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
1. Focus: BPO allows companies to outsource non-core
processes and allow them to focus on their core
competencies.
2. Best Practices: Since BPO vendors specializes in
specific processes they become experts and bring
best practices to improve quality.
3. Cost-Reduction: BPO vendors process huge data from
various locations – economy of scale, operate from
cheaper countries and use latest technologies to
reduce cost.
4. Reduction in Capital Requirements: Organizations
don’t need to buy and maintain costly systems so
their working capital is freed.
5. 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
1. Cost Reduction
2. Focus on Core Competencies
3. Improve Quality
4. Increase speed to market
5. Faster Innovation
6. 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
Organization
Non-Core
Processes
Data Processing Administration/Operations CRM
Core Processes
In-House
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
1. Transactional: Handle only one process not
entire activity. Works on contracts and
performance matrices.
2. Niche BPOs: Wider range of processes (2,4)
than transactional but caters to some specific
industry sector such as banking,
manufacturing. Etc
3. Comprehensive: Handle all transactional and
administrative processes in a Function such
as HR, Finance etc.