Business process outsourcing

Business process outsourcing

1. Business Process Outsourcing Gaurav Awasthi

2. Definition of BPO “ Business Process Outsourcing (BPO) is defined as the delegation of one or more business processes to an external provider who, in turn, owns administrate and manages the selected processes based upon defined and measureable performance matrices ”.

3. Genesis of BPO… Many manufacturing companies have been outsourcing the manufacturing of subassemblies from very beginning. Similarly many large companies have been outsourcing non-core activities such as IT maintenance, housekeeping etc for decades. But since past 15-20 years because of rapid advance in ITES companies have started to outsource complex processes also to outsiders.

4. Business Process Outsourcing can most easily be applied in IT Intensive functions such as: Payroll Processing HRM activities Financial Accounting Customer Interface Hence IT has been stuck with the term BPO these days But BPO can also involve the outsourcing of other non-IT intensive applications. In-fact a whole process such as Distribution can also be outsourced to enable companies to focus on core jobs.

5. Benefits of BPO Focus: BPO allows companies to outsource non-core processes and allow them to focus on their core competencies. Best Practices: Since BPO vendors specializes in specific processes they become experts and bring best practices to improve quality. Cost-Reduction: BPO vendors process huge data from various locations – economy of scale, operate from cheaper countries and use latest technologies to reduce cost. Reduction in Capital Requirements: Organizations don’t need to buy and maintain costly systems so their working capital is freed. Fixed to Variable Cost: BPO vendors charge as they work. So no need to tie capital in lean period.

6. So Rank-wise reasons for Outsourcing Cost Reduction Focus on Core Competencies Improve Quality Increase speed to market Faster Innovation Conserve Capital

7. What to outsource Typically all activities performed by the organizations can be classified into the following broad categories: Core & Non Core activities Critical and Non-critical Activities Core Activities are basic reason for company’s existence such as product design, manufacturing, branding etc. Critical Activities are time sensitive activities e.g. procurement of raw material for production.

8. 2. Non-core & Critical Activities 4. Core & Critical Activities Customer care HR related administration Medical transcription Product design Final manufacturing and main assembly Branding 1. Non-core & Non-Critical 3. Core & Non-critical Security Cafeteria Housekeeping Helper/peon service Marketing of credit cards Transaction processing Accounts, receivable management Outsourcing starts with Box.1. Box.2 is the hot favorite these days e.g. logistics. Even some activities in Box.3 are also being outsourced after advancement in ITES. Box.4 is generally not outsourced

9. The process of Outsourcing Outsourced become key process for BPO Vendor Advantages: Low Cost Access to best practices Reduced risk Improved service Advantages: Core Focus Efficiency and control Customer focus

10. Types of BPOs Transactional: Handle only one process not entire activity. Works on contracts and performance matrices. Niche BPOs: Wider range of processes (2,4) than transactional but caters to some specific industry sector such as banking, manufacturing. Etc Comprehensive: Handle all transactional and administrative processes in a Function such as HR, Finance etc.