What Is BPO?

Companies use business process outsourcing (BPO) when they hire external vendors to complete tasks requiring additional expertise, personnel, or both. In their Global Outsourcing Survey 2022, Deloitte defines three types of these services:

  • Traditional Outsourcing involves automating simple, discrete tasks to achieve cost reduction.
  • Managed Services Outsourcing and Operate Services Outsourcing offer cost reduction and value-added service in areas like specialized expertise, innovation, technology, and cost optimization.

Across the business spectrum, tasks can range from simple (e.g., generating mailings) to complex (e.g., cybersecurity). So, what is BPO, and how can it help TPAs?

Evolution of BPO

Modern outsourcing began in the 1980s with customer support call centers. However, BPO has evolved and dramatically expanded since then, especially with the arrival of the internet and other technological advancements. McKinsey & Company notes that while BPO was once primarily a strategy to save costs by automating basic tasks, today’s companies also outsource more sophisticated, customized, and industry-specific functions. The BPO industry generated $241.7 billion globally in 2021, and projections say it will reach $512.4 billion globally by 2030.

How TPAs Can Benefit

Expanding Services

A TPA may pursue business growth by offering additional accounts and services. However, it may need additional staff to support such an expansion. Hiring the right BPO partner enables the TPA to pursue its growth goals without an immediate staffing investment.

Supplementing Staff

Another area in which BPO can help TPAs is staff supplementation. Current personnel may be sufficient to meet current day-to-day needs. However extended personnel leave or high-volume enrollment season requirements may overwhelm the existing team. In such cases, hiring the right BPO partner can provide the TPA with the skilled and experienced temporary help they need to meet short-term challenges.

Reducing Costs

Hiring the right BPO partner can generate significant savings in operating expenses. With total compensation averaging $42.48 per hour for U.S. civilian employees (Bureau for Labor Statistics), it’s easy to see how quickly TPAs can achieve significant cost savings by hiring the right partner for specific tasks.

How do I choose the right partner?

When choosing a BPO partner, TPAs should consider several factors, including: 

  • Pricing structure – Is it affordable, and are there FTE options to simplify budgeting and productivity comparisons?
  • Experience and expertise – Do they have industry-specific expertise and experience in the type of work you need?
  • Flexibility – Is the BPO provider flexible? For example, if the TPA changes its administration software, can the provider still support them? Can the provider quickly reduce or ramp up services as needs change?

Are you sold on BPO?

With the right BPO partner, TPAs can gain the ability to meet operational needs and pursue prudent but ambitious business goals without incurring potentially harmful levels of financial risk. As a result, they may find themselves in a better position to improve customer service and overcome market challenges while simultaneously reducing costs and increasing revenue.

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