Business process outsourcing (BPO) is a business practice in which an organization contracts with an external service provider to perform an essential business function or task.
An organization typically contracts with another business for such services after it has identified a process that, although necessary for its operations, is not part of its core value proposition. This step requires a good understanding of the processes within the organization and strong business process management.
Many organizations consider processes that are performed the same or similarly from company to company, such as payroll and accounting, good candidates for BPO.
Organizations engage in business process outsourcing for two main areas of work: back-office functions and front-office functions.
Back-office functions, sometimes called internal business functions, comprise support operations including accounting, information technology (IT) services, human resources (HR), quality assurance and payment processing.
Front-office functions are processes and business operations that serve or relate to existing and potential customers, such as customer relation services, marketing and sales.
Some organizations outsource an entire function, such as the HR department, to a single vendor. Other companies outsource only specific processes within a functional area, such as only payroll processing, while having their own team perform all other HR processes.
Commonly outsourced processes include the following:
- payroll and accounting
- customer support
- chat support
- IT management and services
- shipping and logistics