BPO vs. Shared Services: Which to Choose?
To streamline business procedures, companies can choose to either acquire an outsourced service or go for shared services.
For instance, businesses can choose to rely on an outsource accounting service in Singapore to have experienced and professional accountants handle their financial matters.
At the same time, businesses can also choose to consolidate their business functions to better serve the company and its business units.
Many owners are confused about the differences between business process outsourcing (BPO) and shared services. In this article, we explain the differences between the two. Keep reading to learn all about BPO and shared services.
What Is Business Process Outsourcing (BPO)?
BPO refers to the process in which a business procedure is contracted to an outsourced expert.
Through BPO, business processes such as accounting and payroll will still be within the company’s control, but they will be handled by an outside company. As a result, the company may concentrate its efforts on its core business.
Businesses often use BPO because it can help them save time and money and increase productivity.
The following are the two major types of BPO:
1. Offshore Outsourcing
Offshore Outsourcing involves relying on a third-party service provider in another country to benefit from lower costs. For instance, a company in the USA that chooses to acquire an outsource accounting service in Singapore is using offshore outsourcing.
2. Onshore Outsourcing
Onshore Outsourcing involves contracting the business processes to a third-party service provider in the same country.
What Are Shared Services?
When a company consolidates its support functions to better serve the company and its business units, they are engaging in shared services. Shared services operate as a business within a company and make use of a well-defined infrastructure to enable higher value service delivery.
Shared services also reduce costs. Services such as human resources, information technology, supply chain, and various other front-office and back-office services are typically included in this category.
However, implementing a shared service function within an organisation can be a challenging and time-consuming endeavour.
The most prevalent reason for this is a lack of internal competence in carrying out the responsibilities, not to mention the difficulties in finding the right candidates for the job function.
Following are the 3 main types of shared services:
1. Centralized Shared Services
Centralized Shared Services involve a company using its main team or department to manage all of the business functions.
2. Decentralized Shared Services
Decentralized Shared Services involve a specific business unit using a team to manage the business functions for that specific unit, such as accounting.
3. Virtual Shared Services
Virtual Shared Services involve the combination of centralized and decentralized services.
Both BPO and shared services have varying benefits. Let’s explore them in detail.
Benefits of BPO
Businesses may save a lot of money by choosing to outsource certain functions, such as finance, accounting, and HR. With BPO, businesses can get rid of the stress of recruiting and training employees to take on these responsibilities.
With BPO, the cost of technology updates and other upkeep, which would otherwise be borne by the business, is borne by the BPO partner (a.k.a. vendor).
This is because, most often than not, the task may be completed more quickly and efficiently by hiring a vendor that specializes in the area of work the business wants to outsource.
This will lead to improved and streamlined procedures, thanks to the use of technology to achieve the desired outcome.
Benefits of Shared Services
A shared services strategy has been adopted by large organizations in HR, IT, and back-office support operations. Using shared services can lead to cost reduction, improved service, and improved productivity.
This is because, by combining many operations into a single organisation, companies can frequently realise economies of scale and reduce duplication of effort.
Moreover, it is easier to monitor and control performance when certain business functions are centralised. All in all, when everyone is working from the same platform, it can make it much simpler to collaborate on projects and share information with one another.