Fundamentals of

Business Processing Outsourcing

 Topic 1: Introduction to the Information Technology and Business
Process Management (IT-BPM) Industry

Overview:

This topic will provide an overview of an outsourcing operation – from planning, transitioning,
maintenance, and, continuous improvement initiatives – all of which are to be discussed in
practical terms.

Learning Objectives:

After successful completion of this lesson, the student should be able to:

1. Appreciate the essence of taking up the course and the importance of possessing the
right attitude and behavior in the workplace.
2. Understand the IT-BPM Industry.
3. Appreciate the significant contribution of the IT-BPM Industry to the Philippine economy.
4. Explain the underlying reasons why companies outsource and what activities are being
outsourced.
5. Analyze the advantages and disadvantages of outsourcing or the factor driving the need
to outsource.

Course Materials:

Outsourcing
• is the practice of having certain tasks, operations, or job functions done outside a
company instead of having an in-house department or employee handle them; functions
can be outsourced to either a company or an individual
• contracting of a third party or service provider for the delivery of a process or service for
a significant period.
• every time we buy something from somebody rather than producing it ourselves, we
have essentially “outsourced” the production of that good or service.
There are five (5) main reasons why companies outsource:
1. Capacity Management – has to do with the associated manpower and related expertise
of that workforce. It refers to the act of ensuring a business maximizes its potential
activities and production output—at all times, under all conditions.
2. Lower Cost – has a lot to do with a company’s sustainable capacity to effectively
produce or deliver its products or services. The provider places several people with a
specialized skill set on the job, and they get things done faster. They spend less time
overall, which in turn reduces your costs.
3. Better Performance – has to do with manpower and the associated expertise of that
workforce.
4. Faster and Continuous Service Delivery - has to do with producing greater output
from work being done around the clock.
5. Part-based Activities – is closely related to operational efficiency. Work segmentation
allows for numerous benefits such as; a greater degree of control, inventory
management, troubleshooting, and forecasting to mention a few.

Top 10 Reasons to Outsource

Outsourcing is the practice of delegating the business operation of an organization to third
parties or external organizations, exploiting advantages ranging from low-cost labor to increased
quality and creativity in goods and services. Outsourcing takes the form of offshoring when the
outsourcing transgresses national borders and is controlled by corporations based in other
countries.
1. Lower operational and labor costs are among the primary reasons why companies
choose to outsource. When properly executed it has a defining impact on a company's
revenue recognition and can deliver significant savings.
2. Companies also choose to outsource or offshore so that they may continue focusing on
their core business processes while delegating mundane time-consuming processes to
external agencies.
3. Outsourcing and offshoring also enable companies to tap into and leverage a global
knowledge base, having access to world-class capabilities.
4. Freeing up internal resources that could be put into effective use for other purposes is
also one of the primary benefits realized when companies outsource or offshore.
5. Many times stranded with internal resource crunches, many world-class enterprises
outsource to gain access to resources not available internally.
 6. Outsourcing, many a time is undertaken to save costs and provide a buffer capital fund
to companies that could be leveraged in a manner that best profits the company.
7. By delegating responsibilities to external agencies companies can wash their hands off
functions that are difficult to manage and control while still realizing their benefits.
8. Outsourcing and especially offshoring helps companies mitigate risk and is also among
the primary reasons embarked upon.
9. Outsourcing also enables companies to realize the benefits of re-engineering, revising,
and upgrading the project as per the client's requirements.
10. Some companies also outsource to help them expand and gain access to new market
areas, by taking the point of production or service delivery closer to their end users.

WHAT IS BEING OUTSOURCED?

• Support and Auxiliary Services – has to do with their own.
• Routine activities or activities that can be automated at larger centers
• IT Services - bring new capabilities to use for companies that need to select the right
kind of vendor to get the best technology at the cheapest cost.

ADVANTAGES AND DISADVANTAGES OF OUTSOURCING

Advantages:
1. The service provider or the BPO company determines the most efficient number of
resources, processes, and supervision to achieve output.
2. The service provider may have more expertise/capability than the buyer.
3. Buyers can leverage the economies of scale of the service provider.

Disadvantages:

1. Cost can be higher because the provider may add a premium for risk in case
processes are not well defined.
2. The buyer does not have full control of resources doing work because the people
doing the work are limited to the requirements of the job being outsourced to them.
3. Shifting schedule because providers are required to match the client's time zone. It can
result in a graveyard shift.
4. Dealing with an irate customer
FUNDAMENTALS OF OUTSOURCING

Outsourcing is usually defined as “an organization entering into a contract with another
organization to operate and manage one or more of its business processes.” Business
Processing Outsourcing (BPO) in a broader sense means employing an external agency or a
third-party vendor to get a job done to attain maximum accuracy at a comparatively lesser cost.
A vendor is a party in the supply chain that makes goods and services available to companies
or clients.

THE TWO (2) TYPES OF OUTSOURCING

1. Third-Party wherein service is given by the service provider that is not part of the
company. It means that instead of the company doing the business themselves, they
may opt to outsource it to another company.
2. Shared Service Center wherein service is provided by the company wholly owned by
the mother company. It means they provide services entirely to affiliates and subsidiaries
or the clients of their own company.

There are five (5) strategies for outsourcing:

1. Multisourcing– contracting or using multiple vendors for the fulfillment of a client’s

outsourced project
2. Crowdsourcing– is the practice of obtaining needed services, ideas, or content by
soliciting from a large group of people and especially from an online community, rather
than from traditional employees or suppliers.
3. Onshoring – contracting vendor or service provider that is based in the same country as
the client company.
4. Nearshoring– the transfer of business to a nearby country, often sharing the same
border.
5. Offshoring– the vendor and client are in a different country.
TYPES OF SERVICES RENDERED BY BPOS

• Customer support services: These services are voice, e-mail, or chat-based. The
related call centers operate 24/7 throughout the year. Typical examples include resolving
customer queries related to customer’s bank-account status, order status, product
information, etc.
• Technical support services: These services are also depending on voice, e-mail, or
internet chat. The technicians at the outsourced center work round the clock to resolve
customer queries about computer hardware, software, peripherals, and the internet. The
queries handled include installation, product support, troubleshooting, and user support.
For example, if a customer is unable to connect to the internet it is the online technician
who troubleshoots the issue.
• IT helpdesk support: The IT professionals assist the internal customers (corporate
employees) troubleshoot issues related to password reset and other vital functions, or
issues with MS Outlook/Outlook Express.
• Data-entry services: It includes entering data at a fast pace and taking care to maintain
a high degree of accuracy. Examples of this service include maintaining data related to
sales, purchases, mortgages, etc.
• Accounting services: This includes services related to maintaining the general ledger,
financial statements, balance sheets, bank reconciliation statements, assets, liabilities,
etc.
• Internet/Online services: This includes online sales and purchases, e-booking, and e-
ticketing. This is one of the fastest modes to reach out to a majority of customers
worldwide in the shortest period.

WHAT TO OUTSOURCE – TWO TYPES

1. Core activities-task-processes are essentially what the company is known for. It is

defined as strategic tasks that improve customer value and drive profits.
2. Non-core activities-task-processes are generally defined as day-to-day routine tasks
that add little value and are not a profit center.
Activities / Assessments No. 1:

Interview someone – whether a friend, neighbor, brother, or sister – who currently works at a
BPO company. Please provide the link to the interview transcript and video in your Google Drive
for easy downloading, ensuring that the link is not password-protected for my access. During
the interview, gather information on the following topics: (1) company profile, vision, and
mission, (2) duties and responsibilities of the interviewee, (3) career path in the BPO industry,
and (4) a brief history of why and how they secured a job at the BPO company.

Note: If a video interview is not possible, you may take screenshots of your chat or email
conversation with them. Just make sure they are fully informed about it.