What is BPO?

Business process outsourcing means examining the processes that compose the business and its functional units, and then working with focused service providers to both re-engineer and outsource these at the same time. BPO involves the full transfer of responsibility for functions such as transaction processing, policy servicing, claims management, HR, finance, and compliance to the outsourcing company. The outsourcing provider then administers these functions on their own systems to agreed service standards and at a guaranteed cost. 


Typically, companies that are looking at business process outsourcing are hoping to achieve cost savings by handing the work to a third-party that can take advantage of economies of scale by doing the same work for many companies. Or perhaps the cost savings can be achieved because labor costs are lower due to different costs of living in different countries (labor arbitrage). In exchange for the potential cost savings, the company in question must relinquish control over an aspect of their business that explains why business process outsourcing is often reserved for non-critical, non-core type of work.