Business process outsourcing (BPO) and robotic process automation (RPA) are two of the most popular productivity solutions available today. But while both approaches focus on completing and optimizing core business tasks, there are some distinct differences between the two. 

Understanding these differences can help you make an informed decision about which process is right for your company or whether a combination of the two is the best approach. And crucially, with an economic downturn looming and budgets looking tighter than ever, choosing the right approach could be the key to much-needed cost savings. 

RPA vs BPO - Differences and Benefits

RPA uses software robots to automate repetitive, rules-based tasks usually performed by humans. In simple words, RPA replaces human workers with digital workers. While RPA is popular across industries, it's incredibly disruptive in industries with resource-intensive back office tasks, like banking and financial services, healthcare, insurance, manufacturing, retail, and the public sector. 

The primary benefits of RPA are boosting productivity, improving efficiency, improving accuracy, boosting data security, enhancing customer service, and enabling more robust auditing and reporting. For example, in healthcare, RPA bots can cut costs, improve efficiency, and serve patients. 

BPO is the process of identifying repetitive, tedious processes and outsourcing them to an external provider. BPO is considered "offshore outsourcing" and has been widespread across sectors for many decades now. 

The main attraction of BPO is operational flexibility and cost-savings. These third-party companies benefit from economies of scale and often operate out of countries with lower taxes and cheaper labor. And on the flexibility side, BPO enables businesses to free up resources and reallocate time to focus on core business competencies like customer relations or product leadership. 

What's the Verdict? Which Option Is More Cost-Effective?

Okay, so both RPA and BPO can offer cost savings, but which is the most cost-effective today? 

Here's the bottom line. BPO can be an excellent way to achieve immediate cost savings by leveraging cheaper labor in foreign countries. This can be particularly effective in the US, where labor costs are high and rising.

In contrast, RPA may be more expensive initially due to the upfront costs associated with implementing the technology. However, RPA offers significant long-term cost savings by reducing the need for human labor altogether. By opting for automation bots, you can dramatically reduce your workforce while maintaining high levels of productivity. 

At the same time, RPA helps combat some of the disadvantages of BPO. Namely, by outsourcing tasks with BPO, you have to trust a third party to protect your corporate data. And in a world where data breaches are alarmingly common, this is no small risk. If your offshore provider experiences a data breach that involves your data, this can have a ruinous impact on your reputation and finances. But with RPA, you remain in total control of your sensitive data and core business processes.