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Tenets Of Outsourcing

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What is Business Process Outsourcing (BPO)?
Business Process Outsourcing (BPO) refers to engaging the services of an external provider to manage certain non-core yet critical processes of an organization. BPO services come under the larger outsourcing umbrella.

What is outsourcing?
Outsourcing is a strategic initiative that organizations take to employ external resources to conduct functions and run business processes that are both core and non-core activities and critical for business success. These functions or processes, which were traditionally handled by in-house resources, are delegated to an external party with specialized skills to perform them efficiently.

Who outsources?

In today’s global economy, many companies outsource business functions to reduce costs, create efficiency and add value to their business. Most industries outsource to some extent, but the most common ones are Information Technology, Financial Services, Communication (Telecoms), Consumer Goods/Service and Manufacturing.

Why is outsourcing needed?

Outsourcing comes into play when companies want to stay on the cutting edge in the market. To grow their business and increase their profitability, outsourcing has become a viable option for many companies. More than a means of just reducing costs, it has become a tool for creating and adding value to business, while allowing companies to have the ability to concentrate more on core functions and competencies. Furthermore, it helps management to re-configure business processes and provide the necessary information to assist effective decision-making and ensure quality and cost control.

What are the areas of expertise of leading BPO firms?

Top BPO firms have mastered the facets of different industries and have become experts in managing functions in different verticals. This deep knowledge base is hugely beneficial for their customers. The areas that BPO firms today should have a depth of know-how in are: banking and financial services, communications (telecoms), healthcare, insurance, shipping and logistics, manufacturing, retail and consumer products, travel and leisure and utilities and energy. Additionally, leading BPO firms provide cross-industry solutions such as: customer care, finance and accounting, procurement, legal services, human resources, research and analytics and transformation solutions.

What are the advantages of outsourcing?
Outsourcing carries with it many advantages for companies that engage with BPO firms.The top eight advantages that companies have access to are:
  • Ability to focus on core activities
  • Cost and efficiency savings
  • Reduced overheads
  • Operational control
  • Staffing flexibility
  • Continuity and risk management
  • Transformation
  • Innovation


How should I go about looking for an outsourcer?

After deciding to outsource certain functions of your business, you should keep the following in mind while looking for an outsourcer. You can take the help of consultants and advisory agencies for your search.
  • Is the BPO service provider an expert in your ‘need area(s)’?
  • What is the level of satisfaction of the BPO service provider’s current clientele?
  • Is the BPO service provider’s business expanding?
  • Is it a recognized entity within its own industry?
  • What is the financial condition of the BPO service provider?

What goes into a Service Level Agreement (SLA)?

The SLA is a part of the overall contract. Keep in mind that an SLA is often revisited and modified by parties as the partnership grows and changes over time. These are the basic components of an effective SLA:
  • Introduction and purpose section of the SLA including the: “who, what, when, where, why and how” of the engagement
  • Scope of work section that outlines the services to be delivered.
  • Performance, tracking and reporting section that maps out a detailed method of keeping services top-notch
  • Problem management section that discusses contingency plans and uniform definitions of what constitutes a ‘problem’ along with how problems will be handled
  • Fees and expenses section that chalks out the pricing guidelines
  • Client duties and responsibilities section that conveys the customer’s areas and methods of involvement

What are the methods of outsourcing?
Companies that outsource follow one or more of these methods of outsourcing:
  • Offshoring outsourcing business processes to locations around the globe to reduce labor, tax and operational costs
  • Onshoring outsourcing business processes to a BPO firm that is within the same country. While the company gains benefits that come with intimate knowledge of in-country logistics, this method can be more expensive than other methods of outsourcing
  • Rightshoring - outsourcing business processes to locations that provide the best combination of cost and efficiency. It refers to maintaining a balance between processes that can remain domestic and those that can be outsourced overseas
  • Nearshoring outsourcing business processes to a facility that is located at a nearby country in order to gain benefits such as reduced travel costs, maintaining communication methods and expenses while lowering other operational costs
What are the models of outsourcing available?
Various models of outsourcing exist in today’s global delivery network. The basic models that dominate the market are:
  • Offshore Development Center – refers to a model of outsourcing also known as third-party offshoring that essentially creates and supports a dedicated facility under contract to the customer. It suits customers seeking to enter the market fast and with minimal start-up costs and want to use the partner’s resources to scale up or down the business as the need arises.
  • Joint Venture – refers to a model of outsourcing wherein an in-country and foreign organization join up to share responsibility in terms of management, as well as risks and rewards that correspond to their investments.
  • Build Operate Transfer– refers to a model of outsourcing wherein the customer works contractually with an in-country service provider to build, staff and handle a development or processing center. Once the center is fully operational, ownership is transferred to the customer.
  • Captive Center – refers to a model of outsourcing that is basically an extension of the customer’s facilities in an offshore location. Customers have complete ownership and control over total operations offshore.

What is transformation in outsourcing terms?

Transformation in the BPO world is about sculpting business processes that would facilitate operational excellence, save costs, enhance the brand image and create continuous value for your business. It goes beyond shaking out inefficiencies and sticking to SLAs. Transformation is a collaborative approach where your organization takes active part in the process right from the beginning.

What certifications should a BPO service provider have?

Depending on the nature of your business, you should partner with an outsourcer who has the right certifications. Here are a few important certifications that leading BPO service providers possess:
  • Sarbanes-Oxley (SOX) - covers issues such as auditor independence, corporate governance, internal control assessment and enhanced financial disclosure.
  • ISO 9001:2008 - a set of quality standards set to ensure that customers’ needs are met. The International Organization for Standardization (ISO) publishes these standards. The ISO 9001:2008 is the most recent version of these standards.
  • Environmental Management Systems (EMS) - The Environmental Management Systems (EMS), which falls into the ISO 14000 series, is a method for managing the impact of an organization's activities on the environment.
  • Payment Card Industry Data Security Standard (PCI DSS) - The PCI DSS is an information security control for companies that handle cardholder details for credit, debit, prepaid, e-purse, ATM and POS cards.
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