Business process outsourcing
THE CONCEPT of business process outsourcing (BPO) is one that continually ranks high on the list of “hot trends for the near future”.
BPO involves a company finding an external supplier and letting it take control of a key function previously handled inside the organisation. The idea is that certain tasks within any company add no value, they are simply there because they always have been.
A typical example is payroll. While it’s vital that people are paid and taxes deducted, the department doesn’t generate money for the company.
A BPO service provider would focus on, in this case, providing pay- roll services and, by using the same infrastructure and systems to service multiple companies, it can create economies of scale to do the job cheaper than any company could do it itself.
Payroll is one example but the benefits of BPO can apply to other areas, including human resources, call centres and IT help desks.
This enables companies to pay for services they use without worrying about additional capacity when times are good or cutting back when times are bad.
The extreme of this concept is that a manufacturer could retain its sales, research & development and marketing teams but outsource all other aspects of the business to partners scattered across the world. This is made possible by the proliferation of high-speed data networks that allow a call centre agent in India to appear as though he’s sitting in Dallas, Texas.
One risk of this strategy is that by fragmenting the organisation, senior management has to spend more time managing the BPO service providers, which could detract from its focus on delivering value to the business.