Business Process Outsourcing Definition

Business process outsourcing (BPO) is the act of giving a third-party the responsibility of running 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. Other common examples of BPO are call centres and payroll outsourcing.

Typically, companies that are looking at business process outsourcing are hoping to achieve cost savings by handing the work to a third-party that can take advantage of economies of scale by doing the same work for many companies. Or perhaps the cost savings can be achieved because labor costs are lower due to different costs of living in different countries.

In exchange for the potential cost savings, the company in question must relinquish control over an aspect of their business which explains why business process outsourcing is often reserved for non-critical, non-core type of work.

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