What is Back Office BPO (Business Process Outsourcing)?
Back Office BPO is a sensible way to outsource certain operations (for example, paying a service provider to automate payment processing) and is a subset of Business Process Outsourcing. A service provider manages the process required to execute a specific task with verifiable outputs. BPO generally refers to electronic tools, procedures, and the technology required to accomplish the output of any task; where Back Office BPO has a specific focus on back-end tasks that do not involve customers, such as data entry, accounting, finance, or IT support. These are the operational tasks that keep the business operating every day. Back Office BPO is used widely by sectors such as telecoms, healthcare, real estate, and various government operations. Ultimately, Back Office BPO helps businesses expand their back-end capabilities.
Back Office BPO Services
Let’s take a look at the Back Office BPO services:
Data Management and Administration
Here’s a transformation of back-end administrative work using data—whether you’re performing the administrative duties of manual data entry, automated data entry, form processing, or claims processing. Data management as a professional and ethical industry has delivered a type of discipline for the front end, allowing companies to focus on the big picture and big picture thinking through planning and strategy.
IT Support
Moving all non-customer-facing IT work to the experts takes the heat off your staff. IT professions require knowledge of software bugs, maintain hardware, maintain networks, develop data collection and storage strategies and develop backup and recovery plans. IT employees will manage the ticketing and escalation levels (Level 1 or 2) to allow sanctioned change management.
Finance and Accounts
As all accounting professionals have diverse backgrounds in technology, fraud protection, supporting finance, and general best practices. Data processing supports the company's compliance responsibilities, develops financials, and manages accounts payable, accounts receivable, budgeting, forecasting, and audits.
Advantages of Back Office BPO
The outsourcing company and service provider achieve substantial wins, whether work is conducted onshore or offshore, based on their individual needs and capabilities.
To The Company
Price-wise, Back Office BPO will make a considerable cost difference over in-house work due to wage costs and infrastructure and equipment costs. Onshore work can be 20%-25% less, and offshore costs can be reduced by as much as 40%-60% depending on location and complexity of the work. When you run the cost comparison, you can factor in access to better skills, increased process accuracy, flexibility scaling for peak season or growth, lower compliance risks, and built in backup systems to support disaster recovery plans.
To The Service Provider
Delivering work on time increases the service provider's brand reputation which catalyzes multi-year contracts and consistent cash flow, flexibility to expand into F&A or HR which increases service capacity and ROI on their investments, while building relationships on trust with new customers, while offshore providers take advantage of currency exchange and expansion of brand presence or capabilities internationally. Onshore providers process work faster, more accurately, and vitally more in-line with regulatory requirements.
Revenue Generation Model in Back Office BPO
Back Office BPO is truly a cash cow for both parties, and herein lies the flow of money:
Company
Companies take their savings and turn it into profit; onshore workforce costs are reduced by the range of 30%-35%, and offshore by 50%-60%, plus the 65%-70% savings in IT and infrastructure (costs change by location and complexity). The total cost disappears as: they could have hired the employee(s) and incurred the costs of hiring and maintainence; they do not incur these costs since the provider absorbs them; they can focus on leadership and strategy which will increase productivity ranging from 15%-25% depending on the changes, administration, and workload.
Service Provider
The savings do flip into profit based upon service fees, and recurring charges. The all-in revenue comes in a variety of places as: payroll, technology, training, and sometimes consulting. These amounts are recorded in different ways as: fixed and capitalized across different processes. Additionally, pay (compensation) is based on the SLAs and contracts (per-seat rates or hourly + performance bonus, etc.). A positive relationship with the client provides an opportunity for additional referrals and cross-selling opportunities and affects profit sharing (the client is aware of their global ranking).
Human Capital Inputs
Implementing your Back Office BPO successfully will require the right people at both ends of the process. Some specifics of people on the company side:
Company
Some staff will be required to fortify the company-service provider relationship, experienced personnel will manage any contractual arrangements with third-party suppliers, a small number of staff will answer any daily inquiries, and a portion of accounts personnel will monitor invoicing arrangements. Segment leaders, senior staff and stakeholders will keep this partnership humming.
Service Provider
Workforce planning will depend on the process being delivered and scope of work. For data management it could include data entry operators, team leads, quality analyst, operations manager, HR and administrative support. Department leaders will provide coverage for their areas of expertise, work with clients and manage internal stakeholder expectations to deliver promised results.
Take Away
In summary Back Office BPO serves a dual purpose; it creates a win-win condition, and it creates opportunities for economic development by employing skilled people in communities, regionally, nationally and globally.