The practice of using a third party which is contracted to perform specialized and specific processes on a companies behalf is called Business Process Outsourcing. Earlier outsourcing meant companies used outside accountants to balance the books but now outsourcing is used by many large companies and businesses on a much larger scale.
Some part of the business is outsourced and the company is able to focus on its primary purpose, whatever that may be. Also, managers have much less time and there are limited resources in the business. Managers can get help in order to set priorities as the customer service is being handled by an outsourcing vendor.
Front office and back office outsourcing are the two primary types of business process outsourcing. Advertising, marketing, customer service and technical support are included in front office outsourcing while the back processes that might be outsourced are human resources, logistics, billing and payroll. Services are also offered by some companies in job recruitment, credit analysis and collections.
Processes like claim processing at an insurance company and other processes which one may think cannot be outsourced are also being outsourced these days. Small companies which are not able to afford in-house support service can gain from outsourcing which allows for the company to have a higher level of efficiency.
One parts of Business process outsourcing is the foreign call centers that are located in different parts of the world. Although most of the companies claim that customer support is their top priority in many cases they end up with people who have little interest in the company. The main reason is that a lot of money is saved when customer service is outsourced to countries like India. Obvious scripting and accents are some of the biggest customer complaints that occur with foreign call centers.
Cost may be one of the reasons why companies utilize Business process outsourcing service but another factor is that the company does not have the expertise to deal with certain aspects of the business. Outsourcing also reduces the risk involved in business.
The risk is managed by the companies who provide outsourcing. Using Business process outsourcing in order to cut costs has made many companies face criticism especially in case of call centers. Many companies located in the United States, Europe etc are outsourcing their work to countries like India because they are able to get services at an excellent price. This is because many of these countries have low cost of living, high unemployment rates and a well educated labor pool. In 2006, India had 63% of the offshore Business process outsourcing market.
Many western workers are losing their jobs to foreigners. Although companies improve their bottom line by outsourcing they are also facing harsh criticism because of the decline in the quality of customer service. Now, Business process outsourcing is popular but due to employee and consumer backlash and restrictions from the government on taxation Business process outsourcing may become less popularity in the future.
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