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Outsourcing Fundamentals

Independent guide to Outsourcing: BPO strategy, Service Provider selection, contracting and implementation projects. Assessing and improving your current service.

What is BPO? > BPO Defined

What is Business Process Outsourcing (BPO)?

Outsourcing is generally understood to mean the contracting out of activities that would otherwise be carried out in the company to a third party, with Business Process Outsourcing (BPO) focussing on operations of specific business functions such as Human Resources, Finance and Accounting or customer relationship, as opposed to IT support or application development. The nature of the processes outsourced can range from simple rule-based transactions to those requiring significant knowledge and judgement.

Generally, BPO should include:

  • The core service, being made up of a defined scope of business activities together with any related issue resolution, tracking and follow up activities.
  • A third party company, the Service Provider, taking responsibility for executing the defined activities on behalf of the client company.
  • Measurement of the service to allow management of quality and charging, usually more rigorously than would be done internally.
  • Governance processes undertaken by both Service Provider and client to ensure the continuing effectiveness of the service.
  • A pricing and charging mechanism
  • A contractual agreement setting out the services and how foreseeable issues and circumstances will be dealt with.

A viable BPO service will also have sufficient scale (probably greater than 50 full time staff equivalent) to warrant the overheads of working across company and contractual boundaries. The nature of the activity can be quite wide ranging in terms of expertise and requirement for judgement, but will need to be definable and quantifiable in some way.

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There is an amazing amount of jargon and acronyms in outsrourcing. Rather than explain terms each time they are used, I have collected the definitions onto a page accessible via the bottom left hand button.