what is bpo in it industry

What Is BPO In IT?

Business process outsourcing is common in most industries, but it goes into another realm of seriousness when we relate it to the IT industry.

IT outsourcing is a bit more tricky and sensitive because the operations being outsourced usually have something to do with the company’s core competencies and/or intellectual property.

When these two factors are involved, the risks of an IT outsourcing project usually go up.

Even so, BPO remains common in IT.

IT companies are not machines — they cannot do everything themselves. They need to focus on their strengths, which is why many IT companies choose to outsource some of their business processes.

In this article, we will discuss BPO in IT in further detail, as well as highlight some benefits and risks associated with it.

We will also cover certain situations where BPO in IT might be a good idea, and other situations where it might prove to do more harm than good.

Let’s get started!

What is BPO in IT?

BPO in IT stands for business process outsourcing in the information technology industry. Simply put, it is the contracting of non-core or ancillary business processes to a third-party service provider.

​​The main reason why companies outsource any business process is to focus on their core competencies while delegating the non-core processes to someone else.

This allows businesses to cut costs while still maintaining (or even improving) quality and efficiency.

However, as we mentioned earlier, outsourcing IT processes can be more complicated than other types of outsourcing. This is because the outsourced processes are usually related to the company’s core competencies and intellectual property.

When these two factors are involved, there is a greater chance that something could go wrong. As such, businesses need to be extra careful when choosing to outsource their IT processes.

The most common examples of BPO in IT are help desk support, application development and maintenance, data center operations, and network operations.

These processes are usually outsourced to countries with lower labor costs, such as India or the Philippines.

Types of BPO in IT

There are two types of BPO in IT: onshore and offshore.

Onshore outsourcing is when a company outsources its IT processes to another company within the same country.

This type of outsourcing is more expensive because labor costs are usually higher. However, it is often seen as less risky because both companies are located in the same country and share the same culture and business practices.

Offshore outsourcing is when a company outsources its IT processes to another company in a different country.

This type of outsourcing is usually cheaper because labor costs are lower in countries such as the ones we mentioned previously, like the Philippines. However, it is often seen as more risky because of the cultural and language barriers that exist between the two companies.

The type of business process outsourcing you want to do will depend on your firm’s propensity for risk and your budget.

person using mouse on computer

5 Benefits of BPO in the IT industry

There are many benefits that come with outsourcing IT processes. Let’s take a detailed look at some of the most notable ones:

1. Improved Efficiency and Quality

When done correctly, outsourcing can lead to improved efficiency and quality. This is because you are delegating the process to experts who are focused on getting the job done right. After all, why would you want to outsource a process if the quality would be worse?

2. Cost Savings

This is one of the most common reasons why businesses choose to outsource any business process — not just IT. By outsourcing, businesses can save on costs such as labor, benefits, and overhead expenses.

3. Access to Expert Resources

When you outsource IT processes, you are essentially gaining access to expert resources that you might not have otherwise had. This is especially beneficial for small businesses that might not have the budget to hire full-time IT staff.

4. Increased Focus on Core Competencies

As we mentioned earlier, one of the main reasons why businesses outsource is to focus on their core competencies.

When you outsource non-core processes, you are free to focus your attention on the areas of your business that matter most. Multitasking is seldom a healthy habit, and outsourcing prevents it from negatively impacting your employees’ productivity.

5. Improved Customer Service

Another common benefit of outsourcing is improved customer service. This is because the company can now focus on providing a better experience for its customers, instead of worrying about the technical aspects of its operations.

customer service agent answering call

5 Risks of BPO in the IT Industry

Here are 5 detailed risks of BPO in the IT industry that businesses should be aware of:

1. Security and Compliance Risks

When you outsource your IT processes, you are essentially giving a third-party access to your company’s most sensitive data. This includes confidential customer information, financial records, and more.

As such, it is important to make sure that the service provider you choose is reliable and has robust security measures in place to protect your data.

2. Loss of Control

When you outsource your IT processes, you are also giving up a certain degree of control over those processes.

This can be problematic if the service provider is not meeting your expectations or if they make a mistake that affects your business.

3. Communication Difficulties

Miscommunication is always a risk when working with any third-party, but it can be especially problematic when outsourcing IT processes.

This is because IT is a complex industry with its own jargon and technicalities. As such, there is a greater chance for things to be lost in translation, which can lead to problems down the line.

4. Cultural Differences

When outsourcing IT processes to another country, cultural differences can also be a source of difficulty and misunderstanding.

For example, what might be considered acceptable customer service in one culture might not be seen as such in another. This can lead to frustration on both sides and ultimately impact the quality of the services being provided.

This is especially relevant in the IT industry where the work tends to be very complicated, so effective communication without culture clashes is a necessity.

5. Dependency Risks

When you outsource your IT processes, you are also creating a dependency on the service provider.

This means that if they were to experience any type of problems (e.g., financial difficulties, technical issues, etc.), it would likely have an impact on your business as well.

3 Situations Where BPO can Benefit Your IT Company

Here are 3 simple situations highlighting when BPO can prove to be an asset to your IT company:

1. When your IT Company is Expanding Rapidly

If your IT company is growing quickly, you might not have the time or resources to keep up with the demand.

In this case, it would make sense to outsource some of your business processes so that you can focus on the more important tasks.

2. When you Need to Free up Internal Resources

If you have too many employees working on non-core tasks, it might be a good idea to outsource those tasks to a third-party provider. This way, you can free up your internal resources and have them focus on more important projects.

3. When you Need to Improve Efficiency or Quality

If your IT company is not as efficient or effective as you would like, outsourcing some of your business processes could help you achieve these goals.

This is because third-party providers are usually specialized in the outsourced process and can provide better quality and efficiency than your in-house team.

old man teaching young lady on laptop

3 Situations Where BPO can Hurt Your IT Company

There are certain situations where BPO can actually do more harm than good for your IT company. Let’s take a look at three of them now:

1. When Working With Sensitive Data

If your company works with sensitive data, it is important to make sure that the third-party service provider you are working with has strict security measures in place.

There have been many instances where companies have outsourced their IT processes, only to have their data leaked or stolen by the service provider.

This can obviously be a nightmare for any business, which is why it is important to do your research and due diligence when choosing a service provider.

2. When the Process is too Complex:

There are some IT processes that are just too complex to be outsourced. If a process is too complicated, it might be best to keep it in-house so that you can have more control over it.

The last thing you want is for something to go wrong because the service provider did not understand the complexities of the process.

This could end up costing your company a lot of money, so it is important to weigh the risks and benefits before making a decision.

3. When Quality is More Important Than Cost

In some cases, the quality of the service is more important than the cost savings. For example, if you are outsourcing your customer support, you will want to make sure that the service provider is able to provide excellent customer service.

The last thing you want is for your customers to be unhappy with the level of service they are receiving. In this case, it might be worth it to pay a bit more for a service provider that can guarantee quality.

2 hands holding one dollar bill

The Bottom Line

It’s clear to see that BPO can be a very useful tool to use in the IT industry, especially in today’s world where remote working is more normal than ever.

Have a browse at some of the benefits and risks associated with BPO in IT, and consider whether it might be the right option for you.