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What is Business Process Outsourcing?

BPO is the practice of contracting the services, business-related operations, or work processes of an external, third-party vendor. The umbrella term BPO covers a number of subcategories describing the location and function of the service provided. These subcategories include:
Front-Office BPO
Back-Office BPO
Offshore BPO
Nearshore BPO
Onshore/Domestic BPO

Business Process Outsourcing Types: Supply Chain and Services

Back-Office BPO
Back-office business process outsourcing involves contracting services that are not customer-facing. These services include IT, accounting, business process automation, human resources, quality assurance, and more. Subtypes of BPO have emerged, including IT-Enabled Services such as paralegals or advisors, and Knowledge Process Outsourcing (KPO), such as outsourcing an individual who understands and can implement/manage a specific program. By outsourcing these tasks, businesses can focus on their core mission rather than engaging in time-consuming and expensive internal training and onboarding.
Front-Office BPO
This term refers to customer-facing services, including tech support, customer service, sales, and marketing. These services are frequently outsourced due to technical knowledge requirements and can be accomplished off-premises. By outsourcing web development, customer support lines, or any front office services, businesses can benefit from specialized talent with unique knowledge and cut costs.

Business Process Outsourcing Types: Location of Vendor

Offshore BPO
Offshoring occurs when services are outsourced overseas. This is incentivized by available resources, political stability, lower labor costs, various tax savings, and more. A common example is companies outsourcing their customer service departments by contracting with call center vendors across the world. As result, businesses can access qualified labor and services at a lower rate, which helps reduce overhead costs, and potentially lower product or service prices for the end-user.
Nearshore BPO
Nearshore business process outsourcing is the act of contracting the services of vendors in countries that are geographically closer. For businesses in the US, this could include Canada and Mexico, as well as Central America. This form of outsourcing usually occurs when specialized skills are available at a lower cost in a nearby nation, but certain factors, such as timezones or language proficiencies, need to be taken into account.