What Is BPO (Business Process Outsourcing)?


Some things are best left to the specialists, which is where business process outsourcing (BPO) comes into play. In the U.S., two-thirds of companies with at least 50 employees outsource a portion of their business processes.

How is BPO different from traditional outsourcing? Outsourcing is the general term for contracting help from outside a company. Many duties within an organization can be outsourced — from building maintenance to talent acquisition. However, BPO is about outsourcing specific day-to-day operations for a company to third-party experts to execute.

Are you curious if your company could benefit from BPO and utilize solutions like Smith.ai’s outsourcing capabilities? This article will guide you through what BPO is and explain the pros and cons to help you decide if hiring a BPO provider is right for you.

What is BPO?

What is BPO?

BPO is a specific type of outsourcing where third-party individuals or companies are hired to perform operations tasks — or business processes. Some companies rely on BPO to supplement a small internal core team. The internal team focuses on growth activities, while outside vendors manage other day-to-day operations like human resources, accounting, reception, and so on.

What is BPO used for?

Business process outsourcing covers a breadth of operational activities that can be broken down into two categories: back-office and front-office operations.

What is BPO used for?

Front-office operations

Front-office operations cover customer-facing and revenue-driving functions within a company — think the jobs of The Office’s Jim, Dwight, or Kelly. Outsourcing front-office operations can include any type of client communication, like phone answering, sales, or marketing. Call centers offering customer support are also a type of front-office BPO service.

Back-office operations

Both small and large companies commonly outsourced back-office operations. A company’s "back office" is responsible for the essential administrative processes that sustain day-to-day operations. However, the key difference is the back office is not responsible for driving profit directly. 

Departments within the back office include accounting and payroll, IT, compliance, quality assurance, human resources, and shipping — think the warehouse guys, Angela, or Creed from The Office.

Smith.ai offers both front- and back-office BPO services. With Smith.ai’s live virtual receptionists, businesses can satisfy their need for sales outreach, lead qualification, payment processing, and more.

Types of business process outsourcing providers

As with any type of outsourcing, BPO allows companies to choose where to look for vendors. There are three main types of BPO vendors: onshore, offshore, and nearshore.

Outsourcing Types by Location

Hiring an onshore BPO company

Onshore, otherwise known as local or domestic, outsourcing means hiring a vendor in the same country as your company — whether in your city or a different state. 

The advantages of hiring an onshore BPO company are streamlined communication since language barriers and cultural differences are likely not present. In addition, the difference in time zones is likely minuscule, making meetings easier to schedule.

Hiring an offshore BPO company

Outsourcing to an offshore company — often shortened to offshoring — means that the service provider is located in another country. The BPO company would be far enough away to reside in a separate time zone. Businesses may choose offshore BPO to reach a wider pool of experienced talent and reduce costs. 

Hiring a nearshore BPO company

Nearshore outsourcing utilizes a company located in a neighboring country. For example, a Canadian retailer hires Smith.ai, a U.S.-based BPO company, for American customer support. This would be useful for the Canadian company to continue expanding sales into the United States.

Nearshore offers a balance between onshore and offshore outsourcing. With nearshore BPO, businesses may still find lower costs, a smaller gap in time differences, and less of a contrast in cultural differences.

Pros and cons of BPO

The decision of whether or not to hire outsourced help can seem overwhelming. On the one hand, you may recognize that outsourcing could cut your costs significantly. But, on the other, you may be worried about the time it will take to find and onboard a new service provider. 

Weigh out the pros and cons with the breakdown below. If the advantages outweigh the cons, it may be worthwhile to consider BPO for your company.

Benefits of BPO

A few advantages of business process outsourcing include: 

  • Lower costs: Outsourcing allows you to reduce your business admin and sales costs because you no longer have to pay the salary and benefits of an internal employee or department.
  • Higher efficiency: BPO specialists handling specific duties in their wheelhouses are able to push through tasks with ease, speed, and accuracy. Outsourcing can also help ensure internal employees are operating within their job scope.
  • Wider pool of talent: When you open your positions — whether internal or contract — to remote talent, you reach a larger pool of experienced and skilled workers. 
  • Contractual freedom: While you should still hold contracts with BPO companies, you can write them to be as flexible as you’d like. If it turns out your first vendor wasn’t the best fit, you can find a replacement quickly.
  • Expansion possibilities: Outsourcing allows companies to scale at their desired rate. If you’d like to expand into other regions or countries, you can do so with offshore or nearshore outsourcing.

Drawbacks of BPO

A few disadvantages of business process outsourcing are: 

  • Miscommunication possibilities: Language barriers, cultural differences, and time zone differences can lead to challenges in communication. 
  • Security risks: By sharing private company information, you risk security breaches. 
  • Time-consuming kickoff: Although BPO specialists are great at what they do, your company’s service or product may be new to them, leading to time-consuming onboarding and management.
  • Overdependence: Long-standing relationships with vendors may seem healthy, but it could cost you more in the long run if their prices rise annually.
  • Contractual freedom: Also a disadvantage, contractual freedom is a two-way street, as the vendor could break the contract. If you’re highly dependent on the vendor, this could wreak havoc on daily operations.
Pros and Cons of BPO

How to choose a BPO vendor

Does your business need BPO? If your business could benefit from a boost in efficiency, cutting costs, or specialized skill sets, business process outsourcing may be right for you.

The type of BPO vendor you choose will depend on what type of service your business requires. However, you need to find a third-party you can actually trust. Look out for these few basic things when comparing BPO providers:

  • Professionalism: Do they respect their work and clients?
  • Knowledge and expertise: How long have they been in business? Do they have case studies to show their success?
  • Proven track record: Do their positive reviews outweigh the negative? Are the negative reviews valid?
  • Cost-effectiveness: Is their rate less than what you’re currently paying?
  • Security: What is their security policy like?
  • Scalability: Can they grow with your company?

By now, you should understand what BPO is and whether your company could benefit from hiring outsourcing services. If you’re ready to start outsourcing your business processes, book a call with Smith.ai today to learn how we can boost growth while limiting your overhead.

Business Education
Sales Development
Small Business
Written by Maddy Martin

Maddy Martin is Smith.ai's SVP of Growth. Over the last 15 years, Maddy has built her expertise and reputation in small-business communications, lead conversion, email marketing, partnerships, and SEO.

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