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Business

What is BPO in the IT Industry?

Cassio Sagawa
July 17, 2022
11 minutes to read

As today’s marketplace continues to move online and into cloud-based infrastructures, the role of the IT industry has shifted from that of pure technology service to one that is now expected to offer innovative solutions and business process outsourcing (BPO) services.

Businesses are expecting more from their IT providers, and IT providers are responding by offering services that go beyond traditional delivery models.

The term BPO in the IT industry typically refers to the outsourcing of non-core business processes such as human resources, finance and accounting, customer relationship management (CRM), and supply chain management.

By outsourcing these processes, businesses can focus on their core competencies while still benefiting from the efficiency and cost savings that come from working with an external service provider.

But what exactly is BPO, and where does it come from? In this article, we will explore:

Grab a chair, pour a coffee, and let’s dive in!

What is BPO?

Put simply, business process outsourcing (BPO) is the contracting of a business process to an external service provider. The service provider then becomes responsible for delivering the contracted services, freeing up the business’s internal resources to focus on other areas.

BPO has its origins in the manufacturing industry, where businesses began outsourcing production processes to third-party manufacturers to focus on their core competencies and be more agile in the marketplace.

The concept was later applied to non-manufacturing processes such as human resources and accounting and has since been adopted by businesses in a variety of industries including IT, healthcare, banking, and insurance.

Partial Outsourcing

BPO can be either partial or full outsourcing.

In partial outsourcing, the service provider is responsible for delivering some but not all of the contracted services. This is also known as “selective outsourcing”. An example of this would be if a business outsourced its payroll processing but continued to handle employee benefits internally.

Full Outsourcing

In full outsourcing, the service provider is responsible for delivering all of the contracted services. This is also known as “comprehensive outsourcing”. An example of this would be if a business outsourced its entire human resources function, including payroll processing and employee benefits.

The type of BPO arrangement that is right for your business will depend on several factors such as the size of your business, the nature of the services being outsourced, and your internal capabilities.

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LPO vs KPO vs RPO

There are also several subdivisions of BPO, regularly referred to as

  • LPO: Legal process outsourcing
  • KPO: Knowledge process outsourcing
  • RPO: Recruitment process outsourcing

LPO involves the outsourcing of legal processes such as document review, contract drafting, and litigation support.

KPO is a type of BPO that involves the outsourcing of knowledge-based processes such as market research, business intelligence, and software development.

RPO is a type of BPO that involves the outsourcing of recruitment processes such as onboarding, candidate screening, background checks, and interview scheduling.

What are the benefits of BPO?

While there are countless potential benefits of using BPO in business, some of the most common are:

  • Improved efficiency: When businesses outsource their non-core processes, they can focus on their core competencies and the things that they do best. This allows them to operate more efficiently and effectively.
  • Reduced costs: One of the main reasons businesses opt for BPO is to save money. By outsourcing certain processes, businesses can benefit from economies of scale and lower labor costs. In addition, service providers often have access to the latest technology and best practices, which can further drive down costs.
  • Improved quality: When done right, BPO can lead to improved quality of service. This is because service providers are typically specialists in their field and have the resources and expertise to deliver high-quality services.
  • Faster turnaround times: Service providers that specialize in BPO are often able to deliver faster turnaround times than businesses that try to handle everything internally. This is because they have streamlined processes and access to the latest technology.
  • Greater flexibility: BPO can give businesses greater flexibility by allowing them to scale up or down as needed. This can be particularly helpful for businesses that experience seasonal fluctuations in demand.

This is by no means an exhaustive list but does explain some of the reasons why so many more businesses are starting to explore the idea of BPO for their non-core processes. By 2019, the global market of outsourced services had grown to $92.5 billion.

What are the challenges faced when delivering BPO services?

While BPO can offer several benefits to businesses, some challenges need to be considered. These include:

  • Language barriers: One of the biggest challenges faced by service providers is the language barrier. This can be a challenge when dealing with customers from different countries or regions.
  • Cultural differences: Another challenge that can arise is cultural differences. This can make it difficult to understand customer needs and expectations.
  • Time zone differences: Time zone differences can also be an issue, as it can be difficult to coordinate with customers in different time zones.
  • Technology infrastructure: Service providers need to have a robust technology infrastructure in place to deliver BPO services. This includes things like customer relationship management (CRM) systems, enterprise resource planning (ERP) systems, and communication tools.
  • Data security: Data security is a major concern for businesses when outsourcing their processes. Service providers need to have strong data security measures in place to protect customer data.

As you can see, some of these would directly correlate between IT and BPO, meaning it can be difficult to implement at times. To understand how to combat some of these challenges, let’s take a closer look at how BPO is used in the IT industry.

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How is BPO used in the IT industry?

Unlike the manufacturing industry, where BPO first grew in popularity, the IT industry has been slower to adopt this model of working. This is likely because, until recently, most businesses saw IT as a cost center and not a revenue generator.

However, with the rise of digital transformation and the need for businesses to move online, the role of IT has shifted. No longer is it expected to just deliver technology services, but now IT is expected to be a strategic partner that can help businesses drive revenue and growth.

This has led to the rise of IT-BPO or the outsourcing of business processes within the IT industry. By partnering with an external service provider, businesses can focus on their core competencies while still benefiting from the efficiency and cost savings that come with working with an expert team.

There are many different types of BPO services that can be outsourced, but some of the most common include:

  • Help desk support: This is the most basic level of support and typically includes tasks such as password reset, account creation, and troubleshooting.
  • IT infrastructure management: This includes managing an organization’s IT infrastructure, which can include both on-premises and cloud-based systems.
  • Application development and management: This covers the development, testing, and deployment of new applications, as well as the maintenance and support of existing ones.
  • Business continuity and disaster recovery: This helps businesses plan for and recover from disruptions, whether they are caused by natural disasters or system failures.
  • Digital marketing: This encompasses all of the activities that are necessary to promote and sell products or services online. This can include everything from website design and development to search engine optimization (SEO) and social media marketing.
  • Data entry and processing: This type of service includes the capture, storage, and processing of data. This can be everything from customer information to financial transaction records.
  • Customer relationship management (CRM): This helps businesses manage their relationships with customers, clients, and prospects. This can include tasks such as lead generation, customer segmentation, and campaign management.

The IT industry is constantly evolving, and so are the BPO services that are being offered. As businesses become more reliant on technology, the demand for these services will continue to grow.

How to implement BPO for your IT solutions

Does BPO sound like an appealing option for your company? Here’s a step-by-step guide to implementing it for your IT solutions.

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1. Define your business goals and objectives

The first step is to understand what your company is looking to achieve by outsourcing its IT processes. Do you want to improve efficiency? Cut costs? Free up internal resources to focus on other areas of the business?

Once you have a clear understanding of your goals, you can start to look for a service provider that can help you achieve them.

For example, if your goal is to improve efficiency, you will want to look for a provider that has a proven track record of delivering fast and efficient services. If cost savings is your primary concern, on the other hand, you will need to find a provider that can offer competitive pricing without compromising on quality or service levels.

2. Research service providers

When you have a good understanding of your business goals, you can start to research potential service providers. There are a few different ways to go about this:

  • You can ask for recommendations from other businesses in your industry who have outsourced their IT processes.
  • You can search online for directories of service providers, such as the one provided by the International Association of Outsourcing Professionals (IAOP).
  • You can attend industry events and trade shows, such as the IAOP Outsourcing World Summit, where you can meet with service providers and learn more about their offerings.

Once you have compiled a list of potential providers, the next step is to narrow it down to a few that you would like to work with and create an RFP.

3. Create a Request for Proposal (RFP)

The next step in any BPO IT engagement is to create a Request for Proposal (RFP) that outlines your specific requirements. This document will be used by potential service providers to submit their proposals and should therefore be clear, concise, and comprehensive.

Your RFP should answer the following questions:

By answering these questions, you will be able to create an RFP that accurately reflects your needs and allows service providers to submit their best proposals.

4. Select your service provider

Once you have received proposals from several potential service providers, it’s time to select the one that is the best fit for your company. There are several factors to consider when making this decision, including:

  • Price: Make sure that the price is within your budget and that there are no hidden costs.
  • Quality: Check references and reviews to get an idea of the quality of the provider’s work.
  • Capabilities: Does the provider have the necessary skills and experience to deliver the services you need?
  • Flexibility: Is the provider willing to be flexible and accommodating to your specific needs?
  • Culture: Does the provider’s culture match up with your own?

By considering all of these factors, you will be able to select an IT BPO solution that is the best fit for your company.

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5. Implement the solution

Once you have found your preferred provider and negotiated a contract, it’s time to implement your solution.

This will usually involve some level of change management, as your employees will need to be trained on the new processes and systems. Be sure to allow enough time for this process and consider using a phased approach to implementation if necessary.

Your service provider should have a dedicated team in place to help with the transition and ensure that everything runs smoothly. They will also be responsible for providing ongoing support and maintenance once the solution is up and running.

6. Monitor and optimize performance

Nothing in business is worthwhile if it isn’t being constantly reviewed and updated, with BPO no different.

Once you have selected a service provider and implemented their services, it is important to monitor the performance of both the provider and the outsourced processes. This can be done through regular check-ins, surveys, and KPIs.

If you find that there are areas for improvement, don’t be afraid to sit down with your service provider and discuss how things can be changed. After all, you are paying for a service that should be continuously improving.

BPO can be a great way to improve the efficiency of your business while freeing up resources to focus on your core competencies. When done right, it can be a win-win for both businesses and service providers.

To ensure success, be sure to do your research, create a comprehensive RFP, select the right provider, and monitor and optimize performance on an ongoing basis.