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By some estimates, digital transformation — defined by Salesforce as the process of using digital technologies to create new or modify existing business processes, culture, and customer experiences to meet changing business and market requirements — represents a $315 billion opportunity for Australia.
Whether your enterprise falls into this category — or whether you anticipate joining those pursuing BPO in order to create or sustain a competitive advantage — it is critical to know what you can outsource, why doing so may be beneficial and what challenges you may encounter along the way.
Use this Canon Business Services (formerly Converga) guide to help your organisation make an educated decision on how to implement BPO in a thoughtful and strategic way.
“Business process outsourcing (BPO) is the contracting of non-primary business activities and functions to a third-party provider.”
according to Techopedia
Business process outsourcing, as a concept, is rooted in manufacturing, where businesses frequently use other companies as contractors to handle certain tasks and activities as parts of their supply chain. Today, BPO is used more broadly to encompass many different processes. Ultimately, however, its core function is outsourcing business tasks to an external provider.
In Australia, a recent report by KPMG found that 93% of businesses have accelerated their digital transformation plans in the past two years.
This digital transformation is essential for businesses to remain competitive and grow in the years ahead. However, it can be a complex and expensive process.
A significant 87% of senior business leaders acknowledge digitalization as a top priority for their companies. However, the reality reveals that only 40% of organisations have successfully implemented digital initiatives at a larger scale. This growing disparity between intentions and achievements highlights the widening gap faced by enterprises in their pursuit of digital business transformation.
BPO is one solution that can help businesses accelerate their digital transformation journey. This can free up internal resources to focus on core competencies and accelerate digital transformation initiatives.
There are many benefits to BPO, including:
• Reduced costs: BPO can help businesses reduce costs by eliminating the need to hire and train in-house staff.
• Increased efficiency: BPO providers have the expertise and resources to streamline processes and improve efficiency.
• Improved focus: By outsourcing non-core functions, businesses can free up internal resources to focus on core competencies.
• Increased agility: BPO providers can quickly adapt to changes in the market, helping businesses stay ahead of the competition.
• Increased security: BPO providers often have more robust security measures in place than businesses do. This can help businesses protect their data and systems from cyberattacks.
• Improved compliance: BPO providers are often experts in compliance with regulations. This can help businesses avoid costly fines and penalties.
• Increased flexibility: BPO providers can quickly scale up or down to meet the changing needs of businesses. This can help businesses adapt to changing market conditions.
A study by Gartner found that businesses that outsource at least one business process are more likely to be digitally transformed than those that do not. The study also found that BPO can help businesses improve their customer experience, increase their market share, and boost their profits.
If you are considering BPO as a way to accelerate your digital transformation journey, there are a few things you should keep in mind:
• Choose a reputable BPO provider with a proven track record.
• Make sure the provider has the expertise and resources to meet your specific needs.
Overall, BPO can be a valuable tool for businesses that are looking to accelerate their digital transformation journey. By carefully selecting a BPO provider and managing the relationship effectively, businesses can reap the many benefits of BPO.
Sources and Reports
• KPMG, "The Future of Work in Australia: A Digital Transformation Imperative," 2022.
• Gartner, "The State of Digital Transformation in Australia," 2022.
• "The Benefits of Outsourcing to a BPO Provider," Forbes, 2022.
• "How to Choose a BPO Provider," Business Insider, 2022.
Businesses at all levels can utilise BPO, though it is not appropriate to automate all processes. Never automate a bad process. A good BPO provider will use their expertise and knowledge of best practices to improve processes as part of a BPO transition or a commitment to continual improvement. Processes that remain can be outsourced — especially tasks that are repetitive or that can be mapped and optimised in terms of flow, information or people. With the integration of Business Process Automation, your BPO transition can reach new levels of efficiency.
Take invoice management as an example. A mid-sized company may receive 5-10K invoices a month. Yet because the task of processing them follows the same replicable workflow, the process can be optimised with business process outsourcing.
A transition workflow could involve:
• Arranging for the ingestion of all invoices collected via email, physical mail, cloud sources or EDI to be sent to a central electronic system
• Scanning all invoices received to the box on a daily basis and utilising OCR to capture all header and line items
• Implementing technology that facilitates 2- or 3-way matching and then moves invoices through an approval workflow and into an ERP
Not only would such a process minimise the required human input into the process, it could potentially improve accuracy by removing the potential for human error.
According to Techopedia, common BPO services include “payroll, human resources (HR), accounting and customer/call center relations.”
However, it can encompass myriad of other tasks, including:
• Mailroom Services
• Executive Hospitality
• Supply Chain Management
• Scanning Services
• Digital Mailroom
• Workflow and Exception Management
• Outbound Communications
• Physical Records and Information Services
• Digital Records and Information Management
• Storage, Sentencing and Destruction
• Information Management Consulting
• General Bookkeeping
• Accounts Payable & Receivables
• Financial Reporting
• Bank Reconciliation
• Credit Collection & Allocation
• Data Entry & Processing
• Secretarial Services
• Calendar & Appointment Services
• Filing & Records Management
• Sales Support
• Recruitment
• Contract Alteration & Promotion
• Benefits & Administration
• Payroll Processing
• Employee Database Management
• Help Desk
• Desktop Management
• Infrastructure Monitoring
• Mobile Device Management
• IT Operations for Infrastructure
• Software Updates and Patching
What should be notable about this list of potential outsourcing opportunities is that it encompasses both front office and back-office support roles; both of which can benefit from BPO.
Front office roles include those that come into direct contact with customers or consumers or that generate revenue for a company; sales and customer support are front office roles, for example.
Back office roles, on the other hand, include any functions that do not directly produce revenue, but that are still required to facilitate smooth operations. IT, human resources, accounting and compliance are all examples of back office roles.
Another way to think about BPO is in the way that different solutions can be executed and implemented. Three common models that may be encountered include:
1. On-site:
Talent from a BPO partner works on-premise with a company’s internal teams, though they themselves are not directly employed by the company.
2. Off-site:
BPO talent works off-premise (typically at the BPO partner’s offices), but is located in the same country as the company being supported.
3. Offshore / Overseas:
BPO talent is located in a different country, such as the Philippines, where language capabilities and skill sets are comparable to those available in the company’s home country (though often at a much lower cost).
Each arrangement offers different advantages and challenges, discussed in greater detail in later sections of this guide. Having on-site BPO support may be necessary when sensitive data is being handled or where work must be conducted in-person, for example.
Off-site or overseas BPO solutions may be appropriate in other cases where cost savings are the highest priority or where there is a lower need for data sovereignty or language skills to match the required customer or staff experience.. Users of off-site BPO enjoy real estate savings by removing the space needed for facilities such as mail rooms or print rooms. This is especially impactful for businesses located in CBDs, where real estate is at a premium.
Business process outsourcing offers several benefits to forward-thinking businesses.
Today’s competitive business environment rewards rapid growth and innovation, whether in the case of startups trying to disrupt seasoned incumbents or established enterprises seeking to sustain performance in quickly evolving markets.
These growth pressures commonly result in bottlenecks, where the capacity of an existing team is stretched or even exceeded, contributing to employee burnout and dissatisfaction. Adding headcount may be necessary to resolve growth challenges, but enterprises may also benefit from transitioning specific tasks and activities to a BPO partner.
Business process outsourcing is highly valuable when a team lacks the required knowledge to complete tasks effectively; perhaps because they have recently expanded into a new area. Business process outsourcing makes it possible to supplement internal wisdom with external expertise, fueling innovation and growth via accessing specialist skill sets such as IT technicians quickly on an as-needed basis.
Further, BPO dramatically increases the size of the talent pools available to companies, preventing them from being limited by the confines of their local workforce. This can be a major boon for companies that feel they have fully tapped the talent available in their geographic area.
Improving efficiency and productivity is another big opportunity of BPO.
Understandably, allowing specialists to handle tasks frees up your time and allows you to accomplish much more than you would if you were responsible for every single task businesses require. If a workflow is automated, it is not sitting on someone’s desk waiting to be actioned. In this way, BPO also improves visibility in order to facilitate better resource management at the task level.
However, BPO also supports process efficiency on a macro level. A BPO partner can help your company map its existing process, if they are not already documented. Process improvement can then occur as part of your organisation’s BPO transition planning process, or as part of the continual improvement (CI) initiatives your BPO partner should offer.
A good BPO provider will have:
• Service level agreements (SLAs) and defined scopes of work (SOWs) that clarify your mutual expectations regarding quality control and data integrity standards.
• A governance plan agreeing to regular audits and ongoing monitoring to ensure consistent quality is maintained.
• A commitment to ongoing compliance to relevant industry standards, such as ISO 27001 and 9001.
• A confidentiality agreement that offers legal protection against data theft or loss.
• Mutually agreed-upon key performance indicators (KPIs) that can be tracked and monitored over time.
BPO solutions may represent a cost-effective alternative, compared to engaging to full-time employees (FTEs). Not only does transitioning tasks to a BPO partner prevent you from paying a full-time salary or other ancillary benefits, it offers you flexibility, should your business needs change in the future.
“Outsourcing cuts down on costs for in-house labor, particularly for staffing and training, and for the work space to accommodate local employees,” says Smartsheet. “An outsourcing company physically located in a developing country leverages lower-cost labour markets.” According to one study, Australian companies can save anywhere from 30 to 50% without compromising skill sets and performance levels.
Process improvement and the implementation of cutting-edge technology like robotic process automation can also help minimise manual input for additional savings.
In some cases, a business might need a specific skill set for a short period of time or for a specific project. For instance, imagine that a company’s accounts payables processes have become overburdened, and that they would like to introduce an element of automation to streamline payment processing.
Not only could a BPO provider offer specific expertise in both implementing new technology and developing the organisational processes required to support it, they could be onboarded faster than trying to bring on a new employee or to up-skill someone else in the business for a short period of time. This is a scenario where outsourcing represents a more cost-effective, flexible solution.
Perhaps the most impactful opportunity that arises from investing in BPO is the ability to free up resources so that executives and other team members can focus on the business processes and operations at which they excel.
Most businesses have a lot of moving parts. Spending time on supplementary tasks can be a burden and potentially hinder long-term progress. With BPO, companies can concentrate their focus on the essentials, leaving the rest to third-party providers. To make the most of this strategy, businesses should understand the difference between offshoring vs outsourcing. Offshoring shifts tasks to overseas providers, while outsourcing can involve both local and global third-party partners. By choosing the right approach, companies can improve productivity and alleviate stress, contributing to their top-line margin and strengthening their competitive advantage.
Our approach involves collaborating with you to understand your business, pains and goals, thus helping to pinpoint your most pressing requirements, where the quick wins are as well as the longer strategic opportunities may lay. Working in a consultative approach we’ll develop a tailored solution to optimising, automating and transforming your business processes.
Whether your focus is on enhancing customer experience, streamlining operations, maintaining precision, leveraging business intelligence, or expanding your processes, we are here to help you establish a consistent workflow that meets your specific business needs, and helps transform your business
