Business Drivers for BPO.

Six important business drivers are pushing enterprises to consider the BPO option.

First, enterprises may decide to use BPO so they can focus on their core competencies within their business segment—the areas of expertise or intellectual property that help them gain a competitive edge. Essential commodity services, such as back-office operations, can be less costly and more efficient to run if they're turned over to a company that specializes in each respective area.

Similarly, BPO can mean a higher level of expertise in key business areas. An in-house HR department in a corporation may spend 20 percent of their time on compensation matters, 30 percent on benefits administration, 10 percent on learning, and the rest on recruiting and other areas. That's being a generalist. They may be doing compensation, but They're not a compensation experts.

Third, BPO can give enterprises cost savings of from 15 to 50 percent compared to internal operations. The reason? As BPO Providers specialize in certain niches and provide similar services to a large number of global companies, they become process specialized in those areas. They can bring to the table the best practices in each process area to gain greater process efficiencies.

A fourth driver is derived from a related form of cost avoidance—enterprises don't have to invest already-tight resources for new infrastructure and staffing in response to business realignment.

Fifth, the growing number of regulations facing companies throughout the world is spurring organizations to consider BPO as part of their compliance strategy. By centralizing services, enterprises can assure that regulatory policies are being applied consistently throughout all of the various divisions. A service provider can streamline processes across geographies and then document accurately. These are all factors that contribute to effectively maintaining compliance.

Finally, and perhaps the most significant growth area for the future, BPO can help organizations undergo fundamental business transformations. Because BPO Providers are experts at engineering efficient business processes, they can perform a consultancy role for optimizing internal operations. It is not enough just to take a broken process and get the BPO provider to run it for you. That may prove to be a bit cheaper in the short term, but it's certainly not better over time. Instead, an enterprise may need a process expert to take a high-level view of the entire business system and suggest fundamental revisions.

The change is driven by the expertise of the third party that runs the process assessment, that designs the future process flows and takes the client company through the transition phase. That enables a company to go beyond what was possible in the past. That's when BPO becomes a strategic tool. A merger or acquisition is often a catalyst for BPO transformation to streamline process between the parent company and the new divisions.