BPO The concept of outsourcing started with Ross Perot when he founded Electronic Data Systems in 1962. EDS would tell a prospective client, “You are familiar with designing, manufacturing and selling furniture, but we’re familiar with managing information technology. We can sell you the information technology you need, and you pay us monthly for the service with a minimum commitment of two to ten years. BPO is the act of transferring some of an organization’s repeated non-core and core business processes to an outside provider to achieve cost reductions while improving service quality. Because the processes are repeated and a long-term contract is used, outsourcing goes far beyond the use of consultants.
If done well, BPO results in increasing shareholder value. The main difference between BPO and more traditional IT outsourcing is that BPO offers companies a way of achieving transformational outcomes much more quickly. In a typical BPO contract, a service provider takes over a specific corporate function. Effective BPO encompasses much more than just changing who is responsible for performing the process. In BPO, the outside provider not only takes on the responsibility to manage the function or business process, but also re-engineers the way the process has been traditionally done.
The next generation of Business Process Outsourcing has emerged as a priority for businesses looking to better options in managing their application portfolios. The first wave offered low-cost, off-shore development labor, but today firms are demanding new, less risky options for applications that are strategic, complex, or mission-critical, while still taking cost into consideration. Outsourcing has moved from a niche technology management tool to a mainstream strategic weapon.
Business Process Outsourcing leverages process driven efficiencies in terms of organizational excellence, responsiveness & branding, financial efficiency and customer relationship. BPO is emerging as a powerful and flexible approach that business leaders can use to achieve a wide range of tactical and strategic aims. The most common business process that gets outsourced is call centers. Call centers and Help Desks of many multi national and fortune 500 companies are being outsourced to low waged, English speaking countries such as Philippines and India.
Countries like India with vast IT human resources are also attracting outsourcing from American IT/Technology companies to outsource their IT Help Desks. Many of these help desks are state of the art with latest Help Desk software and help desk hardware with technical savvy IT graduates behind them answering your questions. It can be defined as the transfer of an organization’s entire non-core but critical business process/function to an external vendor who uses an IT-based service delivery. By doing so, BPO helps an organization concentrate on its core competencies, improve efficiency, reduce cost and improve shareholders’ value.
Though IT outsourcing has been happening for so many years, an increased momentum has been witnessed since the late 1990s due to the rise of Internet and Communication technologies. Several global giants from various industries have begun to realize the importance of BPO and have started outsourcing their non-core business functions. This has given rise to many specialized BPO vendors across the globe, with India being a major hub owing to its large computer-literate English-speaking population, low billing rates, strategically favorable time zone and high quality.
The BPO market in India is expected to grow exponentially in the coming years. Although the term “business process outsourcing” (BPO) has gained visibility in the IT services industry only in the past four to five years, the service offering itself has existed for decades. For example, several of the largest service providers have significant legacy revenue streams that are derived from medical claims processing contracts. In many instances, these contracts include the entire back-office function.
The outsourcing of payroll administration, an accepted practice for many years, is another illustration of the true age of the BPO market. This market is now experiencing noticeable momentum in terms of wider user acceptance and the emergence of new service offering categories, as well as a proliferation of providers from which to choose. Service providers offer BPO for literally hundreds of business processes. Some of these service offerings are very stable; some are just emerging and are, therefore, largely untested. Domestic Market Of BPO Business process outsourcing in India.
The business process outsourcing industry in India has grown by leaps and bounds and as its size increases so does its competitive advantage. Compared with 1996 when this Industry had started inroads into the United States with Outbound Telemarketing campaigns, today the vehicle for these calls-the internet has become cheaper and more reliable for the average Indian business. The business has boomed to the extent that many people are now running BPO’s out of their cyber cafes and houses in New Delhi.
The sector witnessed considerable activity during 2004-05, including a ramping up of operations by major Indian and MNC players and stepped up hiring. The domestic BPO market, catalyzed by demand from the telecommunications and BFSI segments, matched the growth of BPO exports. The market experienced maturity and consolidation, a result of numerous mergers and acquisitions taking place within the sector. There were over 400 companies operating within the Indian BPO space, including captive units (of both MNCs and Indian companies) and third-party services providers.
The Indian BPO industry remains on a growth path, emerging as one of the key investment markets in the country. Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.
The Government of India in partnership with private infrastructure giants is committed to bringing all around development and providing robust infrastructure all over the nation. ?Business Process Outsourcing (BPO) – Advantage India The abundant skilled manpower has made India a target destination for multinationals to back end their operations in India. India ranks high in areas such as qualifications, capabilities, quality of work, linguistic capabilities and work ethics, and thus is ahead of competitors such as China, Philippines, Ireland, Australia, Canada etc.
Indian companies have unique capabilities and systems to set, measure and monitor quality targets. In specific BPO categories, Indian centers have achieved higher productivity levels-for example, the number of transactions per hour for back office processing, than their Western counterparts. Also, India is able to offer a 24×7 services and reduction in turnaround times by leveraging time zone differences. India’s unique geographic Positioning makes this possible. Many state governments in India are offering incentives and infrastructure to set up IT enabled services.
About 100,000 engineers graduate from India every year. Many of these engineers are employed with call centers for troubleshooting and providing technical support at salaries that are dramatically lower compared to the pay scales in the US. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels. North America is expected to represent 57 percent of the total BPO market in 2003 – to $69 billion – with growth in other regions eventually outpacing North America. Gartner analysts say that after several years of double-digit growth, delays in contract signings and lower negotiated rates for large BPO deals have led to moderate growth in 2002 and 2003. The Western European BPO market is forecast to grow 10. 9 percent in 2003, to $27 billion, according to Gartner.
In Europe, outsourcing of financial services processes are widely used, however, other industries are growing in respect for different types of BPO. Customer interaction for demand-management BPO is proving popular in the utilities and telecommunications sectors. Supply-management BPO is gaining popularity in local governments, and enterprise services are growing in telecommunications for human resources, finance and accounting Starting off slowly, the Asia Pacific BPO market is expected to grow 7. 8 percent in 2003, to $8. 7 billion, but it is then forecast to have double-digit growth during the next few years.
META Group, Inc. ound that nearly all Asia Pacific IT organizations will outsource at least one mission-critical technology operation by 2005. McKinsey’s research found that Australia and New Zealand are the most mature economies in terms of acceptance of BPO services, followed by Singapore. In most other countries there is almost no history of outsourcing other than product support. CHINA In the outsourcing field, China is the biggest challenge in the future and the largest threat to India. With the largest population and fastest economic growth, China has at least two strengths in the global outsourcing market: manufacturing and IT.
In the Philippines the manpower costs are 60 to 80 percent lower as compared to UK and US. The average salary cost is around $700-800 per month in the BPO sector. The country has a shortage of manpower mainly due to the small population as compared to India. The manpower base for BPO is only 300,000. Right now the country is getting business from nearly 70 companies employing more than 12,000 people with revenues of US$ 250 million. The main advantages of Philippines are as follows:
- Large scale technical training program: The govt. has initiated a no. f policies by which the skills can be provided to a larger population.
- Improved telecom and office infrastructure: Philippines scores over India in this respect.
- 3rd largest English-speaking nation in the world: This is a very important advantage.
- Well developed IT skill set: It is considered 2nd only to India due to performance in software.
Costs of technology workers: This is(which represents the biggest recurring costs for, say, a B2B site) is only around 16% to 25% in the Philippines to that of comparable workers from the United States. Former American colony: As a former American colony, American culture and language is widely emulated here. These cultural and communications skills could prove to be so appealing to American firms that they would outweigh slightly higher labor costs in the Philippines.
The main disadvantages of Philippines are as follows: •Low graduate turnout: Philippines has a low graduate turnout (only 400,000 per annum). This compares very unfavorably with India. •Not having a record of high quality: India has consistently delivered very high quality in Software and has built a very high reputation in it. Political instability: The country has frequent elections which makes it difficult for companies to outsource as there is lack of uniformity of policies with changes in the Govt.
No disaster recovery facilities or multi-location facilities: After the WTC bombing terrorism has become a very important issue for the US companies in particular and they want that the BPO providers should have multi location facilities which can be used in case of any terrorist attack. Issue of scaling up: Philippines face the important issues of scaling up.
Issues like scaling up have stunted the growth of BPO activities being outsourced to Philippines. The largest call Centre in Philippines of AOL has only 800 people. The size of the Philippines BPO industry is only $100 million, whereas India’s BPO industry is presently at $1. 5 billion (2001-02). IRELAND It was one of the front runners in the BPO and started much earlier than India. Thus it has built good brand equity in US. It has a very conducive regulatory framework and is known for excellent quality standards.
The country that has strategically pursued developing outsourcing services market and is planning to invest heavily in telecom infrastructure ($ 5 billion over 10 years). But it suffers from a very big disadvantage of a lack of a large human resource pool. It has nearly 500 companies employing more than 40,000 people. Also it compares very poorly with India and China in terms of Manpower costs. Ireland is actually the biggest exporter of software services in the world today. But there is currently a shortage of programmers in Ireland and companies are forced to outsource work to India. The other countries, which have a share in the BPO sector, are given below. These countries are not serious competitors to India mostly due to the small population base.
It has a mature BPO industry with 4000 call centers employing 225,000 people with US$ 5. 7 billion revenue. It has the advantage of large English speaking population with a favorable time zone. Business process outsourcing means examining the processes that compose the business and its functional units, and then working with focused service providers to both re-engineer and outsource these at the same time.
BPO involves the full transfer of responsibility for functions such as transaction processing, policy servicing, claims management, HR, finance, and compliance to the outsourcing company. The outsourcing provider then administers these functions on their own systems to agreed service standards and at a guaranteed cost. Some of the BPO contracts call for performance-based payouts, tying vendor payments to business performance or overall cost savings. Business Application Outsourcing Company A (vendor) rents applications to Company B (user).
Increasingly corporations are renting applications like enterprise resource planning, customer relationship management, messaging and collaboration, and e-business. The outsourcer provides the mission-critical enterprise application hosting and management. The goal is to relieve the corporation from day-to-day management and lower the total cost of ownership (TCO). The outsourcer hosts the software solution ensuring a preset level of performance and reliability. This is also termed application service provider (ASP) service.
Business Process Off shoring Business process off shoring is the transfer of business tasks (medical transcription) or business processes (call centers) to a low-cost country like India or the Philippines. The interaction is conducted over telecom networks and the Internet. Off shoring typically include tasks like transaction or accounts processing, credit card processing, call centers, translation, and transcription. Most of this work can be sent without the need for in-person interaction. The off shoring of support functions is still relatively new.
The off shoring wave began with IT/software services in the 1980s and accelerated in the 1990s with the Y2K hysteria. With the global economic slowdown, off shoring has vaulted to the forefront as an effective cost-cutting technique that takes advantage of labor price differentials and favorable skill/performance ratios. Business Transformation Outsourcing Business transformation outsourcing (BTO) is a natural extension of the more tactical BPO model and involves the transfer of responsibility for all back-office functions, as well as a comprehensive business change management process to an external vendor.
The objective is to maximize the long-term benefits of the BPO operations, resulting in a comprehensive business transformation (or overhaul). Transformation outsourcing is not a tactical issue but a forward-looking strategic tool for change. The logic: big gains in performance only come about through business transformation. Outsourcing Multi sourcing is the management and distribution of different business processes among multiple BPO vendors. For instance, HR processes are outsourced to one best-of-breed vendor. Logistics are outsourced to another. IT development and maintenance to another vendor.
Risk mitigation is a primary driver behind multi sourcing. One aspect of multisourcing is to use multiple suppliers to eliminate lock-in and achieve so-called best-of-breed advantages. This is especially true for U. S. and European firms, which often like to spread offshore development to a variety of vendors and locations. Multisourcing also covers the different delivery models. These include:
- On shoring – outsourcing to another company within the United States
- Near shoring – outsourcing to Mexico or Canada
- Off shoring – outsourcing to another country such as Ireland or India
The figure below captures the differences. Shared Services (or in sourcing) Shared services, a form of “internal outsourcing,” enables corporations to achieve economies of scale by creating a separate internal entity within the company to perform specific services, such as payroll, accounts payable, travel and expense processing. A typical shared services initiative takes advantage of enterprise applications and other technological developments, enabling the company to achieve further improvements to quality in processes, such as finance, accounting, procurement, IT, and human resources.
At the core of shared services is the idea that new technologies offer businesses the opportunity to 1) make better use of scarce skills, 2) provide information and services more efficiently, and 3) reduce the cost of administration. The bottom line: The modern firm sits at the centre of a network of suppliers. Gone are the big in-house departments and in their place are complex chains of external partners that are meant to deliver better services for less cost. All these signify a greater reliance on partners for non-core activities and resources.
The advent of the Internet and the increasing sophistication of enterprise applications open up new opportunities for companies to share a wider range of services across a greater number of business units, departments, or vendors. The typical organization structure of a BPO service provider is a pyramidal one. The figure below depicts a simplified organization hierarchy, the roles and responsibilities at each level and the competencies required at each level.
Even after taking into account the interaction cost of 10-20% because of locational differences, the customers can still have net savings of 50-60% by outsourcing to India. Impressive growth Potential The ITES industry, which contributes 25% to the total IT Software and Service exports from India, witnessed a growth of 53. 3% to reach US$ 2. 3 bn in FY03. According to Nasscom, the industry is expected to grow by around 57% to touch US$ 3. 6 bn. in the current fiscal. Going by the long-term projection of Nasscom, the industry is estimated to touch a size of US$ 21-24 bn by 2008.
This was followed by the emergence of venture funded third-party Indian ITES firms in descending order of revenues (based on FY03 revenues reported in accordance with US Generally Accepted Accounting Principles) which are Wipro Spectra mind, WNS Group, Daksh services, Ex-Service and HCL Technologies. The industry also has the presence of global BPO players like Converges, ES, Computer Sciences Corporation (CSC), Accenture and Exult Inc. Established software services companies like Infosys, Wipro, Patni, Satyam, HCL, Cognizant and Syntel have also started venturing into the ITES arena.
These companies enjoy a number of synergies between their ITES operations and IT service offerings. They are able to leverage their existing customer relationships to get contracts and are also in a position to target a larger share of the customer’s wallet by cross-selling different services. The customers also prefer vendors who can provide end-to-end services. Moreover, the cash-rich balance sheets of these companies are a big advantage as ITES is a capital-intensive industry. Customer care: Fastest growing segment
Customer care also known as call center includes database marketing, customer analytics, telesales/telemarketing, inbound call center, web sales and marketing, sales and marketing, sales and marketing administration. The hype surrounding the industry can be explained by the fact that this segment is not only the largest revenue earner (US$ 810 mn in FY03). But is also the fastest growing segment (103% in FY03) in the industry (Exhibit 3). It also has to its credit the status of being one of the largest employment generators. The segment employed 65000 people in FY03 a stupendous growth of 117% compared to the previous year.
Some of the BPO players active in the banking, financial services and insurance (BFSI) are ICICI One source, Ex Service and Wipro Spectra mind. Content development, which includes areas like engineering, design animation, network consultancy and management, biotech research, is another high revenue earner in the ITES industry. The revenue of this segment in FY03 was US$ 465 mn. However,with 44,000 employees, this segment is the second largest employment generator in the industry. Some of the other emerging segments in the ITES industry are HR, payment services, administration, healthcare, retail, telecom and hospitality.
Challenges facing the industry Mushrooming of small players Attractive growth rate of the BPO industry has resulted in many reckless start-ups. Several companies from unrelated sectors without the required expertise entered the industry lured by the healthy potential of the industry. These small companies are now finding it difficult to survive in this capital-intensive industry. In a dire strait, some of the players are taking huge cuts in their billing rates, which in turn threaten to de-stabilise the entire industry by reducing margins to unsustainable levels.
They also portray a negative picture of the industry as a whole because of their inability to deliver on time. Margins under pressure With increasing competition and subsequent price dips, the margins of ITES companies have come under tremendous pressure. Moreover, most of the players in the industry are working in low margin areas. More than 60% of the BPO business coming to India is voice related. Barring transcription, voice has the lowest margins among BPO business. With the BPO business increasingly getting commoditised, moving up the value chain is a sensible option before the industry. Vendors can move up the value chain vertically.
For example, for a credit card customer, the low end processes would include services such as data entry and processing of applications, but the higher value jobs would include processes such as credit evaluation and fraud detection. Vendors can also move horizontally, that is expand services portfolio by moving into sophisticated areas such as US GAAP accounting, certain engineering services, consulting etc. HR Issues The ITES industry currently employs more than 171,000 professionals compared to a 25,000 in 1999. However, India is running out of the supply of good quality managerial talent.
There have been recent cases of mid-sized companies losing BPO orders for not being able to demonstrate a competent team that can manage a large workforce. High level of attrition further complicates the problem. At least 60,000 of the 171,000 workforce change jobs every year. The supply of skilled manpower to the industry needs to expand at a fast rate to keep pace with the rapid growth of the industry. In order to create a big pool of qualified personnel, there is a need to encourage private institutions to provide training to people interested in joining this industry.
Infrastructure Bottleneck The state of India’s Infrastructure is also a cause of concern for the ITES Industry. The industry is suffering from long lead-time in commissioning of telecom services and power supply problems. The country also needs to improve its roads and airports to facilitate marketing of India as an ITES destination. In the last couple of years, the Infrastructure condition in the country has shown improvement. Deregulation of the telecom sector has resulted in the addition of significant bandwidth as well as a decline in telecom costs.
Several high-quality technology parks such as Hitec city, Hyderabad Tata-Singapore Consortium, Bangalore and Tidel Park. Chennai have also been established in the Industry. Apart from the challenges discussed above, if the unemployment rate in the US/ other customer countries soars further, it could lead to increased opposition to outsourcing. This could become a threat for the Indian BPO Industry.
BPO is becoming part of the new model for managing international growth. The benefits of this model are clear: Management can focus more time and attention on building core business, without the distraction of back-office operations and administrative issues. Also, management can avoid having to invest in office facilities and computer systems, thereby freeing up investment capital that can be used to better advantage elsewhere. Another benefit is that local outsourcing firms can provide valuable in-country experience and really help new entrants get things done more efficiently. Business process outsourcing (BPO) is a broad term referring to outsourcing in all fields.
A BPO differentiates itself by either putting in new technology or applying existing technology in a new way to improve a process. Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external provider that in turn owns administers and manages the selected process based on defined and measurable performance criteria. Business Process Outsourcing (BPO) is one of the fastest growing segments of the Information Technology Enabled Services (ITES) industry.
Service Example: Customers calling to check on their order status, customers calling to check for information on products and services, customers calling to verify their account status, customers calling to check their reservation status etc. Technical support offerings include round-the-clock technical support and problem resolution for OEM customers and computer hardware, software, peripherals and Internet infrastructure manufacturing companies. These include installation and product support, up & running support, troubleshooting and Usage support.
Service Example: Customers calling to resolve a problem with their home PC, customers calling to understand how to dial up to their ISP, customers calling with a problem with their software or hardware. •Telemarketing Services Telesales and telemarketing outsourcing services target interaction with potential customers for ‘prospecting’ like either for generating interest in products and services, or to up-sell / promote and cross sell to an existing customer base or to complete the sales process online.
Service Example: Outbound calling to sell wireless services for a telecom provider, outbound calling to retail households to sell leisure holidays, outbound calling to existing customers to sell a new rate card for a mobile service provider or outbound calling to sell credit or debit cards etc.
Employee Benefits Provided By Majority Of the BPO Companies Provident Fund: As per the statutory guidelines, the employee is required to contribute a percentage of his basic salary and DA to a common fund. The employer for this fund contributes as well. The employee can use the amount deposited in this fund for various personal purposes such as purchase of a new house, marriage etc. Gratuity: Gratuity is one of the retrial benefits given to the employee in which the employer every year contributes a particular amount. The fund created can be used by the employee for the purpose of long-term investment in various things such as a house etc.
Group Medical claim Insurance Scheme: This insurance scheme is to provide adequate insurance coverage of employees for expenses related to hospitalization due to illness, disease or injury or pregnancy in case of female employees or spouse of male employees. All employees and their dependent family members are eligible. Dependent family members include spouse, non-earning parents and children above three months Personal Accident Insurance Scheme: This scheme is to provide adequate insurance coverage for Hospitalization expenses arising out of injuries sustained in an accident.
Subsidized Food and Transportation: The organizations provide transportation facility to all the employees from home till office at subsidized rates. The lunch provided is also subsidized. Company Leased Accommodation: Some of the companies provides shared accommodation for all the out station employees, in fact some of the BPO companies also undertakes to pay electricity/water bills as well as the Society charges for the shared accommodation. The purpose is to provide to the employees to lead a more comfortable work life balance.
Recreation, Cafeteria, ATM and Concierge facilities: The recreation facilities include pool tables, chess tables and coffee bars. Companies also have well equipped gyms, personal trainers and showers at facilities. Corporate Credit Card: The main purpose of the corporate credit card is enable the timely and efficient payment of official expenses which the employees undertake for purposes such as travel related expenses like Hotel bills, Air tickets etc Cellular Phone / Laptop: Cellular phone and / or Laptop is provided to the employees on the basis of business need.
The employee is responsible for the maintenance and safeguarding of the asset. Personal Health Care (Regular medical check-ups): Some of the BPO’S provides the facility for extensive health check-up. For employees with above 40 years of age, the medical check-up can be done once a year. Loans: Many BPO companies provide loan facility on three different occasions: Employees are provided with financial assistance in case of a medical emergency. Employees are also provided with financial assistance at the time of their wedding.
And, The new recruits are provided with interest free loans to assist them in their initial settlement at the work location. Educational Benefits: Many BPO companies have this policy to develop the personality and knowledge level of their employees and hence reimburses the expenses incurred towards tuition fees, examination fees, and purchase of books subject, for pursuing MBA, and/or other management qualification at India’s top most Business Schools. Performance based incentives: In many BPO companies they have plans for , performance based incentive scheme.
The parameters for calculation are process performance i. e. speed, accuracy and productivity of each process. The Pay for Performance can be as much as 22% of the salary. Flexi-time: The main objective of the flextime policy is to provide opportunity to employees to work with flexible work schedules and set out conditions for availing this provision. Flexible work schedules are initiated by employees and approved by management to meet business commitments while supporting employee personal life needs .
The factors on which Flexi time is allowed to an employee include: Child or Parent care, Health situation, Maternity, Formal education program Flexible Salary Benefits: Its main objective is to provide flexibility to the employees to plan a tax-effective compensation structure by balancing the monthly net income, yearly benefits and income tax payable. It is applicable of all the employees of the organization. The Salary consists of Basic, DA and Conveyance Allowance.
The Flexible Benefit Plan consists of: House Rent Allowance, Leave Travel Assistance, Medical Reimbursement, Special Allowance Regular Get together and other cultural programs: The companies organizes cultural program as and when possible but most of the times, once in a quarter, in which all the employees are given an opportunity to display their talents in dramatics, singing, acting, dancing etc. Apart from that the organizations also conduct various sports programs such as Cricket, football, etc and regularly play matches with the teams of other organizations and colleges.
Wedding Day Gift: Employee is given a gift voucher of Rs. 2000/- to Rs. 7000/- based on their level in the organization. Employee Referral Scheme: In several companies employee referral scheme is implemented to encourage employees to refer friends and relatives for employment in the organization.
The history of management in India can be traced to the English East India Company, (1600–1874) chartered by Queen Elizabeth I for trade with Asia. After independence in 1947, India subscribed to a model which placed a strong emphasis on central planning and a big role for government owned Public Sector Enterprises (PSEs) who were established to control the “commanding heights” of the economy. After the economic reforms of 1991 the country’s economy became much more integrated to the world economy, which was the effect of liberalization in our country and globalization worldwide. The concept of human resources has undergone drastic changes as far as the Indian Industry is concerned.
The age-old concept of Human Resource Management has changed to Human Resource Development. This change has come as a result of the change in industry from manufacturing in the public sector to information technology in the private sector.
The evolution of the concept of performance management as a new Human Resource Management model reflects a change of emphasis in organizations away from command-and-control toward a facilitation model of leadership.
This change has been accompanied by recognition of the importance to the employee and the institution of relating work performance to the strategic or long-term and overarching mission of the organization as a whole. The performance management process provides an opportunity for the employee and performance manager to discuss development goals and jointly create a plan for achieving those goals. Development plans should contribute to organizational goals and the professional growth of the employee.
Critical to the success of this new model, a flexible attitude in the face of constant change is most essential. For performance managers, this changing environment offers many new challenges and opportunities. Performance managers and their employees are increasingly being asked to become generalists who step outside of traditional narrowly-defined job descriptions in support of team objectives and goals. These changes are resulting in the development of new approaches to human resource management.
The BPO industry with its major thrust on knowledge workers offers a challenge to the Human Resource manager. The major challenges are: Brand equity: People still consider BPO to be “low brow”, thus making it difficult to attract the best talent. Standard pre-job training: Again, due to the wide variety of the jobs, lack of general clarity on skill sets, etc, there is no standard curriculum, which could be designed and followed. Benchmarks: There are hardly any benchmarks for compensation and benefits, performance or HR policies.
Everyone is charting his or her own course. In both the pre-job training as well as in benchmarks, the role performance management plays is not too small. Performance appraisals whether they be pre/post training, offers the company a quick glance through the effectiveness and the worthiness of a person in the organization and also helps in effective placements.
Business process outsourcing (BPO) satisfaction levels are on the up – but hile more organizations are now confident when negotiating outsourcing contracts. Most struggle with ongoing management and making the deal deliver ongoing value, argues Simon Lindley, Principal Consultant at Orbys Consulting. Over the last couple of years, the outsourcing market has turned a corner and the widespread perception of failure has been replaced by a growing acceptance that BPO can really deliver on its potential benefits – from reduced cost to supporting business growth through effective access to key skills.
Organizations now have a level of confidence in negotiating outsourcing contracts that is enabling far more to achieve strategic objectives via a BPO arrangement. Indeed, in a recent independent study undertaken by Benchmark Research on behalf of Orbys Consulting, 29 percent stated the contract exceeded expectations, 61 percent believed it was in line with expectations and only nine percent felt that it fell below expectations. However, it is also apparent that organizations increasingly recognize that getting to contract is just the beginning of a complex, evolving relationship with the outsource service provider.
Ensuring the contract retains its successful perception throughout the business over the long term requires a proactive approach to managing the relationship between the business and BPO service provider. For example, post contract performance management should not just be about tracking service level agreement (SLA) metrics. If organizations are to maximize their relationship with a BPO service provider and achieve long-term strategic benefits – or even just make sure they stay on track – then other key factors need to be identified, monitored and actively managed against.
Some will be ongoing regular measures; others should be modified over time to reflect changing business priorities, and current business strategy and initiatives. This wider ‘balanced scorecard’ approach to performance management is not only of value to the business in driving continuous improvement and business focus, it also helps the BPO service provider in terms of providing greater clarity of customer perceptions and satisfaction, and clearer specification of business priorities and how the service provider can help them be delivered.
Although initially some service providers may be wary of the additional effort and investment required, the wiser ones will realize the potential for providing wider service and project support. Effective ongoing management can also greatly reduce the risk of client dissatisfaction and therefore ultimately help avoid subsequent re-tendering of the contract or services being taken back in-house.
Business process outsourcing (BPO) has become an essential trend in the current digitalization and globalization environment which influences the strategy of enterprise greatly. In this paper, current research and results are discussed as well as their deficiencies. Then based on business process performance measurement, the total life cycle management framework of BPO is brought forward to solve challenges identified through these deficiencies.
At last business process performance and management system and relevant concrete methods such as business process based risk analysis, hierarchical fuzzy cognitive map to simulate the cause-effect logical relationships among performance indicators are presented as well to support the analysis and decision in the total life cycle management. Companies of today and tomorrow are confronted with intense global competition, demanding customers with rapidly changing desires, shrinking response times and shortened product life cycle.
However, globalization also gives companies an opportunity to take a fresh look at their competitive strategy and exploit outside resources even in remote regions. Thus outsourcing has become the most popular strategy in business for several decades. According to the definition in [1], outsourcing is the operation of shifting a transaction previously governed internally to an external supplier through a long-term contract, and involving the transfer of staff to the vendor for the firm. Obviously, outsourcing implies transferring a significant amount of management control to the supplier.
Although outsourcing IT and other specific services has taken place for about 50 years, outsourcing entire functions which is called business process outsourcing (BPO) started in the late 1980s and early 1990s [5]. There are several principal reasons for company to outsource business process. The first is apparently cost saving and to focus on core capabilities; the second is to improve or reengineer the outsourced business process; and the third is that a business requires immediate access to specialist skills. In the beginning, companies outsource their non-core ctivities to countries where labor and other expenses are low. But today there is more to BPO than just cutting down costs.
BPO tends to focus more on the overall creation of value such as efficiency, high quality and customer satisfaction. What are the major challenges of BPO confronted by service provider (or called third party providers) and outsourcing company at present? From the point view of service provider, there exists contradiction between large scale and customization. Due to the complex nature of business processes and activities, service providers have to cater for the special requirements of a company.
Nevertheless to meet the demand for flexible but multi-clients outsourcing arrangements, it is promising that the advent of standards-based architectures, such as Web Services which provide a standardized IT environment will achieve the seamless integration between service provider and outsourcing company. While from the point view of outsourcing company and combined with many failure cases, the principal challenge and obstacle stems from loss of control on outsourced activities which always leads to the huge risk and high failure rate.
So the key to success in all BPO segments, regardless of process or industry, is the ability to measure process performance before a process is outsourced and during the life cycle of the engagement. Although BPO is a growing trend and has finally moved from concept to reality, the existing huge risk and lack of support approaches and technologies still lead to high ratio of unsuccessful cases. With the efforts of many researchers research work on this field is significantly developed but still has not fully stepped up to meet the actual requirements of potential world market.
Furthermore these deficiencies in research findings mainly focus on managing approaches, not technical support. However with the rapid IT application development in BPO and dramatic improvement of business process management, the procurement of process data turns to easier and business process-based BPO management with technical support is getting possible.
Through the above literature review and to meet the challenge above mentioned, it is innovative and feasible to propose technical support to BPO grounding on business process analysis and put forward total life cycle management framework of BPO based on business process performance analysis. Total Life Cycle Management of BPO-Framework The total life cycle framework is proposed in attempt to shed light on the relationship between BPO and business process performance the total life cycle management framework is proposed here.
And in the view of constructing BPO, its total life cycle is composed of seven phases. Each phase will be elaborated in the following section. Analyzing and planning outsourcing It is obvious that BPO will bring opportunities accompanied with risks to an outsourcing company. So before the “make or buy” decision, it is very critical to take an all-sided analysis. In this stage, the analysis, which is normally based both on performance and risk factors, firstly focuses on current business process if available. Thus a comparison can be made between the pre-outsourced and outsourced process.
Selecting service providers In this stage a set of evaluation criteria must be defined to select prospective BPO service provider. These criteria typically include cost, quality, IT capability and financial stability. After listing the evaluation criteria in a hierarchical way, decision method like AHP or expert system can be adopted to evaluate potential providers. Then a formal request for proposal (RFP) which take the above evaluation criteria listing as a part initiates the process.
