BPO is distinct from information technology (IT) outsourcing, which focuses on hiring a third-party company or service provider to do IT-related activities, such as application management and application development, data center operations, or testing and quality assurance. BPO goes beyond that–It has to do with improving the performance, efficiency and productivity of a business.
Business process outsourcing is considered as a strategic initiative for companies to stay competitive in the global market. As the size and complexity of the outsourcing project grows, companies need to manage multiple outsource vendors, success of BPO depends on coordination between different vendors located in different countries and time-zones. BPO requires organizations to change their business processes to fit with the process of the service provider. First organization should make organizational changes to support the outsource relationship with the vendors. If organization change activity is not planned and executed properly, the separation and integration of businesses processes cannot work smoothly. BPO process leads to operational as well as mind-set changes to the field.
IT Outsourcing has been effective at reducing IT operational costs, but ITO impact has been limited to controlling IT spend. With respect to BPO, IT outsourcing industry has matured. There are lot of proven standard processes are established regarding ITO. Because of heavy competition in ITO domain service providers will provide solutions according to customer requirements. Clients also take help of legal ITO advisors before signing contract with ITO providers to avoid pitfalls lies under contract. BPO vendors are measured and paid based on outcomes rather than transactions because of such nature the payment, contract and renewal of contract process is more complex than ITO. IT outsourcing act as bridge between supplier and customer so they can work together effectively and efficiently.
Most of the key core processes of a business require IT support; if you're executing logistics management or warehouse management or customer care, for example, then those processes will have a strong IT infrastructure to them. Under an ITO contract it is important to make sure you don't automate or freeze the operational structure or process. ITO’s progress is measured in IT cost savings. BPO seeks to constantly update and improve a designated process and measures its progress based on business results. ITO is not in conflict with BPO and each cannot replace the other–they are complementary
BPO will face more operational risk than ITO in the form of operational complexity, communication, security, measurement problems, vendor exploitation of customer expertise, Misuse of trust and incapable vendor resources.
