Business Process Outsourcing

Origination

It originated from the theory of core competence suggested

by C. K Prahalad.

A Business Enterprise identifying the areas of

specialisation and focus on them only;

and get non-core functions performed by outside

agencies.

Meaning

The contracting out of a company’s non-core in-house function to a preferred vendor with high quality level In a particular task area.

Examples- A manufacturing company outsourcing its accounting work

to an outside accounting firm, or A telecommunications firm using an outside company to

handle customer service

Outsourcing Checker

• What to Outsource?• Whom to Outsource?• SLAs (Service Level Agreements)

Outsourcing Guide• What is a good starting point for an outsourcing

programme?• Are there enough external service providers?• Are you convinced by the quality?• Are you getting benefits of scales of economies?• Is your corporate culture ready for it?• Is it a long term relationship?

Outsourcing Pyramid

Require high level of skillsEg- R&D and Management

Level III

Level II For Strategic Initiatives + Skills get higherEg- Payroll and HR admin

Level ICost reduction phaseBasic skills required

Eg- Catering, fleet management

BPO Vs Franchising

BPO Franchising

Non- Core Processes are outsourced

Core product is given as Franchise

Outsourced- Outsourcer Franchiser-Franchisee

Objective is to focus on core function

Objective is to expand business and enter new market

Benefits

Focus on key function

Reduction in cost

Less investment

Specialisation

Freedom of choice

Economic Progress

Limitations

• Lack of secrecy• Potential competition• Sweat shopping• Resentment• Loss of control

Types of Services

Financial Services

Advertising Services

Courier Services

Customer Support Services

Human Resource Services

Key Success Indicators

Analyze process, cost and determine savings;Define roles and responsibilities;Have measurable performance indicators –

(Speed of transactions, time period to close books, etc.)Develop a detailed transition plan- smooth hand off;Develop a clear Dispute resolution process;Monitor results for continuous improvements.

SWOT- Indian ScenarioAbundant manpower, Operational

excellence; Conducive BE.

Skilled manpower shortage; Local infrastructure; Political opposition

$ 69 billion ITES business by 2010; $ 97.5 billion IT market

ThreatsCompetition from other low cost destinations; slowdown of demand.

Opportunities

Strengths

Weaknesses