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Business process outsourcing (BPO) has taken the world by storm. Valued at over $232 billion in 2020, the BPO market is expected to further rise at an eye-popping 8.5% compound annual growth rate (CAGR) between 2021 and 2028!
This growth may seem incredible—and it is—but it’s the logical consequence of businesses discovering the many benefits of successful BPO outsourcing. For example, outsourcing allows companies to reduce costs by cutting down on in-house labor, training, and office space. Outsourcing also increases productivity by enabling a company to focus on core business processes. BPO teams achieve better non-core results than in-house teams due to their access to consistently up-to-date technology and teams of veteran professionals across various functions.
To stay competitive in the modern business environment, it’s important to consider how BPO can help your business maximize growth. As such, you need to know what kind of outsourcing partners are out there, so you can choose the best fit for you.
The Two Categories of BPO
There are two ways to categorize types of BPO—according to location-based or service-based. To get the most out of a potential outsourcing partnership, it’s important to understand the details of each service type so you can choose which is best suited for your business.
Location-Based Outsourcing
BPOs fall into one of the following four different types based on location. Each has its own set of pros and cons and is appropriate for different business needs.
Offshore BPO
This is the most common type of business process outsourcing. Simply put, it involves one company outsourcing non-core functions to a BPO partner in a distant country.
The biggest plus of outsourcing to an offshore partner is affordability, as the difference in BPO costs between highly developed and developing countries can be drastic. In some cases, costs for a service might be less than half of what you’d pay in a country like the U.S.
These savings mean that you can afford a wider range of services. The cost for a barebones service in a developed nation might be enough to afford a selection of services with an offshore BPO partner instead. These services then provide even more value for your company, allowing you to get more bang for your buck.
Additionally, working with a partner in a different country may de facto include multilanguage support. This is because customer service representatives in offshore BPO companies are often at least bilingual.
However, similar language barriers can prove one of the biggest problems for an offshore BPO as well. Although most customer service representatives can speak English, not all can do so conversationally. This means that in some situations, they can be uncomfortable deviating from a script. And even if a representative is fluent in English, their accents can make them difficult to understand for some, frustrating callers.
Similarly, cultural differences can be another concern with offshore BPO providers. Agents may not be able to fully understand the unique situation of callers from a different culture. Naturally, this often makes problem-solving difficult.
Security concerns may arise with offshore outsourcing partners because of regulation differences between countries. Naturally, you have decreased control over your business with an offshore partner. This is due to the obvious difficulty in physically visiting the site, meeting your team, and providing direction. Offshore partners may follow different protocols, effectively splitting your operations in two.
Nearshore BPO
In contrast to offshoring, nearshore outsourcing entails partnering with a BPO provider located in a country close to yours. For example, a company based in the US might work with a provider based in Mexico or Central America. While this mitigates some of the problems of offshore outsourcing, nearshore BPO still shares many of these issues to a lesser degree.
Due to proximity, customer service agents in nearshore BPOs may already speak your local language. This means they can engage customers conversationally and go off-script when needed. Nearshore BPO agents are also more likely to understand the culture of your home country. This allows them to connect more emphatically with customers compared to an offshore BPO.
While usually not as cheap as offshore, nearshore outsourcing is still relatively affordable compared to its onshore counterpart. Similar to offshore BPO, nearshore allows you enough financial wiggle room to avail of additional services such as 24/7 and multilingual support.
However, culture and language differences in neighboring countries can still prove an obstacle in certain situations. The issue of security is still significant in nearshore BPO as well, as different countries may have drastically different security regulations.
Onshore/Domestic BPO
Domestic BPO, also referred to as onshore BPO, is when you hire a company based in the same country where you do business. This often means that both companies operate in similar time zones, and are located relatively close to each other.
A shared culture and language is an advantage of domestic BPO that cannot be emphasized enough. This type of BPO is often a good choice for companies seeking to provide top-notch service to their customers. Callers tend to have a better experience when talking to someone who naturally understands their language and culture. This results in increased customer satisfaction.
Similarly, increased data security is a feature of domestic BPOs that nearshore and offshore struggle to match. Partners in your country of business are governed by the same security laws as your own company. As such, they will be familiar with what security protocols and technologies work best to keep your information secure. Developed countries also tend to have tight cybersecurity regulations that all businesses must follow.
Of course, the most obvious drawback of domestic BPO is its high cost. It's simply more expensive to do business in developed nations such as the US. While the quality of work and customer satisfaction may increase, you’ll have to pay a premium for it. This increased cost will also limit the selection of services available to you. The price of 24/7 availability, multilingual agents, and technical support in an offshore BPO may only equal the most basic of services in a domestic one. However, it’s worth noting that you may enjoy savings over time with domestic BPOs, due to the increased efficiency and customer satisfaction.
Local BPO
A local BPO provider is located within your city or within driving distance. If the price was not a factor, this would be the ideal choice, as local BPO allows for maximum control over your business. The proximity to your place of work allows you to readily engage during site visits. This means you directly can monitor the quality of output.
Working relationships are important in business. Local BPO providers allow you to build a personal connection with your partners. This allows for easier communication and a more harmonious work environment. Likewise, local BPO allows for a higher degree of efficiency due to proximity, similar time zones, and physical visits. This allows for fast scaling, planning, and troubleshooting.
However, the drawback of working with a local BPO is that you can be constrained by the limited number of providers and services. It’s possible you may not be able to find a BPO partner with the exact service you need within the accessible range. Local and onshore BPOs can also have prohibitive pricing, due to high labor wages in the country of business.
Service-Based Outsourcing
Business process outsourcing can also be categorized according to the type of service provided. Some partners may offer more than one of these services, while others are specialists in a single type. The following are some common examples of BPOs based on service:
ITES (Information Technology Enabled Services)
ITES is a type of outsourcing that handles IT-related solutions remotely. Some examples of ITES include technical support, document processing, and help desk systems. IT support is a commonly outsourced business function, as it’s one of the most critical non-core processes in a company.
ITES is ideal for outsourcing because by working with a BPO partner, a business can have access to cutting-edge technological tools such as cost-effective storage, contingency plan services, and high-level security. This enables even small companies to enjoy the benefits of advanced tools and systems without a large capital investment.
KPO (Knowledge Process Outsourcing)
Knowledge process outsourcing is a type of BPO that involves hiring a partner to provide advanced expertise on complex business processes. These processes are often high-level functions that fall outside regular BPO services. For example, think research and development, biotechnology, content design, and insurance market services.
While KPO tends to be more expensive than its more standard BPO counterparts, you can count on a good partner to provide you with value. Keeping an in-house team of experts for these functions can be extremely expensive, especially as you may not need them every day. Outsourcing these functions allows you to pay only for what you get, saving money while still having experts working for your business.
LPO (Legal Process Outsourcing)
Legal process outsourcing is when a BPO offers legal services to clients. The responsibilities handled by an LPO can include legal research, licensing, patent applications, legal advice, and drafting of legal documents.
Legal work is often tedious and exacting with little margin for error, as any mistake can have large consequences. As such, many businesses avail of the benefits of outsourcing their legal work to an LPO partner instead of keeping a legal team in-house. This ensures that costs stay low while still ensuring an expert team complete with quality assurance systems and up-to-date research and technology.
RPO (Recruitment Process Outsourcing)
An RPO provider allows a company to transfer all or a part of its recruitment process to an expert partner. These processes include candidate vetting, training, quality assurance, and post-hire processing. This is a great process to outsource, as ideally, you should not need to constantly be hiring—thus, you don’t always need a recruiter on staff. However, when one does, it’s crucial to have one who knows what they’re doing.
By working with a capable RPO partner, your business can strengthen its workforce with qualified candidates, boost employee satisfaction, and have increased retention as all hires will have been properly vetted.
Maximize Your Growth Potential With BPO Outsourcing
To get the most out of a BPO partnership, it’s important to understand what type of provider you need. Determining if you need an offshore or onshore provider will depend on your business’s unique context and clientele. Similarly, what type of service you will need, whether it’s LPO, ITES, or something else, can change depending on different contexts.
However, whatever type of BPO you need, you need to make sure you find the right partner. Beyond the appropriate services offered and location of the business, the right partner should also have experience in the industry and your best interests at heart. Those core values are professionalism and concern are why Helpware has been able to grow to become an international BPO provider with locations across eight continents since 2015. Along the way, Helpware has picked up dozens of service quality awards. Whether you require an on- or offshore solution across a range of services such as back-office support, AI operations, and start-up acceleration, Helpware’s people-first approach is here to help partners achieve their goals.
If you want to see how Helpware can help you, get in touch now!
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