BPO may not be right for every company, nor is it right for every process in a given company, but its promise makes it imperative that managers seek out BPO opportunities and exploit them where possible. Whether or not your company has formal functional boundaries, it has processes that may be suitable for outsourcing to third-party providers. BPO was pioneered primarily by large companies eager to reduce their costs and bloated payrolls. Today, many small to medium sized enterprises (SMEs) have discovered BPO advantages that enable them to compete with the larger firms who have been using outsourcing for years. In 2001, 75% of BPO users were firms with greater than $500 million in revenue. By 2002, that number had dropped to 64%.1 What is indisputable is that any business that has grown to more than about $25 million in sales has begun to encounter growth-related challenges in back-office processes that may be suitable for handing over to an outsourcing partner.
For example, an exhibits design company in Illinois has 25 employees. To control costs the firm had whittled down its health care coverage over a period of years. As a result, it had begun to struggle to attract and retain talented employees. In an effort to remedy the situation, the company outsourced its HR and benefits processes to a professional employer organization (PEO). By outsourcing to the PEO the company now can offer a lower deductible plan with better health care and dental coverage, while gaining the use of a professional claims manager. The firm was able to offer its employees these additional benefits while saving 40% overall on its health care costs.2
Without question, the decision to implement a BPO solution for any organization has far-reaching consequences and risks. At the same time, these implications of the decision making process should not lead to paralysis-there are too many possible benefits to fall into the trap of doing nothing. It's important for decision makers to recognize that undertaking a BPO initiative is a strategic action. With the increasing sophistication of BPO providers, the decision to outsource is no longer one of mere cost savings or headcount reduction; it is also one of performance enhancement in critical functional areas. Is your technical support team overwhelmed by customer inquiries? Consider a BPO provider. Is your new product development cycle too slow? Consider a BPO provider. Is your accounts receivable department tardy in tracking down late payers? Consider a BPO provider. In each of these examples, and many others, the choice of adopting a BPO solution is based on improving the company's performance in that process. In each case, performance enhancement may mean much more to the firm than simple cost reductions. Exhibit 1 highlights some of the reasons that decision makers have cited as grounds for choosing to implement a BPO initiative.
With these potential advantages it is not difficult for organizations to justify a decision at least to investigate BPO opportunities.