More About the Advantages of BPO
"It was an nightmare", exclaims Alberto Cedano, owner of Superior Interlocking Pavers. "We were so focused on operations that no one recorded anything financial. Near the end, we were guessing how much cash we had available in the bank. Outsourcing our accounting function has been an unbelievable success."
Superior Pavers is one of the growing number of firms discovering the benefits of Business Process Outsourcing (BPO), the offloading of business functions to a third-party provider. Such functions can include accounting, HR, logistics, inventory control.
"Anything that is not core to the company or related to your strategic direction is appropriate for outsourcing," says Rita Terdiman, PHD, who is a mentor with the SCORE association, a small business consultant organization. Of course, what is and is not core will vary from industry to industry and from company to company.
"In general, things like product/ service development or direct client contact are within the domain of core competencies, anything that affects revenue generation should probably be kept inside the company," says Mr. Litofe. But finance and accounting, while important, are not core. Why should your company spend time and resources in these areas if they do not provide differentiation? Why not offload them to someone who can provide state of the art process knowledge?
Those are questions more small businesses are asking. In fact, spending on BPO has increase dramatically over the past five years. Today, 65 percent of companies outsource some portion of their business. By 2005, that number is expected to reach the low 80's. There's good reason for that growth. BPO offers a wide range of clear, measurable benefits that fall into three broad categories:
A primary reason many companies choose to outsource crucial but non-core processes is that it can mean lower costs. Because outsourcers provide similar services to numerous clients, you benefit from economies of scale. The cost of infrastructure, technology and personnel is spread across all customers. What's more, outsourcing allows you to convert fixed costs into variable costs; you pay only for the volume and level of service you need.
Superior Interlocking Paver's accounting cost dropped by more then 60 percent when the company outsourced the function to Counterpoint's Business Service, a provider of accounting outsourced services. Accuracy levels also increased dramatically.
Lower costs are certainly attractive, but many experts believe that's just a starting point for BPO. BPO should involve more than simply taking the accounting function and giving it to someone else to manage, says Name. "The real value comes when you improve productivity or add structure and methodology to that process."
Many companies place cost as their number one factor in outsourcing, but that (is a mistake). First you want to make sure the service levels meet your needs. Don't start with cost and find a service to fit it. Start with the service you require and make sure the quote is for that service.
Meeting service-level requirements is where BPO can add tremendous value. BPO can give you access to the latest and most effective technology, highly trained and experience personnel and proven methodologies and best practices. It can also provide a single point of contact for problem resolution, plus assurances of reliable operations and business continuity.
Perhaps most significant, BPO can enable organizations to focus on their core business. In challenging economic times, the ability to focus on core functions will become increasingly compelling. Companies turn to outsourcing to reduce operational transaction costs and to improve services levels.
Ultimately, BPO's strongest selling point is its ability to create value- value for the company through re-engineered processes, value for customers through better service and value for owners who's enterprises focus on their core business.
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