5 Main Categories of BPO Services: Explained

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Written by Dion Jay Tality

Contents

In today’s business landscape, business process outsourcing (BPO) has gained ground. Companies of all sizes outsource front-office and back-end operations. They hire BPO services to: 

  • Prioritize their core business,
  • Save money,
  • Increase efficiency,
  • Improve quality, and
  • Boost profitability.

But did you know that BPO comes in different types? Read on to discover the categories of BPO services so that you can make informed outsourcing decisions.

5 Primary Types of BPO Services

5 Primary Types of BPO Services

First of all, what is BPO? Simply put, it entails delegating processes to third-party service providers. Small and midsize enterprises (SMEs) and big companies outsource customer service, sales, information technology (IT) support, creative, and administrative functions. Instead of handling these functions in-house, companies entrust them to external vendors.

According to Grand View Research, the global BPO market is projected to grow from $280.6 billion in 2023 to $525.2 billion by 2030. It could expand at a compound annual growth rate (CAGR) of 9.4%, which means that BPO services will continue to be in high demand.

There are five categories of BPO services:

Based on function:

  • Front-office BPO – dealing with customer-facing tasks
  • Back-office BPO – handling non-core operations and administrative work

Based on the location:

  • Onshore BPO – outsourcing to a service provider in the same country 
  • Nearshore BPO – outsourcing to an external vendor in a nearby country
  • Offshore BPO – outsourcing to an overseas BPO partner

Let us expound on each of them below.

1. Front-office BPO: Serving and Supporting Customers 

Front-office BPO is one of the primary categories of BPO services. The “front office” refers to the customer-facing department of a company. Outsourcing pertains to delegating tasks that directly interact with customers. 

The most common front-office BPO services are:

  • Customer service assisting customers by answering questions, processing requests, and resolving issues
  • Sales or telemarketing reaching out to potential and existing customers to sell your products or services
  • Technical support – technical assistance to tech-product end users

Example: A financial and banking institution in the United States outsources its billing and collections to a contact center in the Philippines. The offshore BPO team is responsible for calling clients to collect payments and answering phone billing inquiries.

Potential Benefits:

  • Reduced labor and operating expenses
  • People-oriented talent
  • Enhanced customer experience
  • Increased customer satisfaction (CSAT)
  • New customer acquisition
  • High customer retention
  • More generated leads
  • Increased sales revenues
  • Business scalability and growth

Possible Drawbacks:

  • Unmanageable staff
  • Inevitable communication barriers
  • Cultural differences
  • Poor customer-agent interactions
  • High customer churn rate
  • Misaligned goals
  • Damaged business reputation
  • Difficult control maintenance

Top Recommendations:

  • Hire a contact center or call center with a customer-centric operation.
  • Work with a highly skilled and people-oriented workforce.
  • Create a service-level agreement (SLA).
  • Set key performance metrics (efficiency, quality, and CSAT).
  • Audit contacts and monitor performance.
  • Establish clear communication channels.
  • Ensure regular collaboration.

2. Back-office BPO: Streamlining Business Operations

Back-office BPO, which encompasses ensuring BPO security, is one of the primary categories of BPO services. In contrast to the front office, the back office has no interactions with customers at all. Back-end operations are non-core activities supporting the front-office team. They also refer to administrative tasks crucial to day-to-day business operations.

Some examples of back-office BPO services are:

  • Data entry obtaining, recording, organizing, updating, and securing business, customer, or product information
  • Administrative work including accounting and finance (A&F) services, human resources (HR), and payroll
  • Creative tasks including content creation, graphic design, and web development

Example: An e-commerce startup in the U.S. outsources its data entry, order fulfillment, and supply chain management to an expert provider in the same country. The onshore BPO team has the expertise, technology, and resources to handle these functions. They can help the startup optimize its operations and scale its business.

Potential Benefits:

  • Significant cost savings
  • Highly skilled talent
  • Digital tools and modern technologies
  • Ensured regulatory compliance
  • Streamlined processes
  • 99% data accuracy
  • Improved efficiency
  • Enhanced productivity
  • Increased profitability
  • Optimized business operations

Possible Drawbacks:

  • Lack of business control
  • Goal misalignment
  • Language barriers
  • Cultural gaps
  • Privacy and security risks
  • Non-compliance with regulations
  • Possible work delays
  • Low-quality output
  • Productivity decline
  • Potential business disruptions

Top Recommendations:

  • Hire a reputable BPO service provider.
  • Create an SLA.
  • Set key performance indicators (KPIs) for auditing and monitoring.
  • Establish standard operating procedures (SOPs).
  • Provide solid process training.
  • Create policies for regulatory compliance.
  • Recommend investing in the latest technology.
  • Have constant communication and collaboration.

3. Onshore BPO: Accessing Expertise and Technology 

Onshore BPO is one of the BPO service categories determined by the service provider’s location. This type of BPO involves delegating business processes to a third-party vendor in the same country.

According to Clutch, nine out of ten small businesses plan to outsource in 2022. Two main reasons for doing so are working with experts (26%) and accessing flexible resources (33%).

Example: A perfect example of onshore BPO is when a walk-in clinic outsources its imaging services and laboratory tests to a radiology center and lab clinic. Since the clinic does only medical checkups, it entrusts its diagnostic services to reliable service providers in the area.

Potential Benefits:

  • Better access to expertise and technology
  • Seamless communication and collaboration
  • Increased efficiency and productivity
  • Improved quality and customer satisfaction
  • Improved regulatory compliance
  • High English proficiency
  • Advantageous geographical proximity
  • Minimal time zone difference
  • Easy traveling
  • Shared culture
  • Minimal outsourcing risks
  • Scalable business

Possible Drawbacks:

  • High labor costs
  • Increased overhead expenses
  • No global expansion
  • No market expansion

Top Recommendations:

  • Select a reputable onshore provider with real expertise and advanced technology.
  • Create an SLA.
  • Set KPIs.
  • Ensure constant communication and collaboration.
  • Negotiate outsourcing costs.
  • Choose the right pricing structure.
  • Strike a balance between affordability and quality.

Accessing Expertise and Technology

4. Nearshore BPO: Saving Money and Enjoying Proximity

Nearshore BPO is one of the BPO service categories by location. It entails outsourcing business processes to a third-party provider in a nearby country. 

Deloitte cited cost reduction as the top outsourcing reason. Businesses outsource front- and back-office functions to cut labor and operating costs. Instead of outsourcing offshore, they can also choose nearby countries due to the geographical advantage provided.

Example: An example of nearshore BPO is a retail business outsourcing its customer support to a service provider in Latin America. The retail company takes this route to ensure it can also assist its Spanish customers. The BPO team of bilingual agents assists its American and Spanish customers.

Potential Benefits:

  • Significant cost savings
  • Skilled and talented workforce
  • Advanced technologies and available resources
  • Reduced outsourcing risks
  • Increased efficiency and productivity
  • Advantageous geographical proximity
  • Minimal time zone difference
  • Cultural compatibility
  • Easy traveling
  • Expanding business

Possible Drawbacks:

  • Lacking business control
  • Language barriers
  • Cultural differences
  • Non-regulatory compliance
  • Business goal misalignment
  • Potential business disruptions

Top Recommendations:

  • Hire a reliable BPO service provider.
  • Create an outsourcing contract with clear SLAs and KPIs.
  • Invest in cross-cultural training and orientation.
  • Establish SOPs and policies.
  • Develop clear communication protocols.
  • Ensure constant collaboration.
  • Require regular monitoring and reporting.

5. Offshore BPO: Reducing Costs and Scaling Operations

Offshore BPO is the last BPO service category on this list. It refers to outsourcing business functions to third-party service providers in foreign countries, typically those with lower labor costs. Companies employ offshore outsourcing to save money in the long term.

The Philippines and India are some of the top offshoring destinations. European countries such as Ukraine and Poland are not far behind, especially in IT services and software development. You can distinguish between nearshore and offshore BPO based on the provider’s proximity to your country of operation.

Example: A tech giant in the U.S. outsources its IT support services to an IT-BPO firm in India. It employs offshore outsourcing to reduce its labor and operating expenditures. At the same time, this business strategy lets the company tap into IT professionals and experts.

Potential Benefits:

  • Lower cost of living
  • Cost-effective labor
  • Reduced operating expenses
  • Diverse pool of highly skilled professionals
  • Easy access to tools, technology, and talent (3Ts)
  • Increased efficiency and productivity
  • Improved service quality
  • Improved customer satisfaction
  • Enhanced business profitability
  • Faster business growth and expansion

Possible Drawbacks:

  • Loss of business control
  • Business goal misalignment
  • Privacy and security risks
  • Communication barriers
  • Cultural differences
  • Non-compliance with regulations
  • Potential business disruptions

Top Recommendations:

  • Be highly critical and selective when choosing a BPO partner.
  • Create an outsourcing contract with comprehensive SLAs, clear KPIs, defined SOPs, and detailed policies.
  • Offer robust process and product training programs.
  • Provide cross-cultural training and orientation.
  • Ensure constant communication and collaboration.
  • Monitor and measure outsourcing performance.
  • Optimize processes and address improvement areas.

The Bottom Line

The BPO industry has grown and expanded its service scope. Businesses of all sizes can capitalize on the following categories of BPO services:

  • Front-office outsourcing
  • Back-Office outsourcing
  • Onshore outsourcing
  • Nearshore outsourcing
  • Offshore outsourcing

Understand what these BPO services are and how they work. Weigh their pros and cons before working with a service provider. More importantly, follow our top outsourcing recommendations above. 

Looking to hire BPO services? Contact Unity Communications, and let’s connect. We offer various BPO services to businesses of all sizes and across different industries. We are committed to helping your business grow and succeed!

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Author - DIon Jay

About The Author

Dion Jay Tality is a content writer and one of the creative forces behind Unity Connect’s blog posts and marketing copy. Before joining Unity Communications, he spent over five years in the BPO industry, wearing various hats—from being a CSR and email and chat support specialist to being an SME and QA analyst. Name it; he tried it!

Passionate about writing, Dion loves to bring ideas to life through the power of words. When he’s not busy crafting content, you might find him working out, enjoying mindful walking, exploring conspiracy theories, or singing at the top of his lungs.

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