What is BPO? Meaning, Benefits, and Applications

Business Process Outsourcing (BPO) is one of the fastest-growing business strategies in the world. According to Grand View Research, the global BPO market was valued at $302.62 billion in 2024 and is projected to reach $525.23 billion by 2030¹. This article explains what that means and evaluates the benefits and challenges of BPO.

Some key takeaways:

• BPO is defined as “the act of outsourcing some aspect of your business's operations to a third-party vendor or service provider.”
• BPO service providers operate under a service level agreement (SLA) that defines performance standards, quality metrics, and accountability measures.
• When done properly, BPO can provide your company access to more cost-effective global talent and improve business efficiency.

What is BPO?

If you search for “BPO meaning” on Google, you’ll learn that BPO is defined as “the act of outsourcing some aspect of your business's operations to a third-party vendor or service provider.” This isn’t a new concept. Companies have been outsourcing customer service, accounting, and other services for decades.

Expand your search by entering the long-tail keyword “bpo business process outsourcing meaning.” That will bring up an Investopedia article2 that uses terms like “subcontracting” and “vendors.” This article will focus on those because the concept of business process outsourcing has expanded since its inception in the 1980s. Today, it falls into two categories:

Front-Office BPO

• Customer service and support
• Sales and marketing
• Technical support
• BPO call center operations

Back-Office BPO

• Accounting and finance
• Human resources
• Data entry and processing
• Supply chain management

How Does BPO Work?

The first step in the BPO process is to identify specific business functions that can be outsourced. Ideally, you’ll want to remove that process from the internal workings of the company and completely hand it over to a third party. When done properly, this can reduce costs and improve business efficiency. Examples of this include:

• Customer service and technical support
• Accounting and bookkeeping
• Data entry and processing
• Human resources management
• IT services and software development

BPO service providers operate under a service level agreement (SLA) that defines performance standards, quality metrics, and accountability measures between clients and service providers. To ensure a proper fit, the client company can prepare the SLA before searching for a provider, and then use it as a checklist to ensure they find the right partner.

What Are the Benefits of BPO? Why Do Companies Use BPO?

There are several benefits to business process outsourcing if you choose the right vendor. The most obvious is cost savings, but BPO can also help your company grow and scale more effectively by tapping into global talent pools and streamlining internal business operations. In other words, BPO can save you time and money. Here’s a breakdown of these benefits:

• Cost Reduction and Efficiency: Outsourcing to different geographical regions can create significant cost savings for your business. It also allows companies to convert fixed costs into variable costs, improving cash flow management. This is, of course, dependent upon the quality of your BPO partner.
• Access to Global Talent and Expertise: Hiring skilled workers in the United States or the United Kingdom is expensive. Outsourcing those same positions to BPO partners in other nations with cheaper labor costs can give you the same (or better) level of talent for significantly less. This is one of the key drivers of BPO growth.
• Focus on Core Business Activities: Outsourcing certain business functions streamlines your internal operations and gives you more time to spend on core business activities that can drive sales and revenue. This creates a competitive advantage over businesses that don’t outsource their non-core functions.
• Scalability and Flexibility: BPO services are easier to scale because you don’t need to worry about severance pay and employee benefits. This scalability is particularly valuable for seasonal businesses or companies experiencing rapid growth. It can also be useful when companies are involved in mergers and acquisitions.

What Are the Challenges and Risks of BPO?

Despite significant benefits, BPO implementation faces several challenges. Cutting costs is important, but not when it comes with a decline in the quality of your services. This can happen for several reasons, including language barriers, data security, and unrealistic expectations. Here’s a more detailed breakdown of what that looks like:

• Communication and Cultural Barriers: Outsourcing to other nations means you’ll be dealing with a different culture and possibly a different language. That can create barriers that are difficult to overcome. Consider this carefully.
• Data Security and Privacy Concerns: Sharing sensitive business information with external providers raises security risks. Companies must establish data protection protocols and ensure compliance with global and domestic regulations.
• Dependency on Service Providers: Becoming overly reliant on BPO service providers could be damaging to your company if the provider goes out of business or becomes less efficient. It’s important to keep core functions in-house to avoid this.
• Managing Quality and Performance: Doing business with a BPO provider in another country limits the amount of control you have over quality and performance. This often happens with manufacturing or development firms.

What Is the Difference Between BPO and KPO?

Let’s go back to our Google search. Enter the keyword “BPO and KPO meaning.” These two terms are often confused because they’re so similar. Here’s how they differ:

• Business Process Outsourcing (BPO) focuses on routine, process-driven tasks requiring minimal decision-making. Examples include data entry, customer service, and basic accounting functions.
• Knowledge Process Outsourcing (KPO) involves complex, knowledge-intensive activities requiring analytical skills and domain expertise. Examples include research and development, financial analysis, and legal services.

Future Trends in BPO

Artificial intelligence and machine learning are changing the nature of business process outsourcing. Client companies are automating more processes, limiting BPO opportunities. On the other side of that equation, BPO providers are utilizing technology to streamline their operations and reduce costs. Expect this trend to continue.

Nearshoring and reshoring are also on the rise as companies seek better cultural alignment and closer geographic proximity. This improves business sustainability and simplifies the alignment of environmental and social responsibilities. One example of this is outsourcing US services to Caribbean nations rather than the Philippines.

Streamline Your International BPO Payments with Wise

Managing payments to international BPO providers can be complex and expensive with traditional banking. Wise makes international BPO payments simple, fast, and affordable.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

Wise offers a smarter solution for businesses working with global outsourcing partners. You can open an account 100% online and make payments with ease.

Open a Wise Business account online

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	Editor & Business Expert:
	Panna is an expert in US business finance, covering topics from invoicing to international expansion. She creates guides and reviews to help businesses save time and make informed decisions. You can read more useful business articles on her author profile.

	Author:
	Kevin D. Flynn is a retired financial professional, business coach, and financial writer. He lives in Leominster, Massachusetts with his wife Evelyn, two cats, and ten wonderful grandchildren. When he’s not working, you’ll find him at the golf course or on his back porch reading classic sci-fi novels.

Sources:

1. https://www.grandviewresearch.com/industry-analysis/business-process-outsourcing-bpo-market
2. https://www.investopedia.com/terms/b/business-process-outsourcing.asp
   Soures checked October 2025.