Business process outsourcing (BPO) is when activities within a business are contracted to be performed by an external vendor. Generally, a business will choose to outsource select activities to reduce costs, access certain resources, scale quickly and/or focus internal resources on core competencies. Quality of service is a key concern noted by 50% of businesses and there is a notable trend towards automation and AI, which may result in a shift for some BPO activities in the coming decade.
The cost of specializing in everything
Building an in-house specialist team that knows your business has its benefits. However, even if a business can afford to build its own specialist team, the costs might outweigh the benefits. When considering the field of intellectual property, this can become prohibitively expensive for a business to manage internally. It would require onboarding legal experts that are experienced with specific tools and processes for the various tasks associated with IP management.
For instance, the process of conducting trademark searches requires a high level of knowledge, expertise and complex tools. However, IP valuation requires legal expertise, accounting skills, and additional complex tools. These are just two of many activities related to intellectual property management.
In some cases, a business may need support in some tasks, but won’t need full time, in-house staff. Business process outsourcing would make more sense than investing significant time and money into an area that is important, but not the core competency of the business. In this way, they can maximize results by focusing on their key business activities, keeping overheads low and still maintaining access to specialist resources.
Automation vs Outsourcing
Hyperautomation was named a top strategic trend for 2021 by Gartner. This refers to functional automation across multiple processes and even business ecosystem automation. As data analytics continues to enable the advancement of automation technologies, this will allow businesses to rely more on automation in order to reduce the risk of information sharing with external platforms and vendors. Sharing sensitive information with external providers carries risk, therefore working with reliable and trustworthy partners is essential.
There’s also a notable increase in demand for automation for certain processes, such as e-commerce, food and beverages, and logistics, which had to quickly adapt to social distancing restrictions during COVID-19. Although automation was previously not adopted by businesses because of the associated costs, the trend towards using automated technologies will have a lasting effect on business process outsourcing post-pandemic.
Cloud technologies are disrupting business process outsourcing
For any business, time is money. Onboarding a team, training them in processes and tools, and ramping their productivity can take valuable time that causes the demise of a business. Speed to market is a key factor for success. According to Deloitte, 63% of executives say that they are adopting cloud technologies to improve the time or speed to the market and 54% are using cloud technology to scale rapidly. This shows that cloud technology will continue to be a key disruptor in outsourcing as executives are using it to improve business performance, not just processes. As such, outsourcing vendors will need to align with technological advancements in order to retain a competitive advantage.
Companies of all sizes will continue to outsource certain activities to markets with cheaper labor markets and lower tax costs. However, given that data security is a decisive factor for many organizations, automation has become a key investment area to mitigate the risk of information sharing with external vendors. Despite the high costs associated with cloud technology services and data security, there are no guarantees; businesses are constantly at risk of data breaches. Current trends and future predictions show that business process outsourcing will continue to see a shift in the activities that are outsourced versus automated, and the technologies used between clients and vendors.