Business Process
Outsourcing
What is Business Process Outsourcing?
is a subset of outsourcing that involves the
contracting of the operations and responsibilities of
specific business functions (or processes) to a third-
party service provider. Originally, this was associated
with manufacturing firms, such as Coca Cola that
outsourced large segments of its supply chain. In the
contemporary context, it is primarily used to refer to
the outsourcing of business processing services to an
outside firm, replacing in-house services with labor
from an outside firm.
BPO is categorized into back office outsourcing, and
front office outsourcing
Back Office Front Office Outsourcing
Outsourcing which include customer related
which include internal business services such as:
function such as:
Contact Center Services
Human Resource
Finance
Accounting
BPO- Types
There are three types of BPO.
Offshore Outsourcing
Onshore Outsourcing
Nearshore Outsourcing
BPO that is contracted outside a company's
country is called offshore outsourcing.
What is offshore outsourcing?
is the practice of hiring an external organization to
perform some business functions in a country other
than the one where the products or services are
actually developed or manufactured is the practice of
hiring an external organization to perform some
business functions in a country other than the one
where the products or services are actually developed
or manufactured.
There are 4 basic types of OFFSHORE
OUTSOURCING:
ITO — Information Technology Outsourcing
BPO — Business Process Outsourcing covers things
like running call centers, processing insurance claims.
Software R&D — offshore software development
KPO - Knowledge Process Outsourcing covers things
that require a higher skill set such as reading X-Rays,
performing investment research on stocks and
bonds, handling the accounting functions for a
business or executing engineering design projects .
BPO that is contracted with company's own
country is called onshore outsourcing.
What is offshore outsourcing?
Onshore outsourcing (also called domestic
outsourcing) is the obtaining of services from
someone outside a company but within the
same country. Also see offshore outsourcing,
the obtaining of services from people or
companies outside the country.
BPO that is contracted to a company's neighboring
(or nearby) country is called nearshore outsourcing
What is nearshore outsourcing?
Nearshoring is "the transfer of business or IT
processes to companies in a nearby country, often
sharing a border with your own country", where both
parties expect to benefit from one or more of the
following dimensions of proximity: geographic,
temporal (time zone), cultural, linguistic,
economic, political, or historical linkages. The
service work that is being sourced may be a
business process or software development.
There are some sub-segments of business
process outsourcing industry.
Knowledge process outsourcing (KPO) is a
form of outsourcing, in which knowledge-
related and information-related work is carried
out by workers in a different company or by a
subsidiary of the same organization, which may
be in the same country or in an offshore
location to save cost. KPO firms, in addition to
providing expertise in the processes themselves,
often make many low level business decisions
—typically those that are easily undone if they
conflict with higher-level business plans.
Legal Process Outsourcing (also known as LPO)
refers to the practice of a law
firm or corporation obtaining legal support services
from an outside law firm or legal support services
company. LPO providers have established themselves
in Canada, India, the Philippines,
the US, Israel and Latin America. They traditionally
offer services in the areas of document review, legal
research and writing, drafting of pleadings and briefs,
and patent services outsourcing.
Why BPO is gaining ground?
Few of the motivation factors are:
Factor Cost Advantage
Economy of Scale
Business Risk Mitigation
Superior Competency
Utilization Improvement
Different Types of services being
offered by BPO
Customer Support Services
Technical Support Services
Telemarketing Services
Employee IT Help-desk Services
Insurance Processing
Policy Maintenance/ Management:
Data Entry Services/Data Processing Services
Scanning, OCR with Editing & Indexing Services
Internet/ Online/ Web Research
Advantages of BPO
Cost reductions- Cost reduction is done through process improvements, reengineering and
use of technologies that reduce and bring administrative and other costs under control.
Concentration on core business- With the day-to-day back office operations taken care of,
the management is free to concentrate more on the core business of the company.
Outside expertise- Company is saved from the hassles of recruiting and training personnel.
BPOs ensure that experts from another company provide the needed guidance and skills.
Cater to changing customer demands- It is another great advantage of out sourcing the
business processes. Many BPOs provide the management with flexible and scalable
services to meet the customers' changing requirements, and to support company
acquisitions, consolidations, and joint ventures.
Revenue increase- As stated above, by outsourcing non-core processes, companies can
concentrate on increasing their sales and market share, develop new products; spread out
into new markets and increase customer service and satisfaction
Disadvantages of BPO
Odd working hours
Health issues
Abusive clients
Age factor
Social issues/ alcohol consumption/sex
Future trend of call center jobs
Why people
Prefer BPO… Leave BPO…
Did not get a better job No growth opportunity/ lack
Find nothing better to do of promotion
Education level doesn’t For higher Salary
matter For Higher education
Good work environment Misguidance by the
Good Benefits company
Flexibility of time Policies and procedures are
Attractive life style not conducive
Transport facility
Physical strains
Uneasy relationship with
pears or managers