Business process outsourcing and the services commonly outsourced

Meaning of business process outsourcing

Outsourcing means contracting out to an outside agency work that a firm used to do itself. Firms are moving away from the old mindset of doing everything in-house and are contracting out manufacturing, research and development and their business processes, whether or not these processes depend on information technology. Business process outsourcing (BPO) is this contracting out of business processes, such as customer support, back-office work and professional services, to specialist firms. Its spread has been accompanied by knowledge process outsourcing (KPO). Outsourcing is counted, with digitisation and internationalisation, among the strongest trends now shaping business.

Why firms outsource

Inside the firm, the push comes from its own search for improvement and efficiency; from outside, it comes from rising competition and ever more demanding customers. The idea extends the principle of division of work to the whole business: a company specialises in its core competence and hands non-core activities to outside agencies.

Services commonly outsourced

1. Customer contact. Call centres and help lines, through which customers make toll-free calls to ask questions and lodge complaints at any hour, need not be run by the company itself; they can be outsourced. An online retailer in Bengaluru may hand its Hindi and Tamil help lines to a specialist centre in another city.
2. IT-enabled professional services. The internet allows legal, accounting, medical and other consulting services to be rendered electronically, which opens a wide range of IT-enabled services to outsourcing.
3. Advertising and marketing. Companies give their advertising to outside agencies, and today even marketing, a core process, is being outsourced.
4. Manufacturing. Under contract manufacturing a firm gets local manufacturers to produce components, to assemble components into finished products, or to make complete products such as garments, all to its specifications.
5. Share-transfer and other back-office work. Some companies outsource non-core work such as managing share transfers.
6. Research and development. R and D is among the core processes that firms now contract out.
7. Distribution, transport and finance. In a network organisation the central firm relies on partner firms, linked to it electronically, to perform manufacturing, distribution, financing, transportation and other functions on contract.
8. Management services. Under an overseas management contract, a company of one country supplies personnel to perform general or specialised management functions for a company in another country.

Conclusion

Business process outsourcing lets a firm concentrate on what it does best and buy the rest from specialists. India has gained considerably from it, through employment, capability building and its contribution to exports and GDP.