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Back Office Services

Back office typically means all the back-end operations of a company. This term originated from times when the building of organizations had a typical front office to incorporate the sales teams and other staff that interacted with customers directly. Back office therefore meant all the manufacturing, developing and administrative activities of the company and the staff working in the back office would not interact with customers directly.

Although back office operations are usually not given a lot of consideration, they are a major contributor to any business. Back office operations are like a soul to a body. Large amount of data needs to be stored by organizations which typically eats into the core business activities. If companies outsource processing of non-core but sensitive and critical data, it reduces costs, increases profitability and delivers greater core value and operational excellence.

Back offices are a part of Business Process Outsourcing (BPO). They include Information Technology departments that maintain telephones, networks, accounts, computers, human resources, operations architecture, administration and other support functions. These tasks are often supported by back-office systems: secure e-commerce software that processes company information (e.g. a database). A back-office system keeps a record of the company’s sales and purchase transactions, and update the inventory as needed. Invoices, receipts, and reports can also be produced by the back-office system.

In banking, the Back office includes a heavyweight IT processing system that handles position keeping, clearance, and settlement. In legal and para legal areas back office operations include research, report writing, deposition summaries and most common legal duties for lawyers and other legal experts. Legal operations are typically time consuming but with Back Office Services speed can be accomplished to centralize daily activities and information, client and case management, document preparation, research and billing. Such ease of legal operations can ensure a smooth functioning of legal firms.

In investment firms, the back office includes the administrative functions that support the trading of securities, including record keeping, trade confirmation, trade settlement, and regulatory compliance.

In sales, the back office typically plays a key role internally, providing support to the sales force for administrative duties such as legal, finance, marketing, order management, operations support, etc. as well as customer facing roles typically positioned to include functions that support customer order fulfillment and duties involved with readying customer-support call centers.

Data analysis and entry is an important area of expertise that helps boost the performance, competence, and increase the productivity of an organization. A quick support for data analyzing or large-scale data capture, claims processing or any other business outsourcing services can be accomplished by a back office operation.

Back offices may be somewhere other than the headquarters of a company. Much of the time they are in areas and countries with cheaper rent and lower labor costs. Back office functions can be outsourced to consultants and contractors in any country.

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Business Process Outsourcing

Business Process Outsourcing (BPO) is a division of Outsourcing which includes contracting of operations and responsibilities of a specific area of business functions, to a third party service provider. BPO has been there in the manufacturing industry for many years now. Manufacturing industries typically have big divisions such as suppy chain that require services to handle.

Business Process Outsourcing (BPO) has two types of outsourcing; Back office outsourcing involves functions like human resources, accounting and finance; Front office has services related to customer related and contact center.

BPO that is contracted outside a company’s country is called offshore outsourcing and BPO that is contracted to a company’s neighboring country is called nearshore outsourcing.

Since BPO is close to Information Technology industry, it is generally called as information technology enabled service or ITES. Two segments of BPO are Knowledge Process Outsourcing (KPO) and Legal Process Outsourcing (LPO).

BPO has advantages and disadvantages. One of the advantages is it increases the company’s flexibility. Resources can be freed and a variable cost structure can be imposed giving a company a freedom to make changes as per the requirements. BPO allows a company to focus on its core competencies without being burdened by the demands of bureaucratic restraints. Key employees are released from non core processes and given time to focus on their actual core areas. This creates a competitive edge in the company. BPO can contribute to the increase in speed of business processes. Speed in business processes is another area where the company would benefit due to BPO. Business bottle necks can be avoided by companies and retain their goals in the right perspective. BPO would allow a company to retain their speed and agility which would not have been possible without BPO. A company would be able to grow at a faster pace with the flexibility that a BPO would give.

With many advantages of flexibility in the company operations, management needs to take cautious steps before embarking on a BPO. Areas where problems arise in practice are service levels, unclear contractual issues, changing requirements, and unforeseen changes. These challenges are not conducive to a company’s growth. A dependence on a BPO would reduce flexibility on operations of a company.

Risk is the major drawback with Business Process Outsourcing. Outsourcing of an Information System, for example, can cause security risks both from a communication and from a privacy perspective. Employees no longer feel attached to many functions in the organization. Running costs may be underestimated leading to a major risk.

Risk factors must always be influenced to achieve maximum benefits. A business continuity model (BCM) should be in place to manage outsourcing in a structured way. Threats should be avoided by minimizing risks and maximizing positive outcome. A BCM is a series of steps to successfully identify, manage and control the business processes that can be outsourced.

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