Business process outsourcing (BPO) is a strategy in which a third party vendor or provider manages one or more of your business’s systems for you.
Any business can be considered a system. It takes certain outputs from the world, puts them into a “machine” of sorts, and delivers outputs to provide customers with value and create profits.
That big system gets further subdivided into multiple subsystems (and subsystems of subsystems, and subsystems of those subsystems, and so forth). When you run a business, during the start-up phase, almost all systems are managed “in-house.” If you’re a solo entrepreneur, for instance, you do practically everything yourself, at first.
As you add more people to your team, you pass off system responsibilities to others. At some point in time, you may want to move systems outside of your business to reduce costs, improve efficiencies, free up the time of valuable employees, etc. That’s where business process outsourcing comes into play.
How BPO Works
First, you identify a process (or processes) that could be moved outside of your company. Next, locate partners or vendors who can handle the work for you. A simple example is payroll. During start-up phase, you or your secretary may handle payroll personally. Over time, however, you may want to hire a payroll company outside of your business.
What Systems Should You Outsource?
You can outsource diverse areas of your business, including:
- Administration systems;
- Financial systems;
- R&D systems;
- Customer management systems;
- Call center systems;
- Accounting systems;
- And so forth!
Remember: you cannot (or at least you should not) outsource systems that make up your business’s core competencies. What does your company do best? What “value add” do you bring to market and to your customers? Do NOT outsource those processes — the ones that make your businesses special and that play to your strengths. Begin by outsourcing processes that need to get done, but which currently are distracting your team or slowing you down.
You might find it helpful to map out your systems using process maps — flowcharts and schematics that document what happens in a process. You (or anyone who owns that process) can document and adjust the maps, as needed, so that operations become standardized. By using process maps, measuring cycle time, holding process owners accountable for deliverables, and regularly tweaking/improving (and occasionally reengineering) your processes, your outsourcers can help you build a successful, sustainable business.