Business-Process Outsourcing (BPO)

The outsourcing of a company’s entire business process to another company located domestically or in a foreign country. BPO is generally divided into two categories:

  1. back-office outsourcing, and
  2. front-office outsourcing. Back-office outsourcing includes internal business functions such as payroll, billing, and purchasing. Front-office outsourcing includes customer-related functions such as technical support, marketing, and sales.

Examples of business process outsourcing include:

  • A computer printer manufacturer outsourcing maintenance, repair, and stocking of replacement parts to a third-party logistics (3PL) company.
  • A software maker outsourcing its entire customer support process to another company.
  • A company outsourcing its payroll and human resources functions to an outside firm.

Benefits of business-process outsourcing include:

  • Possible lower costs.
  • The ability to concentrate in-house staff on core competencies.
  • The ability to acquire specialized skills that would be difficult to replicate within an organization.
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