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What is Business Process Outsourcing?

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  • Written By: Haven Esme
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 December 2016
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Business process outsourcing is what happens when one company decides to hire another company to handle certain business activities. When business process outsourcing first began, it was restricted to the payroll process. Today, many businesses still outsource their payroll processes; however, there are many other processes that are being outsourced.

Business process outsourcing is an intricate process for companies. When companies decide they want to use outsourcing, they must select a vendor and create contracts. Companies then transition that part of their business smoothly to the new company.

Some of the main business processes of companies that are being outsourced include human resources functions, financial processes, administration processes, call center and customer service activities. When a company decides to use business process outsourcing, they normally create a contract with another company that establishes the length of time for which the business process will be outsourced. Larger corporations establish outsourcing contracts that last for multiple years and can cost millions of dollars.

Most business process outsourcing involves hiring a company in another country to handle the work. This is also called offshore outsourcing because a segment of the business is eliminated in the home country for financial reasons. Offshore outsourcing has grown in controversy because of the economic and political implications involved in this practice.

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Corporations that choose business process outsourcing to move jobs overseas often look into transferring their business processes to countries that have substantially lower currencies. Most of the corporations that are using business process outsourcing are located in Europe, Asia, and the United States.

Some of the most popular countries that profit substantially from business process outsourcing are China, India, and the Philippines. Foreign countries that are especially popular for outsourcing are able to make substantial financial gains and improve their economy and overall quality of life. Business process outsourcing is becoming a primary method in which companies can communicate with other nations for their benefit. Unfortunately, outsourcing often has a negative effect on the home country's economy.

Corporations are attracted to business process outsourcing because it can transform a business into something more dynamic, profitable, and streamlined. Outsourcing provides companies with a certain level of flexibility and efficiency. Technology companies, in particular, are interested in how they can use outsourcing to leverage their technology vendors and provide a company with cheaper services.

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