Business Process Outsourcing (BPO) means letting an outside company perform a process of the business. Outsourcing is done mainly with the objective of achieving cost savings. The outside vendor is able to do the same process at lower costs than what it would have cost the company to do it in-house.
The outside vendor is able to do the process at lower costs because of lower labor costs and its core competency in doing that process. Outsourcing contracts nowadays are mainly awarded to vendor companies located in developing and least developed countries. The labor costs in these countries are much lower than that in developed countries. It is due to this reason that a number of large American corporations have outsourced their business processes (like calling processes) to outsourcing companies in India. An Indian, sitting in Gurgaon, India, can do the job of receiving customer calls at much lower wages than an American sitting in New York or New Jersey.
Companies specializing in taking BPO work need to focus more on the processes outsourced so that they can be made more efficient and effective. By focusing on process improvement they would be able to create more satisfaction for the client company. This in turn will ensure a long term strategic relationship with the client. Indian BPO businesses are facing tough challenge from BPO businesses in countries like Philippines. These countries have comparable labor costs as India. Bangladesh and Vietnam boast of even lower labor costs than India. In such a scenario, Indian BPO companies will be able to sustain their competitive advantage by creating more value for client companies. This value can be created by trying to improve the processes outsourced so that drastic efficiency and effectiveness gains can be achieved for the client.
Most BPO companies focus only on following the key performance metrics given in the service level agreement (SLA) between them and the client company. They do not try to create any extra value for the client company. The objective is simply to perform on the key performance parameters and fulfill the outsourcing contract.BPO companies should focus on maximizing the satisfaction of client companies.
They should try to create delighted customers and not just satisfied ones. Delighted customers are those whose expectations have been surpassed by the actual service delivered. By creating delighted customers Indian BPO companies will be able to retain clients. It should not be forgotten that it is three times easier to retain an existing customer than to recruit a new one. This is even truer in the BPO business.