This delegation, usually called Business Process Outsourcing (BPO), helps small businesses avoid hiring full-time teams to manage and measure the performance of different business processes. BPOs offer benefits from cost savings to a strong competitive edge, and they can help new and upcoming businesses grow more efficiently. Delegating one or more business processes doesn’t come without risks, though. For every function or process that a business outsources to an external provider, the more organizational information they potentially jeopardize. The greatest threats to BPO, chief among them hidden costs that come with outsourcing, can severely damage a business’s customer push-back and satisfaction rates. To that end, let’s explore the main risks involved in BPO projects and how to mitigate them, as well as get a quick intro to BPO with specific examples and benefits.

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August 10, 2022
Business Process Outsourcing: Benefits, Risks, &
Examples of BPO
process.st/bpo-examples
Oliver Peterson
August 10, 2022
Tech & Startups
At one point or another, many businesses reach a stage where they need to delegate some
intensive processes to another provider.
This delegation, usually called Business Process Outsourcing (BPO), helps small
businesses avoid hiring full-time teams to manage and measure the performance of
different business processes. BPOs offer benefits from cost savings to a strong competitive
edge, and they can help new and upcoming businesses grow more efficiently.
Delegating one or more business processes doesn’t come without risks, though.
For every function or process that a business outsources to an external provider, the more
organizational information they potentially jeopardize. The greatest threats to BPO, chief
among them hidden costs that come with outsourcing, can severely damage a business’s
customer push-back and satisfaction rates.
To that end, let’s explore the main risks involved in BPO projects and how to mitigate
them, as well as get a quick intro to BPO with specific examples and benefits.

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BPO examples
Let’s break down BPOs into two categories:
1. Horizontal BPOs
2. Vertical BPOs
These types of BPO initiatives differ based on the industries they impact, so it’s a good
idea to go over examples of both.
(Source)
Horizontal BPO example
Horizontal BPOs apply to a range of industries.
One of the most common examples in this category is a business outsourcing its hiring
process. This business picks an external provider that can hire and onboard people; this
team then performs its duties separately from the hiring party.
Vertical BPO example
Vertical BPOs, on the other hand, deal with the knowledge that applies only to a specific
industry.
A business may, for example, outsource its IT help desk services to a third-party technical
support provider. This third party has all the specific knowledge it needs to manage this
technical process and performs its duties separately from the company that hired them.
3 common benefits of BPOs

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(Source)
BPOs offer many benefits, but we’ll focus on the few that stand out the most.
1. Reduced costs
First, using an external provider to outsource and manage one or more business processes
or functions lets you reduce associated costs.
Businesses that reduce their operational costs with BPOs can invest more heavily in
business development and growth and can even improve cash flow and revenue.
This is paramount to good financial health and long-term success for small businesses
and can prevent them from running out of money.
2. More time for continuous improvement
Outsourcing non-core functions lets you invest more time in the core of your business.
Continuously improving services and products central to your business’s mission helps
build more trusting relationships with your customers, eventually leading to overall
market growth.
3. Improved communication
BPOs also commonly improve issues you may be having with communication.
The external providers whom you hire use their own communication tools to resolve
whatever issues arise surrounding the process you’ve outsourced to them.
The less time you spend sending messages about a process you’ve outsourced, the more
time you can spend improving the core of your business.
3 BPO risks

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Now that we’ve provided examples of horizontal and vertical BPOs and the most common
benefits BPOs offer, let’s see which BPO risks pose the greatest threats to your company.
1. Hidden costs
Hidden costs are easily one of the biggest risks businesses face when using BPO.
It can be easy to overlook all the costs an external provider is invoicing for. This issue is
particularly risky for small business owners that have recently taken out a personal loan
or a new line of credit.
Always read a third-party’s contract thoroughly, so you don’t get hit with unexpected
costs. If possible, ask the external provider to give you notice of additional costs they add
to their invoice later on.
Despite how severe of a risk hidden costs are, most businesses don’t use formal plans to
tackle them. They usually rely on non-documented and informal plans to handle hidden
costs when they become aware of them.
Small business owners need to take the hidden costs of sourcing seriously and consider
them during their business case development.
2. Loss of visibility into processes
Hiring an external provider to manage a non-core business process means you risk losing
visibility and control over that process.
Most businesses inevitably become excluded from the processes they outsource and thus
need a good relationship with their third-party provider.
It helps to mitigate the loss of visibility similarly to how you would mitigate hidden costs:
by creating a formal plan that defines how you’ll transition your non-core processes to an
external provider.
It may also help to become familiar with fixed and flexible outsourcing models to gain
greater control over your outsourced deliverables and relationship with your external
provider.
3. Impact on customer satisfaction
Another common risk that comes with BPO is its impact on customer satisfaction.
As businesses continue to outsource more of their non-core functions, their customers
become more keenly aware that they may be dealing with an external provider based out
of another country.
Some customers may become unsatisfied with the support they receive from a third party
if there are constant issues with communication.

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You can thankfully avoid jeopardizing your customer relationships with the proper
professional training.
Ensure that the contract you share with your third-party provider stipulates clauses
discussing how you’ll arrange professional training sessions and their costs. Your contract
should also discuss how you’ll localize your outsourcing centers.
Business Process Outsourcing: Final thoughts
(Source)
If there’s one takeaway we have after covering the risks that come with BPO, it’s that most
businesses don’t put together formal plans to mitigate those risks.
Most organizations understand that BPOs can include hidden costs and may impact
customer satisfaction and control over outsourced processes.
That said, they don’t often adopt plans to do anything about it.
To overcome this issue, ensure that the contracts you sign with third-party outsourcing
providers stipulate whether they may add new costs to their invoices down the road. It
should also stipulate what, if any, professional training your provider is required to take
to ensure your customer satisfaction doesn’t suffer.
BPOs can go a long way toward improving your business’s efficiency. Make sure that you
have the formal plans in place to mitigate potential risks so that you can enjoy the benefits
that come with BPOs to their fullest.
What do you think about BPOs? Do you think the benefits outweigh the risks? Let us
know in the comments below!

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Oliver Peterson
Oliver Peterson is a content writer for Process Street with an interest in systems and
processes, attempting to use them as tools for taking apart problems and gaining insight
into building robust, lasting solutions.
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