Businesses are always seeking ways to adapt, stay competitive, and cut costs. One way to do that in the modern business world is using business process outsourcing (BPO). It’s something that’s easy to do and, as a cost-saving measure, BPO is highly attractive. But is it what’s right for your company?
Each company is different and some may benefit from business process outsourcing more than others. Certain types of businesses may be better off handling all procedures in-house without any outsourcing. But for many other businesses, BPO helps them cut costs and remain focused on innovation.
Before you decide whether BPO is right for your company, it’s important to carefully consider the pros and cons. And this article is going to help you do just that. Keep reading for an overview of the arguments for and against business process outsourcing.
Pros of Business Process Outsourcing
Not all companies have the resources to handle every one of their necessary business processes in-house. This is where BPO comes in. You outsource certain tasks (such as payroll or billing) to a company that specializes in handling those services.
The costs of outsourcing are almost always lower than if you spend money hiring and training staff to handle everything in-house. In addition to saving money, BPO frees up you and your staff to concentrate on other, more important aspects of your business.
Some other benefits of BPO include:
- Reduced administrative costs. When you outsource business processes, you’re also outsourcing much of the administrative tasks for those processes.
- Focus internal resources on core business activities. You can stop spending company resources on tasks that anyone could handle and focus on what makes your business unique.
- Save on infrastructure, workforce, and technology costs. You no longer have to maintain in-house space for outsourced processes, pay employees to work in those departments or upgrade your own technology.
- Improves your business’s overall efficiency. Employees can now focus the time they would have spent completing routine business processes on completing core business activities more efficiently. That will also increase your productivity.
- Gain access to specialized skills. Rather than hiring specialists in several different areas, you simply outsource tasks like accounts payable and document management to a group of specialists.
- Provide job opportunities. Though outsourcing means your company might not need as many employees, you are still providing jobs through the company you hire to handle your business processes.
- Scale resources quickly. If your business is rapidly growing, outsourcing allows you to upgrade your processing quickly without the hassle that would be involved with expanding an in-house department.
Cons of Business Process Outsourcing
Some types of businesses lend themselves to BPO better than others. For example, if your company requires a great deal of flexibility for certain areas of business, it may be better to handle those functions entirely in-house where you’ll have hands-on control at all times.
Another possible downside to business process outsourcing is the inherent risk of trusting another company to handle the vital processes of your business. If they go bankrupt or go out of business, it can put your own company in a precarious position. That’s why it’s so important to work with a trustworthy outsourcer.
Other potential cons of BPO include:
- Security risks. When you outsource business processes, you’re trusting another company with your sensitive information. Make sure the company you choose has a good reputation and top-notch security.
- Requires time to plan. While it’s very easy to implement BPO, taking the time to plan and prepare your company for the change will pay off in the long run.
- The adjustment period for employees. Relying on an outside company instead of an in-house department for certain business processes can take some adjustment for your employees. Especially if outsourcing also means you’ll be downsizing your workforce.
- Hidden costs. This shouldn’t become an issue if you read the contract carefully. Just make sure you take the time to go over the contract and know what you’re signing up for.