Outsourcing and Concept of Business Process Outsourcing – Objectives and Advantages of BPO (For CBSE, ICSE, IAS, NET, NRA 2022)

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Outsourcing is any task, operation, job or process that could be performed by employees within company, but is instead contracted to another party for a significant period of time. The most common model of outsourcing that is in the news today refers to jobs that are being sent overseas to countries like India or China. Customized offshore outsourcing solutions have created the need of established Business Process Outsourcing (BPO) methodologies. Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to another party service provider. BPO is implemented as a cost-saving measure that a company requires to maintain its position in the marketplace.

Concept of Business Process Outsourcing

  • Business process outsourcing (BPO) can be defined as the act of giving another party responsibility of performing what would otherwise be an internal system or service. For instance, an insurance company might outsource their claims processing program or a bank might outsource their loan processing system. Cost savings can be achieved because labour costs are lower due to different costs of living in different countries.
  • BPO is often divided into two categories back office outsourcing which includes internal business functions such as billing or purchasing, and front office outsourcing which includes customer-related services such as marketing or technical support. BPO. It provides wide range of tactical, powerful, flexible tools which in turn helps in achieving the business objectives in a cost effective and efficient manner. To put it in simple words a BPO (business process outsourcing) is a process in which a company delegates some of its business processes to another party on payment of some fee by passing over total control of process to them. This in turn cuts the operational costs considerably resulting into huge profits.
  • BPO՚s are inclined to provide better customer satisfaction leading to customer retention, increased productivity, deal with competition effectively and in turn increase profitability.
  • BPO will be time and again, simply defined as, taking over non-critical business processes or a function of those processes, as well as the people and systems associated with them, in order to achieve service level improvements and cost savings. It is useful in leveraging the process towards driven efficiency and achieving responsiveness, branding, customer relationships and organizational excellence.


  • explain the concept of Business Process Outsourcing (BPO) ;
  • explain the concept of Knowledge Process Outsourcing (KPO) ;
  • describe the importance of BPO and KPO; and
  • identify the difference between BPO and KPO.

Advantages of BPO

An important aspect of business process outsourcing is its ability to free corporate executives from some of their day-to-day process management responsibilities. Once a process is successfully outsourced, they get more time to, explore new revenue generation activities, accelerate other projects, and focus on their customers.

Advantages of BPO

Achieve Cost Reductions

This is made possible through process improvements, reengineering, and use of technologies that reduce and bring administrative and other costs under control.

Key in on Company՚s Main Business

With the day-to-day back office operations taken care of, the management is free to devote more time to building the company՚s core businesses

Obtain Outside Expertise

Rather than recruiting and training personnel, BPO ensures that domain experts from another company provide the needed guidance and skills.

Meet Constantly Changing Customer Demands

Many BPO vendors provide the management with flexible and scalable services to meet the customers՚ changing requirements, and to support company acquisitions, consolidations, and joint ventures.

Achieving Revenue Increases

By outsourcing non-core processes, companies can focus on increasing their sales and market share, develop new products, expand into new markets, and enhance customer service and satisfactions.

Concept of Knowledge Process Outsourcing

  • KPO is a new phenomenon that is picking pace in India. It is “Knowledge Process Outsourcing” . In simple words it is the upward shift of BPO in the value chain. Old BPO companies that used to provide basic backend or customer care support are moving up this value chain. “Unlike conventional BPO where the focus is on process expertise, in KPO, the focus is on knowledge expertise.”
  • KPO is involved in services like valuation and investment research, patent filing, legal and insurance involves off shoring of knowledge intensive business processes that require specialized domain expertise, thus delivering high value to organizations by providing business expertise rather than just process expertise. It is being claimed that KPO is one step extension of Business Processing Outsourcing (BPO) . BPO Industry is shaping into Knowledge Process Outsourcing because of its favourable advantageous and future scope.
  • Knowledge process outsourcing (KPO) is the allocation of relatively high-level tasks to an outside organization or a different group (possibly in a different geographic location) within the same organization. Most low-level BPO jobs provide support for an organization՚s non-core competencies and entry-level prerequisites are simply a command of English and basic computer skills.
  • KPO and BPO are often conducted through off-shore outsourcing as corporations seeking the most value for the least money source projects to countries where wages are lower.

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