BUSINESS PROCESS OUTSOURCING• the process of hiring another company to handle business activities for you.PROCESS USUALLY OUTSOURCED:• financial and administration (F&A) processes• human resources (HR) functions• call center and customer service activities• accounting and payroll• Information technology
Common Types of Outsourcing1. Multi-Sourcing• Multi-sourcing represents a contracting structure that reduces customers’ reliance on one supplier• getting services from several different sources• brings a lot of flexibility as you can hire several external service providers for one task
Multi-Sourcing continues….• Philips caters to Nokia and Ericsson• In 2000, Philips ‘ plant were on fire and was unable to produce the chips needed by Nokia and Ericsson• Nokia, who realized the problem on production earlier, was able to claim the chips that was produced leaving Ericsson high and dry• Philips was the only supplier of Ericsson• Ericsson lost $1.8B and almost 4% market share to Nokia.
Common Types of Outsourcing2. Nearshoring• Companies looking for savings but worried about the risks and cultural barriers involved in offshore outsourcing• Looking closer to home• a company transfers its processes to companies in a nearby country• form of outsourcing arrangement performed in roughly the same time zone with less than one day’s travel to reach the nearshore destination.
Nearshoring continues…• both parties expect to benefit from their geographic location, linguistic, cultural, political, economical, historical or other similarities.• very common in areas of business and software development.
Nearshoring continues…• complexity of offshoring stems from different languages and cultures, long distances and different time zones, spending more time and effort on establishing trust and long-term relationships, overriding communication barriers and activities of that kind• Nearshoring doesnt necessarily overcome all of these barriers, but the proximity allows more flexibility to align organizations
Common Types of Outsourcing3. Offshoring• having business functions done in another country.• frequently, work is offshored in order to reduce labor expenses, to enter new markets, to tap talent currently unavailable domestically or to overcome regulations that prevent specific activities domestically• The ability to offshore depends on the pool of skilled candidates available offshore to provide you with services you require as a company.
Offshoring continues…• offshoring is usually outsourcing, but the outsourced business process is done outside the country where the company is based.• Example: Deutsche Bank opened an offshore banking unit in Manila in 1977. We also have Bank of America, HSBC, Citibank etc..• outsourcing means transferring one or more business functions to a service provider.• Example: Accenture, Teletech, Convergys and People Support…
Brief History in the Philippines• 1989 – outsourcing strategy started• 1992 – Business Process Outsourcing in the Philippines significantly started by Accenture• 1997 - SYKES entered the Philippines, first multinational BPO player to enter the Philippines• 1999 - eTelecare was founded, The Company launched its first program in the third quarter of 2000
Brief History continues…• 2001 - PeopleSupport restructured its business by relocating outsourcing operations to St. Louis Missouri and Philippines, then eventually migrated it’s complete operations in the Philippines.• 2006 – ePLDT Ventus has become the forefront of the local BPO game with 11,000 employees• 2010 – Philippines surpassed India as the BPO Capital of the World (in terms of voice BPO)
Percentage Distribution of BPO Companies (2008) SOURCE: Business Processing Association of the Phils. (BPAP)
Advantages of Outsourcing1. Swiftness and Expertise• Most of the times tasks are outsourced to vendors who specialize in their field.• Effectively the tasks can be completed faster and with better quality output2. Concentrating on core process rather than the supporting ones• gives the organization more time to strengthen their core business process.
Advantages continues…3. Risk-sharing• helps the organization to shift certain responsibilities to the outsourced vendor since the outsourced vendor is a specialist, they plan your risk-mitigating factors better.4. Reduced Operational and Recruitment costs• outsourcing eludes the need to hire individuals in-house; hence recruitment and operational costs can be minimized to a great extent.
Disadvantages of Outsourcing1. Risk of exposing confidential data• it involves a risk if exposing confidential company information to a third-party2. Synchronizing the deliverables• In case you do not choose a right partner for outsourcing, some of the common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate categorization of responsibilities3. Lack of customer focus• outsourced vendor may be catering to the expertise- needs of multiple organizations at a time. In such situations vendors may lack complete focus on your organization’s tasks.
BPO Issues in the Philippines1. Filling the demand for qualified workers for this fast-growing industry.• a huge number of the population is not really used to using this language in daily conversation• supply may seem to be running shortResponse: TESDA has P400 million in funds put in the industry, so we are training 65,000 scholars who are almost employable and near hires in which 70 percent are converted into hires. CHED had a pilot deployment of the Service Management Program, where college students can enroll while in school and learn IT-BPO skills they need
BPO Issues continues…2. US anti-outsourcing bill• The “Bring Home Jobs Act” pushed by Obama could be a threat to the growing BPO industry in the Philippines. Should Obama win another four year term this November here could be a stumbling block to the continued growth of the industry.• Was already rejected by US Senate• Outsourcing makes American companies more competitive. It is said that the 2,500 multinational companies create more jobs in the US domestically and therefore outsourcing actually supports the American demand for employment,
BPO Issues continues…3. Health issues• shift work disrupt the body clock and have an adverse effects on lifestyle which has been linked to an increased risk of high blood pressure, diabetes, heart attack and stroke caused by lack of blood in the brainResponse: Industry takes pride in providing the best health care benefits possible.“We invest a lot in health and wellness programs for our workers, paying attention and incorporating WHO campaigns on wellness programs, but we haven’t really seen any study that singles out BPO employees,” said BPAP’s Hernandez.