Business Definition of “BPO”
The acronym “BPO” stands for “Business Process Outsourcing”. BPO (Business Process Outsourcing) is a form of outsourcing that focuses on functional areas of a business rather than specific tasks. BPO vendors are engaged for a variety of business processes including accounting, IT, sales, and customer support. BPO is generally leveraged to reduce costs.
Front-office BPO vs Back-office BPO
BPO is split into two primary sub-categories: ‘front-office’ BPO and ‘back-office’ BPO.
Front-office BPO includes public-facing business operations like sales, customer support, and marketing.
Back-office BPO refers to internal functions such as finance, tax planning, and Human Resources (HR).
Nearshore BPO vs Offshore BPO
BPO is also split into categories based on the location of the BPO vendor.
Domestic BPO refers to outsourcing partners located within the same country. For example, a San Francisco tech startup might engage a vendor in Dayton Ohio for customer service, bringing down their cost while avoiding the legal complications of looking for lower prices abroad.
Nearshore BPO refers to BPO vendors outside the buyer’s country, but within three time zones. This setup is ideal for reducing cost when significant overlap of time zone is still required for communication, for example with a software development vendor working in close partnership with an in-office product team.
Offshore BPO refers to BPO vendors who are located outside the country and with a significant time difference of four or more time zones. This option is often used for processes that have lower time sensitivity to reduce cost further. For example, it is common for call center support to be run through BPO vendors in low-cost labor markets such as India and the Phillipines.