring partner like Converga allows companies to take advantage of the provider’s existing facilities, management, infrastructure and talent capabilities. Offshoring offers the further benefits of round-the-clock productivity – thanks to differing time zones – and the opportunity for brand expansion, if the country being outsourced to is within the organisation’s target market.
The risks associated with offshoring, such as data security, quality control and cultural differences, can be successfully managed through SLAs, KPIs, and contractual agreements. Ensuring standards are met, however, requires choosing an overseas provider with a demonstrated track record of service quality, as well as strong local management that is able to make sure SLAs are being met.
Robotics Process Automation (RPA)
One final opportunity worth considering is robotics process automation (RPA), a digital enablement technology that mimics the operations of an actual user on their computer through the creation of scripts that automate routine, predictable data entry and manipulation work.
It might be seen that RPA competes with BPO, however we view it is as a type of BPO, in that both aim to minimise the burden of organisations’ manual workflow needs. But when implemented thoughtfully with the assistance of a good vendor, BPO and RPA can work hand-in-hand to maximise business process efficiencies by combining the best elements of people, processes and technologies.
Although BPO traditionally looks at how to optimise task performance through the use of human talent, adding RPA to the mix allows organisations to choose the right combination of processes and solutions for their needs. In support of this pursuit, RPA can be implemented in one of two ways:
- An ‘attended’ basis, through which RPA robots are able to complete tasks up to a certain stage before human intervention is required
- An ‘unattended’ basis, which involve predictable, repetitive processes that do not require human intervention.
RPA can be used to replace some or all of an organisation’s basic manual tasks, including data input, capture, and manipulation. It can complete those tasks faster, more accurately than human workers, and on a potentially endless basis, saving on wages and operational costs. RPA tools are also scalable to suit business needs and leave clear audit trails that can be easily monitored.
Examples of common RPA processes include logging into applications, extracting data, crawling websites, moving files, and copying, compiling, editing, and pasting data. RPA can be used in many processes across industries, including payroll functions, invoicing, accounting processes, payments, and claims procedures.
The Strategic Value of BPO
Business process outsourcing is not an up-and-coming trend. High-performing organisations of all sizes are already embracing the opportunity BPO provides to focus internal resources on sustaining and expanding a competitive advantage, rather than being slowed down by business operations.
Provided you carefully vet prospective providers, your organisation can use business process outsourcing to free up internal resources, increase competitiveness and productivity, and make steady increases in revenue and profits.