BPO vs Outsourcing: What Is the Difference?

BPO vs outsourcing is a question of scope: outsourcing is the broad practice of handing any work to an outside provider, while business process outsourcing (BPO) is a specific kind that covers business processes such as customer support, billing and back-office administration. Every BPO arrangement is outsourcing, but not all outsourcing is BPO.

What outsourcing means

Outsourcing means contracting an outside company or individual to do work you would otherwise do yourself. It can involve any function: IT, design, logistics, legal support, manufacturing and more. It may be local or overseas.

What BPO means

BPO is the outsourcing of business processes, the routine functions that keep a company running: customer service, data processing, payroll administration, accounts, recruitment logistics and healthcare administration. For a full introduction, read what BPO is.

How they relate

Think of outsourcing as the umbrella:

• IT outsourcing (ITO): software development, hosting and technical support.
• Business process outsourcing (BPO): operational processes, front office and back office.
• Knowledge process outsourcing (KPO): research, analytics and other expert work.
• Legal process outsourcing (LPO): legal support tasks under lawyer supervision.

We compare the last three in BPO vs KPO vs LPO.

Examples

• Hiring a company to build your website is outsourcing (IT). It is not BPO.
• Hiring a company to run your customer support desk is outsourcing and BPO.
• Hiring a firm to prepare a market research report is outsourcing and KPO.
• Hiring a provider to process medical claims is outsourcing and BPO; see our medical billing and RCM service.

Why the words get mixed up

In everyday use, many people say "outsourcing" when they mean BPO, and "BPO" when they mean any offshore team. Providers also use the terms loosely. The useful question is not the label but: what work is being handed over, who manages it and how is it measured?

Related terms

• Offshoring: moving work to another country, whether or not a third party does it.
• Offshore staffing: hiring dedicated people abroad whom you direct. See offshore staffing vs outsourcing.
• Managed services: a provider takes ongoing responsibility for a function.

How to choose

1. Decide what work you want to hand over.
2. If it is an operational process with volume and quality targets, look for BPO.
3. If you want dedicated people you direct, look at offshore staffing.
4. If you are unsure, start with one process and a pilot.

Use our BPO company checklist to compare providers, and the Wikipedia article on outsourcing for background.

BPO vs outsourcing: which words to use in a contract

Precise wording prevents misunderstandings. In an agreement, describe the work rather than relying on labels:

• The process: for example, "handling inbound customer email for the support inbox".
• The volume: the expected number of items per month.
• The service levels: response times, accuracy targets and reporting.
• The hours: days and shifts covered.
• What is out of scope: so there is no argument later.

Whether you call it BPO, outsourcing or a managed service matters less than the clarity of these points. Providers who are happy to define them in writing are usually the ones who deliver.

A quick test for any proposal

Ask: "If this went wrong, who would be responsible, and how would I know?" A good BPO proposal answers with a named lead, agreed measures and a reporting rhythm. A proposal that only lists staff hours describes staffing, not BPO. Both are valid, but you should know which you are buying.

Key takeaways: BPO vs outsourcing

• BPO vs outsourcing: BPO is a type of outsourcing focused on business processes such as support, billing and back-office work.
• Other types include IT outsourcing, knowledge process outsourcing and legal process outsourcing.
• Offshoring is about location, outsourcing about who does the work, and staffing about who directs it.
• Describe the work, volumes, service levels and exclusions in writing rather than relying on labels.
• If unsure, start with one process and a paid pilot.

Teamliva offers both

Teamliva (Team Liva) provides BPO solutions and dedicated offshore staffing from Dhaka. Read about our BPO and staffing solutions and offshore staffing services, or contact us to discuss which fits.