BUSINESS
PROCESS OUTSOURCING
Business Process Outsourcing (BPO) occurs
when an organization turns over the management and optimization
of a business function, to a third party that conducts the activity
based on a set of predetermined performance metrics. BPO is an extension
to IT outsourcing.
In business process outsourcing, the outsourcer retains control
of the process or, in other words, dictates the service provider
how to do the work. In offshore
outsourcing, the outsourcer may not instruct the service
provider how to perform the tasks but, instead, focuses on business
communicating and makes clear: what results are expected. As IT
outsourcing services are becoming more commodity based, customers
and vendors are equally looking at BPO as a means to revitalize
their organizations and reduce costs.
The typical offshore
IT outsourcing relationship is focused mainly on the IT
component of business functions. On the contrary BPO refers to the
outsourcing of one or more business functions or processes together
with the IT that supports that particular function or process. IT
is only a component of the entire business process.
Offshore
IT service providers are now selling BPO as an substitute
to the usual IT outsourcing, inspiring their potential clientele
to categorize more non core business processes, that are incompetent,
excessively costlier or easier said than done to manage. A client's
objective for outsourcing any business process is a subjective matter.
Hence, the question here is how does one differentiate in between
BPO and IT outsourcing?
Let us have a look at the two major differentiators between the
two.
- Varied Skill Sets
The skill sets
necessary to manage the core IT functions are different from those
to manage business processes. An IT outsourcer focuses on to a
great extent on the Technical
Infrastructure, Quality
Assurance and the offshore
model that the vendor follows, whereas a BPO vendor manages
people and processes.
Vendors need to concentrate strongly on the employee transitioning
when they manage a firm's Outsourced business processes. The same
holds true for the customer company.
Companies need to recognize their core competencies as compared
to activities that could be handled more efficiently by a third
party. For example, back-office functions such as payroll or accounts
receivables aren't likely to "make or break" a company,
so it might make sense to Outsource them if someone else can support
them more effectively.
- Savings Unquantified!!!
Quantifying savings from BPO deals can be a difficult job when
compared to IT outsourcing quantifiable savings. More often, companies
outsource to streamline processes, save time or leverage the strengths
of third-party specialists. Small and medium-sized companies generally
choose to outsource business processes to cut costs and build
a function like accounts receivables in a short time. In short,
they need a cheap back office requiring lesser lead-time.
Comparatively large companies choose BPO to improve their efficiencies.
Self-service human resources applications enable employees to
access and update their personnel and benefits information online
without having to involve human resources staff. Certain trends
may prompt firms within a given industry to outsource business
processes. For instance, consolidation within the banking industry
may make it easier for a bank to outsource its human resources
activities rather than integrate data from the parties with which
it merged or acquired.
The most inspiringly quantified figures available are from Mark
Hodges, vice president of corporate development at Exult, saying
that Global 500 firms spend between $50 million and $100 million
per year in a typical BPO deal.
Since BPO converges on an entire business function as a replacement
for attending only the IT outsourcing part of the function, it is
in many ways easier to spot the proceeds of a BPO relationship.
A few of them are:
- Outsource the entire business function to an external service
provider.
- Leverage comparatively better technologies & methodologies,
also reducing investment cost for the same.
- Assistance from industry knowledge or experience
- Reshuffling or regulating processes across organization
- Increase productivity
- Pursuing customer satisfaction
BPO allows the customer to capitalize on its core competencies,
while having a competent third party spotlight on its noncore processes
that also adds value to the business. From the vendor's point of
view, BPO offers a promising way to develop its key service offering,
with the prospect to commence pioneering service and pricing strategies
that realize higher pricing margins, in a relatively available market.
SERVICES OUTSOURCED
- Data Entry
- Programming
- Call Centers
- Back-Office Operations
- Relationship management
- Web Development Services
- Infrastructure
- Communications and Networking
- Operations
- Community Management
- Medical Transcription
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here to Read more details on services being outsourced.
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