Business Process Outsourcing (BPO)

Gartner defines business process outsourcing (BPO) as “the delegation of one or more IT-intensive business processes to an external provider that, in turn, owns, administrates and manages the selected processes based on defined and measurable performance metrics.” Examples of business processes that are outsourced to an ESP include logistics, procurement, HR, finance and accounting, CRM, or other administrative or customer-facing business functions.

BPO services are characterized by multiyear, contractual relationships, with appropriate SLAs that deliver full business processes to the service recipient. Typically, BPO services include the delivery of the people and process workflows, as well as the underpinning technology that supports them. Additionally, gradients of process — and pieces of subprocesses — can be outsourced as discrete BPO contracts, or full end-to-end, comprehensive arrangements. In all cases, the inherent risk for the business process in scope is the responsibility of the service provider, as outlined in the contract’s statement of work. This is what differentiates BPO from, for example, application outsourcing.

At the core of Gartner’s BPO forecasts are process management services, but other product support, consulting, and development/integration services can also be delivered through BPO contracts. This is because the typical life cycle of a BPO contract will follow design-build-and-run phases, during which consulting, implementation and management services are being delivered. That said, the cornerstone of any BPO deal is the process management revenue, which represents the ongoing, steady-state phase of the deal, once the processes are fully transitioned to the service provider.