Chapter Four

Business Process Outsourcing

1
(BPO)

5/3/2023
2 Business Process Outsourcing (BPO) defined

 Business process outsourcing

(BPO) is a type of outsourcing
wherein a third-party service
provider is employed to carry
out one or more business
functions in a company. The
third party is responsible for
carrying out all operations
related to the business
function.
Addis Ababa University School of Commerce
3 Business Process Outsourcing (BPO) defined…

 BPO is defined simply as

the movement of business
processes from inside the
organization to external
service providers.

Addis Ababa University School of Commerce

4 Business Process Outsourcing (BPO) defined

 BPO occurs when an

organization turns over the
management and
optimization of a business
function, such as accounts
payable or purchasing, to a
third party that conducts the
activity based on a set of
predetermined performance
metrics. – Computer World
Addis Ababa University School of Commerce
 Business Process Outsourcing (BPO) defined…

BPO is “the delegation of

one or more IT-intensive
business processes to an
external provider who, in
turn, owns,
administrates and
manages the selected
process(es), based upon
defined and measurable
performance metrics.”
 BPO Trends: Facts and Figures

 With the global telecommunications

infrastructure now well-established and
consistently reliable, BPO initiatives often
include shifting work to international
providers.
7 BPO Trends: Facts and Figures…
 Banking & Finance Industries. Almost every industry can
take advantage of BPO to increase efficiency. ...
 Automation & Artificial Intelligence. ...
 Cost-Cutting Motives. ...
 Information Technology Processes. ...
 Cloud-Based Computing. ...
 Data Security.

Addis Ababa University School of Commerce

8 BPO Trends: Facts and Figures…

Addis Ababa University School of Commerce

9 BPO Trends: Facts and Figures…

Addis Ababa University School of Commerce

 BPO international hot spots…
 Five BPO international hot spots have emerged around the globe,
although firms from many other countries are specializing in
various
Business processes and exporting services:
 1. India. Engineering and Technical
 2. China. Manufacturing and Technical
 3. Mexico. Manufacturing
 4. United States. Analysis and Creative
 5. Philippines. Administrative
 BPO…

 Because of the job shift that

accompanies the quest to employ the
highest value talent, BPO has been both
hailed and vilified from different
quarters.
 BPO DRIVING FACTORS
 Scholars who study how complex systems change over
time are familiar with two types of change: evolutionary
and emergent.
 Evolutionary changes are those that a system is likely to
produce based on its current design and goals.
 Occasionally, however, complex systems develop
structures that are not predictable from their goals and
current state. These phenomena are referred to as
emergent/revolutionary.
 BPO is revolutionary because it is such an emergent
phenomenon
 Business Transformation
 Transformation Is About Change, It’s About Business Improvement
- Better Delivery – Products & Services
- Better Processes – Streamlined & Clean
- Lower Costs – Business & IT
- Greater Flexibility To Grow The Business
- Consolidation – Fewer Moving Parts
- Increased Share Holder Value
 TYPES BPO
Front-
Office
BPO

Onshore/ Back-
Domestic Office
BPO BPO
Types
of BPO

Nearshore Offshore
BPO BPO
 BPO Advantages
 Productivity Improvements
 Cost Savings
 Improved HR
 Focus on Core Business Competency
 Increased Capability
Top 5 Outsourcing Objectives

Focus on Core Activity 91%

Reduced Costs 85%

Improved Operational Quality 35%

Achieve high productivity 29%

De-risk the business 12%

0% 20% 40% 60% 80% 100%

% Respondents

Source Gartner
 Importance of BPO
 A Mckinsey study shows that when
processes are outsourced , companies not
only get the advantage of low cost but also
experience improvement in productivity
and Quality.
Benefits of BPO
 BPO Disadvantages
Recent Studies shows that:
 Knowledge Disappears and is Transferred to the
Outsourcing Partner
 Poor Quality Control
 Restoring Operations is Complicated
 Lack of Loyal Employees
 Reduction in Strategic Alignment
Source: BusinessWeek, The Future of Outsourcing
 5 Managerial Steps That Pay Off
1. Go Offshore for the right reasons
• Shifting a broken process overseas may not fix it
2. Choose your model carefully
• Could cost more…..(I’ll fix this part)
3. Get your people on board
• Employees and middle managers can make the bold move
happen….or stop you in your tracks
 5 Managerial Steps That Pay Off
4. Be prepared to invest time and effort
• Often what is lacking in offshore partners is a lot of deep process
knowledge
5. Treat your partners as equals
• Telling your partners exactly what to do and how to do it is not
conducive to the entire process
23 IS BPO Cost-Effective?

Addis Ababa University School of Commerce

 Rules to Follow: What to Outsource

 Processes that do not add value to a product or

service.
 Highly repeated tasks with little variation.
 Labor intensive tasks that do not require a
companies intellectual property nor core
competencies.
 Processes that will tie up large amounts of capital
in assets.
Rules to Follow: What Not to Outsource

 Processes that incorporate your core

competencies.
 Processes that require access to intellectual
property of your company.
 Non-labor intensive tasks.
 Processes that are associated with the image of
your company.
26 BPO Performance Excellence

Addis Ababa University School of Commerce

 Transition Tool kit

Assessment Transition Parallel Run Steady state

Build the case Migrate the Phase out the Manage the
And Ready processes process process
the after at the client in steady
organization Mapping and put state- Ensure
for Business processes, in place continuity
process Creating measures and
Offshoring. technology, for ongoing continuous
Infrastructure tracking and Quality and
And training monitoring. process
resources. Improvement.

Engagement Management skills

Case organization on
BPO services
 Case Company ICEGEN Service Offerings

 We offer integrated solutions for a wide range of remote processing applications including Business process
outsourcing, technical support and knowledge services. Our BPO portfolio includes end-to-end solutions across
spectrum of services.

Industry Specific Payment Finance &

Knowledge
Services Services Accounting
Services
Services

Medical forms Check Billing Data

Processing Processing Services Analysis
Insurance claims Credit / Debit Accounts Data Mining
Processing Card Processing Payable/Receivable
Mortgage claims General Data
Processing Accounting Management
Document
Management
Financial Management Services
 Financial Management Services

• Development of customized database and accounting

• Corporate
application interfaces for data gathering and
Analytics
transmission
Decision • Financial
Support Analysis &
• Analysis of financial statements including disclosures
Modeling
in footnotes, fund accounting in private equity arena,
• Fund Valuation
modeling, valuation, data extraction and manipulation

• Data entry of incoming invoices, statements of

• Billing
bank accounts, wages, loans, leasing contracts,
Transaction • Reconciliation
rents, etc.
• Receivable/
Processing
Payables
• Treasury services

• Legal Reporting
• Contract Vetting • Customized P&L accounts, balance sheets and
External other standard accounting reports
• Statutory
Reporting & Reporting
Compliance • Regulatory • Yearly and quarterly balance sheets
Reporting and accounts in statutory formats
 Research & Analytics

• Market research
•Equity
Application of domain Research
SWOTs
expertise to draw
Analyse • Forecasting and
conclusions and make
data modeling •Financial
recommendations
• Data analytics Analytics

• Company, industry,
Creation of customized market and
• Business
research deliverables geographic profiles
Synthesise based on synthesis of Information
secondary information • Competitive Services
intelligence

• Tailored newsruns
• Sales and marketing
Effective use of data •Database
target lists
resources, tools and
methods to obtain
• “Pick and pull” Research/
Search research reports Mining
specific secondary
• SEC filings and
information Services
annual reports
• Database population
Transaction Management
 Electronic Content Services

• Structure information for more

Information • Scan/convert/OCR effective retrieval through specialized
Retrieval database system and knowledge
• Index/code/profile Management repository

• Data entry • Extract, synthesize data/information

Transaction
for subsequent processing
Processing • Analysis/adjudication

• Standardized
Web mark-up/tagging • Structure information for electronic
Publishing access, submission or processing
• Repurposing
35 End of the lecture- Chapter 4

Thank you

Addis Ababa University School of Commerce