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Business process outsourcing (BPO) is the act of turning over part of a business's functions or processes to an external specialist. The company may outsource just a part of a particular function, a whole function or several functions. The outsourced functions may include back office duties such as administration, accounting or payroll services; and front office functions such as customer service. BPO vendors are businesses that offer outsourcing services, and they may specialize in specific functions, such as information technology (IT), or in a range of functions, such as different types of customer service. They may be based in low-cost areas that enable them to offer their services at competitive prices, and they may enable their clients to increase flexibility and vary the level of services received as required to maintain a viable business model.
The effectiveness of a BPO vendor can be the result of a location in a low-cost area combined with a skilled and specialized workforce. Some successful BPO vendor companies are based in countries where the vendor can combine efficient operating costs with English language skills and specialization in particular areas, such as IT services. Other BPO vendors may specialize in functions such as human resources or customer service. One aspect of customer service is the call center, which is the function most often associated with outsourcing and the one most frequently encountered by the general public.
The contract between a BPO vendor and its client outlines the areas that are to be outsourced and makes provision for managing the interface between outsourced and in-house functions. The client will likely need to appoint certain staff to oversee the operation of the outsourced functions and to monitor them on a continuous basis. The contract with the client company is likely to contain provisions for modifying outsourcing arrangements depending on the performance of the BPO vendor. The contract must be flexible enough to allow for changes in the business and the economic environment during the course of the contract.
BPO vendors wanting to be successful often must overcome the criticisms of outsourcing that may make enterprises hesitant to outsource their functions. Many enterprises are hesitant to hand over sensitive data to third-party BPO vendors and fear data loss through negligence or theft. BPO vendors combat these anxieties by ensuring that their business premises are secure and that staff and visitors are subject to security screening when entering or leaving a building. Where IT functions are involved, there will be additional measures to protect data security in respect to data held by the BPO vendor.