BPO increasing the flexibility of organizations

One of the most important advantages of BPO is the way in which it helps to increase a company’s flexibility. However, several sources have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways.
• Most services provided by BPO vendors are offered on a fee-for-service basis. This helps a company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not requisite a company in investing in assets and hereby making the company more flexible . Outsourcing of for instance a fraction of the workforce provides firm flexibility and reconfiguring resource deployments and reduce response times to major environmental changes.
• Another way in which BPO contributes to a company’s flexibility is that a company is able to focus on it’s core competencies, without being burdened by the demands of bureaucratic dictate . Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firm’s core businesses . The key in this lies in knowing, which of the main value drivers to focus on – customer intimacy, product leadership, or operate excellence. This is exemplified by for instance the case of Dell. Focusing on one of these drivers instead of more helps a company create a competitive edge. Herewith the company becomes more responsive and is able to react faster on changes in a an organization’s environment .
• A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Using techniques such as linear programming is a way to reduce cycle time and inventory levels, which reduces a company’s slack. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company.
• Finally, flexibility is seen as a stage in the organizational life cycle. For instance in the case of Nortel, which used to be a very rigid and bureaucratic organization, BPO helped to transform the company from a bureaucratic organization into a very agile organization by means of BPO. A company can hereby help maintaining ambitious growth goals, which do not fit with regular incumbent strategies. BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to become efficient as they greatly expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation.