A Look at Business Process Outsourcing – Advantages and Disadvantages

Outsourcing has become a hot topic due to the challenges associated with them. Experts say that when businesses need expertise or skills that they don’t have within their organization, they often turn to outsourcing to solve their problems. These days many businesses outsource for what they need to serve their customers, both internal and external. Business process outsourcing is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions to a third-party service provider. BPO that is contracted outside a company’s country is called offshore outsourcing. BPO that is contracted to a company’s neighboring country is called near shore outsourcing. Outsourcing offers many advantages.

Business Process Outsourcing

Business Process Outsourcing allows companies to seek out and hire the best experts for specialized work. Using outsourcing also helps companies keep more cash on hand, freeing resources for other purposes, such as capital improvements. It’s also often cheaper in terms of salaries and benefits and reduces risks and costs. Outsourcing can also help a business focus on its core components without distractions from ancillary and support functions. It’s sometimes quicker and more efficient to hire a specialist to do something than it is to bring your company up to speed. However, experts say that outsourcing has some disadvantages as well.

The company often has less direct oversight and control of the product or service it’s purchasing, which can threaten the relationship between the company and its customers. Communication can cause problems. Outsourcing overseas can lead to language barrier issues. Outsourcing, especially offshore, is sometimes criticized due to the labour arbitrage factor. This is an especially tricky problem to deal with, say experts. Security issues, such as keeping proprietary information private, also can arise. Hiring an outside company presents challenges to the hiring company. Outsourcing’s impact is, therefore, far reaching. When business process outsourcing began, it applied chiefly to manufacturing entities, such as soft drink manufacturers. Over time a whole gamut of services have been outsourced including IT and IT enabled services.

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