1 business process outsourcing introduction

John H. Halvey and Barbara Murphy
Melby; 2007
Business Process Outsourcing:
Process, Strategies and Contracts, 2nd Ed.

BPO
 Business Process - is a set of business events
that together enable the creation and delivery of
an organization's products or services to the
customers. (p7, Business Processes and
Information Technology, Gelinas,Sutton,
Fedorowicks, 2004)
 Outsourcing involves transferring certain value
contributing activities, processes and/or services
to the premises of one’s own or an agent primarily
to save costs and/or for the principal to
increasingly focus on its areas of key
competence.

BPO
 “the delegation of one or more IT-intensive
business processes to an external provider who,
in turn, administrates and manages the selected
processes based upon defined and measurable
performance metrics.”
 the management of one or more specific
business processes or functions (e.g.,
procurement, finance, accounting, human
resources, asset or property management) by a
third party, together with the information
technology (IT) that supports the process or
function

BPO Categories
 General Category
 Finance and accounting
 Investment and asset management
 Human resources
 Procurement
 Logistics
 Real estate management
 Miscellaneous (energy services, customer service,
mailroom, food processing)

BPO in the Philippines
 Major companies that already operate in the
Philippines (inhouse Line of Business) include
AIG, AOL, Barnes & Noble, Chevron, Citigroup,
Dell, HP, HSBC, IBM, Intel, JPMorgan Chase,
Motorola, Procter & Gamble, Siemens AG and
Trend Micro.

 Outsourcing Companies
1. Accenture Inc. (P28.104 billion in revenues);
2. Convergys Philippines Services Corp. (P17.281
billion);
3. JPMorgan Chase Bank N.A-Philippine Global Service
Center (P10.805 billion);
4. 24/7 Customer Philippines Inc. (P7.711 billion);
5. Telephilippines Inc. (P7.241 billion);
6. TeleTech Offshore Investments B.V. (P6.978 billion);
7. Sutherland Global Services Philippines Inc. (P6.805
billion);
8. Stream International Global Services Philippines Inc.
(P6.738 billion);
9. Sitel Philippines Corp. (P6.364 billion);
10. Deutsche Knowledge Services Pte. Ltd. (P5.754
billion);

11. Sykes Asia Inc. (P5.617 billion);
12. IBM Daksh Business Process Services Philippines Inc.
(P5.516 billion);
13. Aegis PeopleSupport Inc. (P5.445 billion);
14. TeleTech Customer Care Management Philippines Inc.
(P5.402 billion);
15. IBM Business Services Inc. (P5.211 billion);
16. Telus International Philippines Inc. (P4.962 billion);
17. Shell Shared Services (Asia) B.V. (P4.821 billion);
18. HSBC Electronic Data Processing (Philippines) Inc.
(P4.700 billion);
19. ePLDT Inc. (P4.147 billion);
20. SPi CRM Inc. (P3.501 billion);
21. ACS of the Philippines Inc. (P3.492 billion);
22. VXI Global Holdings B.V. (P3.266 billion);
23. Emerson Electric (Asia) Ltd. (P3.230 billion);

24. StarTek International Ltd. (P3.094 billion);
25. IBM Solutions Delivery Inc. (P3.019 billion);
26. Sykes Marketing Services Inc. (P2.760 billion);
27. SPi Technologies Inc. (P2.626 billion);
28. Genpact Services LLC (P2.552 billion);
29. Macquarie Offshore Services Pty. Ltd. (P2.522 billion);
30. Thomson Reuters Corp. Pte. Ltd. (P2.265 billion);
31. AIG Shared Services Corp. Philippines (P2.357 billion);
32. Hinduja Global Solutions Ltd. (P2.194 billion);
33. Lexmark Research and Development Corp. (P1.956
billion);
34. ANZ Global Services and Operations (Manila) Inc. (P1.869
billion);
35. Maersk Global Service Centers (Philippines) Ltd. (P1.859
billion); an
36. Manulife Data Services Inc. (P1.745 billion).

BPO in CSEZ
 Accountant’s Desk Inc.
 Advanpoint Inc.
 Analytical Support Services for Environmental
Technologies, Inc.
 Ausphil Solutions Corporation
 Baele Management Group (Phils.) Inc.
 Clark Digital Valley Corporation
 Cyber City Teleservices LTD
 Dr. Klippe Philippines Corporation
 Ecell Philippines, Inc.

BPO in CSEZ
 Federal Express Pacific Inc.
 Hexus Outsourcing Services
 Igo2 Group Inc.
 IQOR Philippines Inc.
 iTOP126 Inc.
 MDM Systems Inc.
 Microtel Global Solotions Inc.
 Montpac Global Solutions Inc.
 My Cloud People Inc.
 NCO Philippines Inc. (EGS)

BPO in CSEZ
 Netcast BPO services Inc.
 OwensBPO Inc.
 S-Corp Philippines Inc.
 Sharesource Australia BPO Corporation
 Social Image Inc.
 Sutherland Global Services Philippines Inc.
 SV Human Resources Inc.
 Top Sellers Plus Inc.
 Txx Trixan Support Services
 Versar International Inc. Asia Pacific

BPO in CSEZ
 Woods and Day International Business Services
Inc.
 Zeniark Philippines Consulting Corporation
 3MS Outsourcing and Production Inc.
(Source: CFZ Locator’s Directory 2014)

Reasons for Outsourcing
 Transferring the entire function (not just the IT
component) to a qualified supplier
 Enhancing/improving methodologies
 Benefiting from industry knowledge or experience
 Streamlining or standardizing processes across
the organization
 Sharing resources or technologies
 Committing less up-front investment to new
methodologies or technologies

Reasons for Outsourcing
 Obtaining flexibility with respect to the roll-out of
methodologies or technologies
 Increasing productivity
 Quantifying savings or benefits
 Tracking customer satisfaction
 Enhancing shareholder value

Integration Issues
 Systems Integration
 Existing IT Outsourcing Arrangements
 Vendor Management

Vendor Selection
 Scope of service required
 Experience
 Resources
 Geographic scope of the outsourcing
 Technology

Jobs in Call Centers
Entry level Voice sector
 Sales support
 Chat support
 Travel support
 Banking Support
 Technical support representative
 Customer support representative

Entry level Non-Voice
 Back office data entry
 Accounts payable practitioner
 Finance practitioner
 Financial accounting practitioner
 General accounting practitioner
 Travel and expense
 Payroll practitioner
 Mobility practitioner

 Customer assistance center agent
 Benefits service practitioner
 Learning practitioner
 Recruitment practitioners
 Employee data management practitioner
 Medical transcriptionist

Entry level for IT
 Entry level programmers
 Help desk assistants
 Desktop support engineers
 Network administrators
 Business analysis
 Healthcare associates

Entry level jobs for support functions
 Human resource associate
 Recruitment associate
 Training associate
 Employee relations associate
 Employee engagement associate
 Administrative associate
 Quality assurance associate
 Accounting associate
 Facilities associate
 Technical support associate

Outsourcing as an Option
Planning Stage

Planning Stage Steps
 1. Select and form internal outsourcing team
 2. Establish outsourcing objectives
 3. Obtain management support
 4. Determine internal communication strategy
 5. Develop and issue RFI (if applicable)
 6. Review and evaluate RFI responses (if
applicable)
 7. Develop and issue request for proposal (RFP)

 8. Review and evaluate proposals relationship
structure
 Define of any teaming relationships:
 Pricing structure
 Scope of services
 New initiatives
 9. Select preferred vendor(s)
 10. Develop negotiation strategy

 11. Customer due diligence:
 Financial
 Legal
 Regulatory
 Audit
 Tax
 Data-related issues
 Employee-related issues
 Site/local issues
 Intercompany issues

 12. Vendor due diligence:
 • Pricing structure
 • Scope of services
 • Legal
 • Regulatory
 • Tax
 • Data-related issues
 • Employee-related issues
 • Local issues

 13. Term sheet
 Prepare term sheet
 Negotiate term sheet
 Identify key issues
 14. Service contract(s)
 Determine contract(s) structure
 Determine parties to each contract
 Prepare contract(s)
 Negotiate contract(s)
 Identify key issues

Outsourcing as an Option
 An organization-wide directive to outsource non-
core business processes
 An effort to globalize/standardize business
processes throughout the organization
 An organization-wide to downsize or cut costs
 The reorganization of a business department ,
often in response to reengineering study
 The redirection of certain
methodologies/technologies in an effort to remain
competitive
 To enhance public perception

Why managers choose outsourcing?
 As part of the reorganization of all or part of the
business department
 As a means to cut business process costs
 As a means to focus more resources on business
process strategy
 In an effort to enhance performance
 As part of the roll-out of new
methodologies/technology
 In order to provide lacking expertise/experience

Obtaining MGMT Support
 Particular business department
 Senior management
 Board

Forming the outsourcing team
 Within a particular
department being
outsourced
 One or all of the
following departments
 Purchasing
 Finance
 HR
 Legal
 Audit
 Tax
 Risk management
 Other affected areas
 Outside

Guidelines and Internal
Evaluation
1. Establish its top five to ten objectives for
outsourcing
Samples of objectives
• Concentrating resources on core capabilities
• Implementing a variable cost approach
• Obtaining an immediate cash infusion (typically
associated with the transfer of assets to the vendor)
• Improving overall performance
• Improving efficiency
• Improving end user/client satisfaction

Evaluation
 Keeping pace with industry trends
 Providing access to new methodologies/technology
 Reducing risks
 Sharing risks
 Implementing tools for growth
 Standardizing diverse methodologies/technology
 Facilitating migration to new
 Managing legacy methodologies/technology while the
customer or the vendor implements new
 Obtaining new or additional resources
 Providing flexibility to increase or decrease resources

Evaluation
2. determine whether outsourcing is desirable from a
business, financial, technological, operational,
regulatory, and legal perspective
3. determine whether there is any precedent for
outsourcing within the organization and learn how
employee, asset transfer, and other issues were
dealt with in previous or contemporaneous
transactions
4. investigate whether there is any outsourcing within
its organization of or relating to the particular
business process, who the vendors are, and the
status of the relationship
5. consider how outsourcing of the particular business
process will impact other areas within the
organization

Evaluation
Other considerations:
 initiate an investigation into whether any
approvals, authorizations, notices, or other
requirements are necessary pursuant to
corporate ordinance, regulation, or law.
 outline the benefits and risks of outsourcing and
assess whether the benefits outweigh the risks

Evaluation
Benefits:
 Cost savings/benefits
 Greater ability to
concentrate on core
business
 Implementation of wide
initiatives
 Sale of assets (moving
assets off books, capital
infusion)
 Greater resources to
move to new
environment/systems in a
faster time frame
 More/varied skills and
resources
methodologies/technolog
y
 Training expense
reduction
 Greater flexibility
Risks:
 Loss of control
 Difficulty in managing
costs
 Additional liability
 Difficulty bringing
business process back in-
house
 Reduced flexibility

Preparing a Time Table
 2 mos – 3 years
 Ideal set up - spend time define requirements,
perform due diligence, prepare a comprehensive
request for proposal, and negotiate the
transaction

Internal Communications
1. Wait until There Is a Deal
2. On a Need-to-Know Basis
3. Be Up Front from the Start

Wait until There Is a Deal
Pros:
 Negotiating position is not compromised by employee
reactions/demands.
 Negotiations are not strained by fear that employees
will resign during negotiations (particularly if all
employees are not being transferred and severance is
not an incentive to stay).
 Less risk of leakage to the press.
 Avoid false alarm—if decide not to outsource.
Cons:
 Breeds distrust among the general employee
population.
 Employees may claim that they were not treated fairly.
 Allows employees little opportunity to evaluate
options.

On a Need-to-Know Basis
Pros:
 Breeds trust with employees.
 Likelihood that employees will not leave until they
know what the situation is.
 Mitigates employee claims that they were not
adequately informed.
Cons:
 Risk that employees will leave.
 Employees may claim that they were kept in the dark.
 Incomplete disclosure may result in unfounded
rumors.
 Possible loss of negotiation leverage since it may be
difficult not to outsource once announcements are
made.

Be Up Front from the Start
Pros:
 Breeds trust/loyalty with employees.
 Reduces risk of claims that employees were kept in
the dark.
 Often learning what employee concerns are helps in
the negotiation process.
Cons:
 Risk that employees will resign (particularly those who
will not be transferred to the vendor).
 Negotiation process may be driven by employee
reactions/demands.
 Poor employee morale may result in pressure to close
the deal.

1 business process outsourcing introduction

Defining the Scope of
Transaction
Business Functions
 Be over-inclusive
 Include “unbundle” option or separate pricing for
each process
Sites
 Local Taxes and Restrictive Laws
 Management Structure
 proof-of-concept phase- where a few sites are
outsourced, with the understanding that if the trial
period is successful, other sites will follow

Understanding (Customer) Existing Resources
 Relevant Budget
 Shadow Support
 Organizational Structure
 Management Structure
 Inventories
 Service Levels
 Critical Services

Vendor Selection
Steps for vendor identification and selection
process
 1. Appoint a vendor selection team (VST).
 2. Establish qualifications.
 3. Develop a long list.
 4. Distribute the request for information (RFI).
 5. Distribute the request for proposals (RFP).
 6. Evaluate proposals.
 7. Select a short list.
 8. Select a vendor.

Vendor Experience and
Resources
Making the first move
 Obtain vendor information from industry
reports/surveys.
 • Look at industry publications.
 • Talk to other outsourcing customers.

Customer Due Diligence
 Issuing a RFI
 Talking to outsourcing clients
 Visiting outsourcing clients’ sites
 Visiting vendor sites
 Checking customer’s previous experience with
vendor
 Performing a newspaper search for recent articles
 Checking litigation involving vendor
 Obtaining annual reports
 Obtaining industry surveys/reports

What the Customer Need to
Know
 Vendor Reputation
 Vendor History
 Financial Security
 Organization
 Resource Distribution
 Experience- Customer Environment
 Experience – Industry
 Roll-out
 Customer Base/Reference
 Subcontractors/Partners

1 business process outsourcing introduction

More Related Content

What's hot (20)

Viewers also liked (19)

Similar to 1 business process outsourcing introduction (20)

Recently uploaded (20)

1 business process outsourcing introduction

Editor's Notes