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Business process outsourcing: the pros and cons 

Business reinvention is critical at certain points in a company’s life cycle. But like any business venture, reinventing takes time and resources.

For businesses short on time or lacking the expertise needed to innovate, business process outsourcing (BPO) could be the solution. 

What is business process outsourcing (BPO)?

BPO is a way to outsource business processes or tasks to a third-party. The type of business processes that are typically outsourced is those considered to be non-primary or back-office functions – for example, payroll, human resources, IT services, accounting or quality assurance. Front-office functions, such as customer service, sales, marketing, and strategic tasks, can also be outsourced, however. 

You might commission the work to a freelancer or small business within Australia, which is known as onshore BPO, or to an operator located overseas in an offshore BPO contract.

By outsourcing the work, you can free up time within your own team and ensure the job’s done by people with the right skillset. While this can be hugely beneficial during a business reinvention, there are drawbacks; – costs and lack of oversight being two of the biggest. To help you decide whether BPO is right for your business, consider the pros and cons.

PRO: GREATER OVERALL EFFICIENCY

Because BPO providers are essentially experts hired to perform a specific business task, it makes sense that they’re able to complete that task with greater accuracy, efficiency and speed than if you were to try to do it in-house.

The time saved in performing the task ultimately equates to better financial returns because, well, time is money.

It also means companies can reallocate resources and teams to work on core business functions that will help distinguish them in their market and (hopefully) lead to even greater returns.

PRO: A HEALTHIER BOTTOM LINE

Yes, BPO will be an additional outgoing on your list of expenses, but it can be cheaper than keeping the process in-house in a lot of cases.

In addition to paying for the physical task, you’re also paying for all the administrative costs associated with the job and the infrastructure or technology needed to complete it.

For example, when you outsource your company’s accounting, you’re also essentially gaining access to better payroll software with automated processes that you’d typically have to buy outright.

CON: Security and oversight risks

Trust is hugely important in any BPO relationship. If yours is a business you’ve built from scratch, you may be reluctant to give up control over a certain task. This is natural but necessary with BPO.

Communication lines need to be secure, too, to avoid potential exploitation. While these are important concerns, they can be avoided with sound research beforehand to ensure the company or individual has a good reputation and robust security.

CON: Communication challenges

For businesses accessing offshore BPO, perhaps in an effort to reduce overheads, communication can be a cause for concern. This path, while often cheaper, can cause a number of challenges: working across different time zones, language barriers and delayed or poor communication.

Before outsourcing business-critical tasks, do your due diligence and make sure you’re comfortable with the terms of the partnership.

BPO is a great option to help you embrace business reinvention. When done right, it can reduce costs while bringing talented people into your team. Understanding the potential drawbacks, getting to know your provider, and making sure the pros outweigh the cons is key.

Business reinvention: your how-to guide

If you feel like your business hasn’t been going as well as it used to, it might be time to get into reinvention mode. Download our free guide in partnership with Quickbooks to learn what to look out for and what it takes to get your business back on track.

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