| Today's global market is highly competitive and ever | | | | companies. As enterprises and service providers |
| changing. In order for a company to survive in this | | | | evolve, it has become clear that there is no right model |
| dynamic environment, effective methods have to be | | | | for a given company. Instead, enterprises will use parts |
| developed in which to improve productivity in the most | | | | of a model or a combination of models as they begin |
| cost effective ways possible. One strategy that has | | | | to explore and iron out the issues around business |
| gained increasing popularity over the past few years is | | | | processes outsourcing. |
| called Business Process Outsourcing (BPO). A | | | | In a report published by Gartner Research, it is |
| definition given of BPO by NelsonHall describes it as a | | | | suggested that three criteria be used to evaluate the |
| process whereby the outsourcing of business | | | | use of outsourcing: |
| functions or processes are handed over to a third | | | | - Firstly, enterprises should consider the exact reason |
| party. In these contracts the provider is responsible for | | | | for outsourcing: Is it to focus on core business, improve |
| performing and managing the outsourced function or | | | | service levels, to benefit from industry best practices |
| process on behalf of the customer. | | | | or reduce transaction costs? |
| In other words, BPO is the leveraging of technology or | | | | - Secondly, enterprises need to consider the specific |
| specialist process vendors to provide and manage an | | | | processes they would like to outsource. Repetitive, |
| organisation's processes and applications. Some of the | | | | transaction-intensive are the best choices for offshore |
| most common processes which are outsourced | | | | outsourcing. At the same time, many enterprises |
| include customer service call centres, accounting and | | | | looking at end-to-end business processing do not want |
| payroll, and human resources. It is very often found | | | | to give up control of the process because of strategic |
| that the use of offshore resources tend to be more | | | | and security concerns. In this situation, offshore |
| economically viable in some BPO models, and many | | | | insourcing or captive service centres are viable options. |
| companies choose this option when outsourcing | | | | - Finally the enterprise has to consider how well the |
| non-core operations such as back or front office | | | | function is currently performed. If it has benchmarks |
| operations typically performed by white collar and | | | | which are currently outperforming the industry |
| clerical workers. | | | | standard, offshore insourcing may be the best bet, |
| Use of a BPO as opposed to an application service | | | | whilst on the other hand, if statistics show a less than |
| provider (ASP) usually also means that a certain | | | | average performance, outsourcing may be the best |
| amount of risk is transferred to the company that is | | | | option. |
| running the process elements on behalf of the | | | | Some criticisms of BPO include the fact that quality of |
| outsourcer. BPO includes the software, the process | | | | service might degrade due to outsourced workers not |
| management, and the people who operate the service, | | | | actually being paid agents of the company. It has been |
| while a typical ASP model includes only the provision | | | | argued that there is less incentive for an agent to |
| of access to functionalities and features provided or | | | | show loyalty or work ethic in its representation of the |
| 'served up' through the use of software, usually via | | | | client. Furthermore, BPO has been criticised as having |
| web browser, to the customer. Offshoring is similar to | | | | a negative effect on local economies by taking away |
| BPO, but differs slightly in that it means the work is | | | | job opportunities from the population in countries such |
| generally transferred to a different company in another | | | | as the USA and UK. Another criticism worth noting |
| country. Insourcing and captive service are terms that | | | | and which is of greater financial concern to the |
| refer to the use of subcontractors within an | | | | companies involved is that of security risks. Many |
| organisation created to deal specifically with a certain | | | | measures have been taken to combat these risks in |
| task or process. | | | | various ways, but it cannot be denied that they are a |
| As of late the trend towards BPO has become | | | | reality that has to be dealt with. |
| increasingly popular. The main motive behind BPO is to | | | | The main benefits of outsourcing include: |
| allow an organisation to invest more time, money and | | | | - Potential to increase product quality, whilst lowering |
| human resources into core activities such as building | | | | costs |
| strategies for the development and growth of its | | | | - Developing countries benefit from patronage of |
| business interests. It has grown to such an extent that | | | | companies that outsource to them, in terms of |
| managers no longer need to justify a decision to | | | | increased wages, job prestige, education and quality of |
| outsource a process, but rather in some cases need | | | | life. |
| to justify why work should be done internally, when it | | | | - With the ability to purchase intellectual capital, |
| could easily be outsourced in a more cost effective | | | | businesses have the ability to utilize the know-how of |
| manner. | | | | other organisations. |
| Although BPO might at first glance seem like a | | | | - Outsourcing provides an organization with the ability |
| convenient way of delegating processes which are | | | | to focus on distinctive core competencies which will |
| not of the most importance to an organisation, this is | | | | help yield long term benefits. |
| not always the case. In many instances the focus of | | | | - Through the contract development of any |
| BPO is on competencies, meaning that a process | | | | outsourcing contract, organisations have the ability to |
| which is integral to the successful functioning of the | | | | determine and better anticipate any future costs. |
| organisation will be delegated to an external service | | | | Through bids vendors have the ability to make offers |
| provider who has a very high level of expertise in the | | | | to perform the outsourcing for a given project. When |
| given field. Examples of such processes include data | | | | a bid has been accepted the organization has an |
| analysis, engineering design and medical coding and | | | | exact figure illustrating what the expense will be to |
| transcription. | | | | outsource the project. |
| Despite its ever increasing popularity, recent research | | | | When considering the use of BPO for your business, it |
| by firms such as Gartner and Forrester warn that the | | | | is in general good practice to consider the above |
| cost savings envisioned by BPO deals may not | | | | mentioned principles in order to make the most |
| always live up to their expectations. This is mainly due | | | | effective decision for your organisation. BPO is a very |
| to the fact that no two organisations are alike, and | | | | popular and efficient way increasing your business's |
| therefore cannot adopt the same outsourcing model to | | | | productivity, but in order to make the most of this |
| go with their business structure. This has lead to the | | | | method, it needs to be implemented in the correct |
| fact that the rewards and risks of BPO have to be | | | | manner. |
| constantly evaluated to be understood by individual | | | | |