###Business process outsourcing (BPO) is an outsourcing that involves the non-core business activities and specific functions of the business to a third-party service provider.BPO is back office outsourcing, which includes internal business functions such as human resources or finance and accounting, and front office outsourcing, which includes customer-related services such as contact centre services.
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Most services provided by BPO vendors are offered on a fee-for-service basis, using business models such as Remote In-Sourcing or similar software development and outsourcing models. A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible.
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A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. The key lies in knowing which of the main value drivers to focus on – customer intimacy, product leadership, or operational excellence. Focusing more on one of these drivers may help a company create a competitive edge.
Another way in which BPO contributes to a company’s flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic restraints.Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firm’s core businesses.