Business process outsourcing (BPO) is the practice of contracting a business function, such as customer support, payroll, claims processing, or accounting, to an external service provider instead of performing it in house. ISO 37500:2014, the international standard on outsourcing, defines outsourcing as a "business model for the delivery of a product or service to a client by a provider, as an alternative to the provision of those products or services within the client organization". In the Philippines, BPO sits inside the wider information technology and business process management (IT-BPM) sector, which earned more than 40 billion US dollars in export revenue and employed 1.9 million people in 2025, according to the industry association IBPAP.

A definition you can trace to its sources

Most online definitions of BPO are written from memory. The standards bodies have done the work already, so it is worth quoting them. ISO 37500:2014, produced by ISO Project Committee ISO/PC 259 on outsourcing, covers "the main phases, processes and governance aspects of outsourcing, independent of size and sectors of industry and commerce". Its definition rests on a few conditions: the arrangement starts with a make-or-buy sourcing decision, resources can transfer to the provider, the provider is responsible for delivering the service for an agreed period, and the client remains accountable for the outsourced services while the provider performs them.

A second standard is more specific to BPO itself. The ISO/IEC 30105 series on IT Enabled Services-Business Process Outsourcing (ITES-BPO) describes these services as "the delegation of one or more IT enabled business processes to a service provider who uses appropriate technology to deliver service", with the provider managing and administering the process against predefined, measurable performance metrics. The same document defines a business process plainly as a "collection of related, structured activities that produce a specific service or product for a particular customer".

Put together, a working definition holds up well: BPO is a contractual model in which a client hands a defined business process to an external provider, who runs it to agreed performance standards while the client keeps final accountability for the outcome.

Types of BPO

BPO is usually classified along two axes: where the work is done, and what kind of work it is.

By location

  • Offshore outsourcing: the provider operates in a distant country, typically chosen for cost and talent supply. Work sent from the United States to the Philippines is the classic example.
  • Nearshore outsourcing: the provider sits in a nearby country, often in a similar time zone.
  • Onshore or domestic outsourcing: client and provider are in the same country.

By function

  • Front-office BPO: customer-facing work such as contact center services, sales, and technical support.
  • Back-office BPO: internal functions such as finance and accounting, human resources, and data management.

ISO/IEC 30105-4 lists the process areas the model covers, which reads as a fair map of the industry: finance, human resource management, administration, health care, banking and financial services, supply chain management, travel and hospitality, media, market research, analytics, telecommunication, and manufacturing. In the Philippine industry taxonomy, the IT-BPO sector has been described as comprising eight sub-sectors: knowledge process outsourcing and back offices, animation, call centers, software development, game development, engineering design, and medical transcription. You can browse verified providers across these categories in our BPO directory.

The Philippine context

The Philippines is one of the two centers of gravity of the global BPO industry. The Board of Investments, an agency attached to the Department of Trade and Industry, records that as of 2010 the Philippine IT-BPM sector "has already overtaken India's standing in voice-based services, making the country the number one provider for such services in the global economy". The same agency describes the sector as "one of the best-performing and employment generating activities" in the economy, and notes that in 2011 voice services alone accounted for 64 percent of direct employment (493,000 jobs) and 67 percent of revenues (7.4 billion dollars).

The industry has grown several times over since then. IBPAP reported that the sector closed 2025 with 40 billion dollars in revenues and 1.9 million jobs, growth of 5 percent and 4 percent respectively over the 1.82 million employees and 38 billion dollars recorded at the end of 2024. That pace beat the global industry, which grew about 3 percent. The sector now contributes roughly 8 percent of Philippine gross domestic product, and the IBPAP roadmap targets 42 billion dollars in revenue and 1.97 million jobs for 2026. Around 160 global capability centers now operate in the country, including a JPMorgan Chase center employing more than 21,000 people.

On regulation, the foundations were laid early. The Special Economic Zone Act of 1995 created the Philippine Economic Zone Authority (PEZA), whose registration gives IT-BPM firms tax incentives, while the Board of Investments provides income tax holidays and streamlined registration for qualifying enterprises. The first multinational call center, SYKES, opened in the country in 1997, and more recent legislation such as Republic Act 11927 focuses on digital and English language training for the workforce. We track policy changes affecting the sector in our industry news coverage.

Related terms

  • IT-BPM: information technology and business process management, the umbrella term Philippine government and industry bodies use for BPO plus IT services.
  • ITES-BPO: IT enabled services BPO, the ISO/IEC 30105 term for outsourced processes delivered through technology.
  • KPO: knowledge process outsourcing, higher-judgment work such as research, analytics, and legal support.
  • GCC: global capability center, an offshore unit owned by the client company itself rather than a third-party provider.
  • Outsourcing arrangement: defined in ISO 37500 as a "contractual arrangement between two or more organizations for the provision of specific services for a fixed period of time", with one party as client and the other as provider.

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