What is Back Office BPO: Benefits & Revenue Generation

Hey there, business adventurers! You may be aware of Front Office BPO and the magic associated with customer engagement, but Back Office BPO manages a whole other world beyond that. Front Office BPO gets most of the attention because customer experience is usually the flashy side of business. Back Office BPO, however, is busy strategizing on which operations ultimately provide the most value. Do we exit some loss/leaking service? Do we create ancillary services that matter? Wouldn't this be a good time to invest in Artificial Intelligence (AI)? The assignment of these operations to professionals could be called Back Office BPO. If we discussed Front Office BPO last week, let's focus on Back Office BPO, and under what conditions it is valuable.

What is Back Office BPO (Business Process Outsourcing)?

Back Office BPO is a smart business strategy. In Back Office BPO, a company is handing over specific operations/services to a service provider, for example, an outsourcing payment processing service provider. Back Office BPO is one type of Business Process Outsourcing, which is the transfer of operations/services that, while important to the enterprise, are not core/parameterized customer-facing services. The business operations/service provider would manage delegation of the operation/service to the appropriate talent for delivery by the back-office operation. A company may handle a multitude of non-core activities, like data entry, accounting, finance, IT support etc. Think of these projects as the value delivered internally to conduct day-to-day operations (non-customer-facing). Communications service providers, health care organizations, real estate services, and even government agencies have these operations/services and have used outsourced service providers for them.

Back Office BPO Services

Let’s take a look at some of the key services provided by Back Office BPO:

Data Management and Administration

This captures the main purpose of outsourcing administrative tasks associated with data – including both manual and automated data entry, form processing, claims processing etc. All this is done with a focus on ethics and data security, explicitly providing structured assistance to front end facilitators and allowing companies to put focus on their high-level goals and strategies.

IT Support

For specialist teams who are doing non-customer facing IT support role, the BPO service is essentially, putting non-critical customer-facing IT tasks in front of specialists who really only fix glitches in software, keep hardware working, provide network infrastructure assurance, and keep backups and data protection and recovery plans intact for data loss. These specialists manage their workloads through ticketing systems and escalation structures (Level 1 or Level 2, etc.) to support everything efficiently and properly.

Finance & Accounts

Here the function is the outsourcing of finance and accounting related tasks to specialized technical expertise who submit to compliance, legislation and develop finance reporting functionality. Included in this function they will be engaged through support processes including accounts payable, accounts receivable, budgeting, forecasting and auditing, a neat mix of precise functionality and supportive structure.

Advantages of Back Office BPO

Both the outsourcing company and the service provider are rewarded, regardless of whether the work is with an offshore service provider or an onshore service provider, depending on the service provider or outsourcing company's needs and capabilities.

To The Company

When you compare the costs of Back Office BPO to in-house services, it is inexpensive - saving money on salaries, infrastructure, equipment etc. Onshore outsourcing can save 20% to 25% from in-house costs, where offshore outsourcing will save 40% to 60% based on the firm and task complexity. Some additional benefits include specialized skills, increased accuracy in processes, scalability for seasonal surges or expansion, incurring less operational compliance risk and redundancy capabilities for disaster recovery and backup systems.

To The Service Provider

Timely deliverables build the service provider's credibility, resulting in multi-year partnerships and stable revenue streams. The service provider can be flexible and diversify into firms to provide F&A and HR. Building a diverse portfolio of service lines increases an asset's ROI, enables long-term trust and attracts new referrals. Offshore service providers benefit from currency exchange and acknowledgement around the world; while onshore service providers are valued for quick, access, accurate and regulatory compliance.

Revenue Generation Model in Back Office BPO

Back Office BPO is lucrative for both parties involved. Now let's break down the profits:

Company

The company translates savings into profits by lowering workforce costs, taking 30% to 35% offshore and 50% to 60% onshore. Depending on the location and complexity, the company saves 65% to 70% in IT and infrastructure costs. All hiring and training costs are eliminated because the service provider incurs those costs. The intangible opportunity to embrace the leadership role and focus on strategy will also see productivity increased by 15% to 25%.

Service Provider

The savings become profit for BPO providers beginning with the service charge, or a recurring fee. The profit is divided into payroll, technology, training, costs, plus other costs, some fixed and others scalable across processes. Pay is dependent on the Service Level Agreement values - the clients either pay a fixed rate per seat or hourly plus an incentive for performance. Established relationships can enable long-term contracts adding value for both the service provider and the client related to referrals and cross-selling opportunities to improve brand reputation globally.

Human Capital Inputs

Effective Back Office BPO operations require the right people on both sides. Here are the specifics:

Company

A company will require a team to solidify the company-service provider relationship. Staff with experience in managing third party contracts are the ones who will be handing off their tasks to the service provider and the likely only involvement will be to have a small crew dealing with day-to-day inquiries, and part of their accounts department will match invoices before they approve them. Ultimately everyone involved including segment heads, senior staff and stakeholders are important to the success of the relationship.

Service Provider

A service provider's staff will be based on the process and anticipated results. For example, a data management company will require many data entry operators, group leads, quality analyst and operations manager, with HR and administration support. Department heads will oversee the staff, oversee the customer, and deliver results to the customer as well as consider all internal stakeholders.

Summary

Back Office BPO has a win-win scenario, generating economic opportunity because BPO employs people with the expertise locally and internationally.