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Business Process Outsourcing Essay

Introduction:

Business Process Outsourcing (BPO) 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 to concentrate on its core competencies, improve efficiency, reduce cost and improve shareholders’ value.

Several global giants from various industries have acknowledged the importance of Business Process Outsourcing (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 favourable time zone and high quality.

This non-core but critical functions can be anything from data processing – data entry, data validation, data Auditing, Data search and other processing services as per clients’ requirements.

Administrative operations – human resource, accounting, online, marketing, content management and other operation services as per clients’ orders.  Also contact centres – in and out bound telephone services, E-mail correspondence processing, web chart correspondence processing and computer telephony integration.

Literature review:

Unknown to most people business processing outsourcing, did not begin in the last two decades.  In truth, the origin of business processing outsourcing (BPO) can be traced to 1830’s.  This is when the Americans commissioned the workers based in Scotland to build wagon covers and ship sails (erpwire.com).  Over the years there was a diversification in the items outsourced to other nations to make.  With the advent of computers in the 70’s there arose a new area of outsourcing probabilities.  With the need for great man power in computing companies, they started to send out the payroll preparation services.

This was followed by virtually the whole accounting process by the 80’s.  With quality results being achieved, and an increased educated manpower available abroad, companies started to outsource word processing.  In those early days of BPO, it was only possible within America.  It worked in the premise of transferring a job to a business centre located in an entirely different state so as to fulfil a company’s database management or data encoding needs.  As it became a feasible option, more companies across industries started to see the advantages and necessity for such a service.

As computers became smaller, more powerful and networked, the need to have all an organizations staff in the same location was becoming obsolete.  An organization could still have none core function staff not come into work daily but still perform their tasks in the comfort of their homes.  With the high labour costs in developed world, the companies were forced to rethink their strategies in order to remain competitive.  At the same time the South East Asian countries were heavily investing in the latest technology in a bid to industrialize.

This allowed for the same output to be achieved at lesser cost.  Business process outsourcing had effectively cut labour costs. When a certain job is transferred to a different country where labour is relatively cheap, then a much bigger production team can be commissioned to do that particular job. As a result, there would be more tasks completed at half the cost compared when it is done within the company walls.

Aside from that, there will also be lower overhead costs. Because the job is passed on to somebody else, the use of company resources is conserved. There won’t be a need for an additional space for that particular job inside the company, for one thing. There would also be lower maintenance costs as well. Even the smaller things like electricity bills and water bills for the company and insurance payments for the workers are cut dramatically. The lesser workers a company keeps, the lesser overhead costs it has.

In so much as BPO is advocated to as the solution to companies remaining competitive in the long-run, it is only a fool who would think there are no challenges to be faced.  By adopting BPO a company will be looking to loose managerial control over the task they choose to pass over.  This may in turn affect the quality of work as it may not be at par with the company’s standards.  If they chose to rework the poor quality work, the company will end up taking twice as long in the whole process.

In some cases companies many overlook some costs that are incidental.  The time and money lost preparing and coordinating the deal and any fees payable in the hosting country that do not come with official receipts.  Having to deal with countries not used to dealing on the up and up, could see hidden costs arising from time to time making outsourcing very costs very hard to calculate.

Business process outsourcing can also be a threat to a company’s confidentiality and security issues. Delicate processes such as the payroll will reveal the salary of every employee. And salary by nature is considered confidential. It is then very important to choose which outsourcing company to hire. And this is just an example of business process that can be affected by outsourcing (erpwire.com).

In this band wagon is increasingly been found Small and Micro Enterprises (SME’s).  Because business process outsourcing proves to be the low cost solution of a company’s production problems, small and medium enterprises are pressured to contact them to assist with their internal processes. It is because the resources required hiring a group of worker to perform the required task is not feasible for some SME’s.

Most SME’s, even though they try not to outsource their business processes, have no choice but to do so because they need to answer the need to be intimate with their customers, the need to look professional, and the need for integration. Since small and medium enterprises have limited funds and capital and so they end up hiring a business process outsourcer just to retain their market competitiveness.

And another reason is that it is bigger companies does it. And when they do, they get lower labour and overhead costs. That means they could sell their products at a relatively lower price as well. Small and medium enterprises that are not outsourcing their business processes end up with higher labour and overhead costs instead. And so they can’t lower the prices of their commodities or services to be at par with the others in the market. As a result, they lose their competitiveness. They could even close out if they won’t come up with drastic steps.

Business process outsourcing, especially offshore, had brought about diverse reactions throughout America. But even so, the option of companies to move production, call centre services, computer-based works, and similar jobs is always there. But because of the problems of business process outsourcing, companies should think twice before joining the bandwagon.

When all is said and done, it is the aim of this research to find out whether outsourcing has brought the benefits.  I will try to disprove the belief that business Processing Organizations BPO’s are over hyped (internetnews.com).  We contend that if all aspects of a transaction in put into consideration, BPO will stand the test.  By taking into consideration all the challenges in the environment it operates in, it can have strength of knowledge in decision making.  I will be looking at customer care as an integral area of outsourcing in this era.

By choosing the customer care aspect of outsourcing, I plan to achieve some core functions I consider critical.  This will include superior customer care, round the clock operations and superior product knowledge to allow for fast solution provision.  In this area I will be looking to tap into the European market.  Of late all energy has been expended to break into the US and UK market.  This is generating a negative backlash as white collar jobs move abroad (indianchild.com).  In the European market, I will be looking at EADS (European Aeronautic Defense And Space Company).

By its very nature, it has operations spread all over continental Europe [eads.net], and I can imagine the amount of resources that they expend on customer care services. Indeed, customer care services are as vital to EADS as its core business, manufacture and maintenance of engineering materiel [eads.net]. By EADS outsourcing to me its customer care business, it will benefit from consolidating its resources to bear on its core business, hence enhancing specialization.

This will free up all funds currently used in hiring customer care staff at different sites, the floor space and phone bills, insurance and other expenses.  I will be offering an integrated and all-encompassing solution in customer care.  The funds saved will be available for re-investment in research and development or for increased dividend payout to the share holders.

Why should EADS choose to partner with me? By choosing to partner with me EADS will be getting unique advantages over its competitors.  I will be making available to EADS a team that has excellent expertise in customer care and my cost is minimal hence freeing up for EADS the financial resources tied down in sustaining its customer care branch. The training offered to my staff is such that the customers will think they have been connected directly to the head or branches in Europe yet, my locations are in a third world country. How is that possible, considering the problems with different cultures and accents?

Simple, many third world countries boast of populations that have majority of people with neutral accents. Hence, a short training in adoption of the American accent, including understanding the American culture is quite achievable. I will also be able to start work in 7 days time from the day of contract signing.  Since I have a staff on the ground already, I will be offering to EADS a dedicated team led by the account director available and accessible to EADS 24/7, team leaders and team on call 24/7 in order to care for all customers around the globe.

I will also be able to provide broadband connection and a toll free number from UK, US and Canada in 10 days time.  Other countries will take a little more time.  In seven (7) days I will have developed an online software needed for direct entry of reports and any action taken reports direct to EADS in house web server.  This will make sure work completed; queries and default reports are in EADS web server on real time.

I will in addition to the above areas, be able to offer EADS services that will aid in increased business – to – business and business – to – customer interactions.  These will include:

  • Technical support and trouble shooting
  • Maintenance support
  • Help desk services
  • Market research from the customer’s who call in
  • Order taking and status

EADS will also have available to it a state-of-the-art facility and the experience of the assigned dedicated team to increase productivity and business objectives.  This team will engage activities like:

  • Market lead generation
  • Market research /Surveys
  • Re-selling to your earlier customers with new offers
  • Database creation
  • Disaster management calls
  • Customer loyalty programs

The whole process on approval will take a maximum of fourteen (14) days to be up and running.

The base of operations is preferably a third world country with a stable economy and favourable political climate. Most East and Southern Africa countries and South Asian economies fit the bill. Hence Malaysia, Zambia and Kenya are ideal candidates.  These are countries with the requisite infrastructure to support this venture.  Connectivity will be by broadband being offered via fibre optic connection through Mombasa and Fujaira in Oman Middle East for East Africa, and through Cape Town for South Africa. Malaysia has an integrated connectivity with other Asian countries such as Singapore and West Indies.

To guard against any interruption, I have a dedicated satellite uplink with EADS satellite orbiting the Earth over Europe and covering upto Africa.  This will be on stand by at all times.  Because of the nature of the business, some information handled is expected to be of a sensitive nature.  In anticipation of this I will pursue information security guarantees such as those offered by the International Standards Organization’s award: ISO 17799 2005 certification (praxiom.com).

For the success of this undertaking, I will need some core requirements fulfilled. EADS will second a management level trainer to extensively train my staff on the products and protocols unique and required by EADS.  Additionally, EADS will be at liberty to conduct periodic audits of both the internal processes and security protocols to satisfy themselves all care is been taken to protect sensitive information.

Thirdly, it is vital that EADS second a Quality control expert for a period of three (minimum) to six (maximum) months to ensure training on its particular standards. This will basically be a training of quality control trainers and will aid both in future audits and in creating transparency.

EADS should expect to start reaping returns once the whole project is up and running.  Our successes parameters will be on the number of calls attended to.  In the initial phase, I expect to have upto 1000 calls logged in and 100% customer satisfaction.  I will also expect to have an on going training department for incoming staff and those already employed, on EADS products. Additionally I expect to be able participate in promotions and air shows if invited, offering to EADS articulate personnel who can aid in market penetration.  With the realisation of this activities, I expect growth to the level were we can reliably offer transaction processing services to EADS. This will include:

  • Payroll processing
  • Account maintenance and changes
  • Data Conversion
  • Financial statement preparation
  • Accounts receivable management
  • Accounts payable management

All this will be in line with my goal of ensuring EADS is set free to concentrate on its core business, allowing it an opportunity to succeed in its specialty field of aircraft and security systems manufacture and maintenance.

Reference:

Alter, D. Is The Jobless Recovery Due to Small Business Outsourcing?

http://economics.about.com/cs/macroeconomics/a/jobless_recov.htm

Bersin, J. [April, 2005] Business Process Outsourcing: Pros and Cons

http://clomedia.com/content/templates/clo_article.asp?articleid=910&zoneid=67

Engardio, P.: The New Global Job Shift [article dated: February 3, 2003]

http://www.businessweek.com/magazine/content/03_05/b3818001.htm#top

ISO IEC 17799 2005 is a comprehensive Information Security Management Standard

http://praxiom.com/iso-17799-intro.htm [updated on April 7, 2007]

Mani, D, Barua, A, and Whinston, A.B.: Successful Business Process Outsourcing

http://sloanreview.mit.edu/smr/issue/2006/winter/01/

Small and Medium Enterprise Issues with Business Process Outsourcing

http://www.erpwire.com/erp-articles/problems-of-business-process-outsourcing.htm

The Future Of Outsourcing How it’s transforming whole industries and changing the way we work

http://www.businessweek.com/magazine/content/06_05/b3969401.htm#top [Updated Jan 30, 2007]

Olavsrud, T. [September 2, 2003]   Business Process Outsourcing Overhyped?

http://www.internetnews.com/ent-news/article.php/3071001

Zaidi, A. [2004] Business Process Outsourcing (BPO)

http://www.indianchild.com/outsourcing/business%20process%20outsourcing.htm

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