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An established company may opt to outsource a task that it had been performing after determining that a third-party service provider could do the job better or cheaper. Management experts advise enterprise executives to identify functions that can be outsourced and then determine if shifting that task to an outsourcing provider makes sense.

If so, the organization must go through the process of not only identifying the best vendor for the work, but also shifting the work from in-house to the external provider. This requires a significant amount of change management, as the move to an outsourced provider generally affects staff, established processes and existing workflows.

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The shift to an outsourced provider also affects the organization's finances -- not only in terms of shifting costs from the internal function to the outsourced providers, but often in terms of corporate taxes and reporting requirements.

The organization may also need to invest in new technology to enable the smooth flow of work to the outsourced provider. The extent and cost of that technology depend on the scope of the function being outsourced and the maturity of the technology infrastructure in place at both enterprises.

Business leaders then consider whether one vendor should handle all the work being outsourced or whether contracting multiple providers for the various tasks would deliver the best value. For example, a company could decide to outsource most of its HR functions and then either contract for a single provider to perform all the outsourced processes or it could hire one for payroll and another for benefits administration.

Robotic process automation (RPA) and artificial intelligence can handle some of the business processes now frequently outsourced, and these technologies can often perform those functions at lower costs and higher speeds.

Another motivation is speed to market. To make this work, a new process was developed: "outsource the outsourcing process".[30] Details of managing DuPont's chief information officer Cinda Hallman's $4 billion 10-year outsourcing contract with Computer Sciences Corporation and Accenture were outsourced, thus avoiding "inventing a process if we'd done it in-house". A term subsequently developed to describe this is midsourcing.[31][32][33]

Sometimes the effect of what looks like outsourcing from one side and insourcing from the other side can be unexpected; The New York Times reported in 2001 that "6.4 million Americans .. worked for foreign companies as of 2001, [but] more jobs are being outsourced than" [the reverse].[40]

In the early 21st century, businesses increasingly outsourced to suppliers outside their own country, sometimes referred to as offshoring or offshore outsourcing. Other options subsequently emerged: nearshoring, crowdsourcing, multisourcing,[50][51] strategic alliances/strategic partnerships, strategic outsourcing.[52]

UK government policy notes that certain services must remain in-house, citing the development of policy, stewardship of tax spend and retention of certain critical knowledge as examples. Guidance states that specific criteria must govern the identification of such services, and that "everything else" could potentially be outsourced.[59]

Unlike outsourced manufacturing, outsourced white collar workers have flextime and can choose their working hours, and for which companies to work. Clients benefit from remote work, reduced office space, management salary, and employee benefits as these individuals are independent contractors.[62]

There are many outsourcing models, with variations[70] by country,[71] year[72][73] and industry.[74] Japanese companies often outsource to China, particularly to formerly Japanese-occupied cities.[75] German companies have outsourced to Eastern European countries with German-language affiliation, such as Poland and Romania.[76] French companies outsource to North Africa for similar reasons. For Australian IT companies, Indonesia is one of the major choice of offshoring destination. Near-shore location, common time zone and adequate IT work force are the reasons for offshoring IT services to Indonesia.

Co-sourcing is a hybrid of internal staff supplemented by an external service provider.[79][80] Co-sourcing can minimize sourcing risks, increase transparency, clarity and lend toward better control than fully outsourced.[81]

Canada, India, Ireland, and Israel were the four leading countries as of 2003.[84] Although many countries have participated in the offshore outsourcing of software development, their involvement in co-sourced and outsourced Research & Development (R&D) was somewhat limited. Canada, the second largest by 2009, had 21%.[85]

As forecast in 2003,[93] R&D is outsourced. Ownership of intellectual property by the outsourcing company, despite outside development, was the goal. To defend against tax-motivated cost-shifting, the U.S. government passed regulations in 2006 to make outsourcing research harder.[94] Despite many R&D contracts given to Indian universities and labs, only some research solutions were patented.[95]

Reduced security, sometimes related to lower loyalty[113] may occur, even when 'outsourced' staff change their legal status but not their desk. While security and compliance issues are supposed to be addressed through the contract between the client and the suppliers, fraud cases have been reported.

To those who are concerned that nations may be losing a net number of jobs due to outsourcing, some[137] point out that insourcing also occurs. A 2004 study[138] in the U.S., the UK, and many other industrialized countries more jobs are insourced than outsourced. The New York Times disagreed, and wrote that free trade with low-wage countries is win-lose for many employees who find their jobs offshored or with stagnating wages.[139]

In 2010, a group of manufacturers started the Reshoring Initiative, focusing on bringing manufacturing jobs for American companies back to the country. Their data indicated that140,000 American jobs were lost in 2003 due to offshoring. Eleven years later in 2014, the U.S. recovered 10,000 of those offshored positions; this marked the highest net gain in 20 years.[141] More than 90% of the jobs that American companies "offshored" and outsourced manufacturing to low cost countries such as China, Malaysia and Vietnam did not return.[141]

While much of this work is the "bread and butter" of specialized departments within advertising agencies, sometimes specialist are used, such as when The Guardian outsourced most of its marketing design in May 2010.[204]

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca-Cola that outsourced large segments of its supply chain.[205]

Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, minimizing risks and avoiding any threats, a business continuity management (BCM) model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.[220]

The search fields on the directory detail the many different services outsourced ombuds offer and the many different sectors and regions they serve. If you have any questions about the directory, or how to get started, please email the IOA office at [email protected].

BPO is the abbreviation for business process outsourcing, which refers to when companies outsource business processes to a third-party (external) company. The primary goal is to cut costs, free up time, and focus on core aspects of the business. Two types of BPO are front-office and back-office. Back-office BPO entails the internal aspects of a business, such as payroll, inventory purchasing, and billing. Front-office BPO focuses on activities external to the company, such as marketing and customer service."}},{"@type": "Question","name": "What Are the Advantages of BPO?","acceptedAnswer": {"@type": "Answer","text": "There are numerous advantages to BPO. One of the primary advantages is that it lowers costs. Performing a certain job function internally costs a specific amount. BPO can reduce these costs by outsourcing this job to an external party, often in a less cost-intensive country, reducing the overall cost of performing that job function.Other advantages include a company being allowed to focus on core business functions that are critical to its success, rather than administrative tasks or other aspects of running a company that are not critical. BPO also helps with growth, particularly in global expansion. If a company is interested in opening an overseas branch or operating overseas, utilizing a BPO company that has experience in the local industry and that speaks the language is extremely beneficial."}},{"@type": "Question","name": "What Are the Types of BPO Companies?","acceptedAnswer": {"@type": "Answer","text": "There are three primary types of BPO companies. These are local outsourcing, offshore outsourcing, and nearshore outsourcing. Local outsourcing is a company that is in the same country as your business. Offshore outsourcing is a company that is in another country, and nearshore outsourcing is a company that is in a country that is not too far from your country."}},{"@type": "Question","name": "What Is a BPO Call Center?","acceptedAnswer": {"@type": "Answer","text": "A BPO call center handles outsourced incoming and outgoing customer calls on behalf of other businesses. Many BPO call centers will have agents that can individually handle customer complaints or inquiries standing in for a number of different companies, often within a particular specialty. For instance, one call center agent may be able to field tech support phone calls for a variety of vendors or manufacturers."}}]}]}] Investing Stocks Bonds ETFs Options and Derivatives Commodities Trading FinTech and Automated Investing Brokers Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Banking Savings Accounts Certificates of Deposit (CDs) Money Market Accounts Checking Accounts View All Personal Finance Budgeting and Saving Personal Loans Insurance Mortgages Credit and Debt Student Loans Taxes Credit Cards Financial Literacy Retirement View All News Markets Companies Earnings CD Rates Mortgage Rates Economy Government Crypto ETFs Personal Finance View All Reviews Best Online Brokers Best Savings Rates Best CD Rates Best Life Insurance Best Personal Loans Best Mortgage Rates Best Money Market Accounts Best Auto Loan Rates Best Credit Repair Companies Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds ETFs Options and Derivatives Commodities Trading FinTech and Automated Investing Brokers Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard BankingBanking Savings Accounts Certificates of Deposit (CDs) Money Market Accounts Checking Accounts View All Personal FinancePersonal Finance Budgeting and Saving Personal Loans Insurance Mortgages Credit and Debt Student Loans Taxes Credit Cards Financial Literacy Retirement View All NewsNews Markets Companies Earnings CD Rates Mortgage Rates Economy Government Crypto ETFs Personal Finance View All ReviewsReviews Best Online Brokers Best Savings Rates Best CD Rates Best Life Insurance Best Personal Loans Best Mortgage Rates Best Money Market Accounts Best Auto Loan Rates Best Credit Repair Companies Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All EconomyEconomy Government and Policy Monetary Policy Fiscal Policy Economics View All Financial Terms Newsletter About Us Follow Us Table of ContentsExpandTable of ContentsBusiness Process OutsourcingUnderstanding BPOSpecial ConsiderationsThe Attraction of BPOSome DisadvantagesBPO FAQsThe Bottom LineBusinessSmall BusinessWhat Is Business Process Outsourcing (BPO), and How Does It Work?ByAndrew Bloomenthal Full Bio Andrew Bloomenthal has 20+ years of editorial experience as a financial journalist and as a financial services marketing writer.Learn about our editorial policiesUpdated September 06, 2022Reviewed byAmy Drury Reviewed byAmy DruryFull BioAmy is an ACA and the CEO and founder of OnPoint Learning, a financial training company delivering training to financial professionals. She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals.Learn about our Financial Review BoardFact checked byKimberly Overcast Fact checked byKimberly OvercastFull BioKimberly Overcast is an award-winning writer and fact-checker. She has ghostwritten political, health, and Christian nonfiction books for several authors, including several New York Times bestsellers. Kimberly also holds a Class C private investigator license.Learn about our editorial policies Investopedia / Michela Buttignol be457b7860