Companies are increasingly outsourcing key business functions and their related IT operations. The BPO industry is built around the raison d' etre of efficiency and cost-effectiveness. With the current focus on core business capabilities, many companies are outsourcing select business functions to expert partners. BPO takes a set of activities and takes on the responsibility of re engineering the entire way the operation is done. Outsourcing is required in different areas like Finance, Health, Accounting, Human Resources of companies, etc. Globalization, competitive markets, and mergers and acquisitions are the primary stimuli for business process outsourcing. By outsourcing business processes, companies can get a firm assessment of the cost of running their operations. The philosophy behind BPO is specific, does what you do best and leave everything else to business process outsourcers. Companies are moving their non-core business processes to outsource providers. BPO saves precious management time and resources and allows focus while building upon core competencies. The list of functions being outsourced span purchasing and disbursement, order entry, billing and collection, human resources administration, cash and investment management, tax compliance, internal audit, pay roll…the list gets longer everyday. In view of the accounting scandals in 2002 (Enron, WorldCom, Xerox etc), more and more companies are keen on keeping their investors happy. Hence, it is important for them to increase their profits. BPO is one way of increasing their profits.
A recent landmark study of BPO practices among many of the world's leading corporations shows why business has recognized the financial and operational advantages in securing the services of a professional organization to manage non-core activities. Many organizations have commenced the process of better positioning themselves through outsourcing non-core functions and have already begun to reap the many benefits listed below.
[...] Advantages & Disadvantages of BPO in IT Industry Business Benefits: Increase market strength Reduce capital costs, overhead costs and investment risks Renew value to transaction-intensive business processes Increase access to state-of-the-art technology Improve service levels Increase security Business Process Outsourcing helps a company to achieve competitive advantage. It helps a company to move up in the value chain. Diving Into BPO: Five Mistakes and How to Avoid Them: Compared with traditional IT outsourcing, business process outsourcing can mean greater risk, and greater reward. [...]
[...] Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external provider that in turn owns, administers and manages the selected process based on defined and measurable performance criteria. BPO involves turning over an entire function or business process to a back office supplier (for instance the resource management of an organization which may involve payroll and finance; information technology; human resources; inventory management). As corporations merge and consolidate operations, this trend towards outsourcing basic business processes is becoming a new business model for international corporations. [...]
[...] An entry-level standalone BPO player has to be geared for scalability in terms of infrastructure, quality processes and people to stay competitive. However, scalability has to be complemented by product differentiation and domain expertise. Positioning in the BPO value chain: The rungs in the BPO value chain are much flatter compared to that of conventional IT outsourcing. But if BPO is to remain a long-term sustainable business proposition, any strategy based purely on cost arbitrage will commoditize this industry in [...]
[...] "In business process outsourcing, SLA should be business-based, not IT- based," "For example, if we are outsourcing HR, we should measure time to hire, quality of hire, retention rates, that sort of thing. Those aren't the kinds of things we measure in traditional IT outsourcing." The contract should also spell out how much you are paying and what you are paying for. It should be clear about what costs extra and whether costs will change over time. But the contract shouldn't be built around price alone. [...]
[...] "Too many companies try to take a big-bang approach, in which they attempt to do business process outsourcing and business process re-engineering at the same time," observes Gartner Dataquest's Scholl. "But users haven't yet seen the benefits of outsourcing, and they're already being forced to change their habits. You're more likely to be successful if you wait till you see the benefits of outsourcing before you pursue the benefits of transformation." Mistake Not Getting It in Writing The contract, of course, is the linchpin of the entire undertaking. [...]
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