What is Business Process Outsourcing? – Meaning and Important Concepts

In recent years, the term Business Process Outsourcing or BPO has gained prominence and the trend of outsourcing back office operations to centers in India and Philippines along with other countries in Asia has taken center stage. Often, we come across projections that show a greater growth in BPO with more western firms outsourcing to the Asian and other countries.

This module is intended to cover the BPO phenomenon in depth and provide the readers with a clear understanding of the dynamics involved as far as this phenomenon is concerned.

The various articles in this module would help the readers form a perspective of how the BPO sector works and the business drivers and imperatives behind the outsourcing phenomenon.

1. First, why should any company in the west outsource its back office operations? There are several reasons for this and the primary driver is the cost factor.

   Since wages in India and other Asian countries are cheap in Dollar terms which mean that for the same amount of money that the firms are paying their employees in the west, they can get a highly leveraged amount of work when they outsource to India and other Asian countries.

2. Next, because of the fact that the time zones of the West and Asia complement each other to ensure that work gets done in a 24/7 cycle. What we mean is that since the US and Asia are separated by almost a half day time zone differential, whenever it is nighttime in the US, it is daytime in Asia and vice versa meaning that the work can be done round the clock.

3. Third, the BPO employees in the India and Asian countries like Philippines are proficient in English and with some training can be taught to talk in an American accent or a British Accent. This means that the end users or the consumers in the US and Europe can feel comfortable secure in the knowledge that they can make themselves understood as well as understand what the person at the end of the line is saying.

4. Finally, because of the way in which the BPO phenomenon has developed over the years, many companies in India and other parts of Asia are now better at the back office work than their American or European counterparts which means that not only is the cost an important criterion, quality of service offered is also excellent.

Because of these factors, there are humungous benefits for American and European countries to outsource their back office operations to companies in the East. This can take the form of captive companies set up for this purpose or can be a turnkey outsourcing to a vendor. We will explore these themes in greater detail in the succeeding articles.

In conclusion, it would be fair to say that the BPO phenomenon represents a turning of the tide as far as perceptions about the East are concerned and it is to the credit of Indian and other Asian countries that they have delivered stellar results to their outsourcing clients in the US and in Europe.