BPO Outsourcing Delivery Models

The following delivery model is executed by many outsourcing companies.

BPO/Outsourcing Delivery Model

BOOM is a domain independent but process and methodology driven outfit giving Organizations in the west flexibility and complete understanding of their requirements. It enables the client to have complete control over the project at any point. Provides a comprehensive solution completely woven for onsite clients with predictable yields.

The genie is out of the bottle on offshore outsourcing, and all managers need to understand the implications this mega-trend has for their companies. This portal introduces the basic concepts, high-growth application areas, managerial issues, and strategies specific to offshoring and offshore outsourcing.

BPO Processes and BPO Best Practices

Its Process, Process and Process

Software earlier was not process driven. But with the ISO, CMM and SEI processes governing the Software delivery vehicle in today’s market, it has opened up avenues of outsourcing as an integral part of its Project Management Life-cycle. Let’s take the case of Acme Systems, an IT services company has been actively involved in the global market during this transition.

Its unique Blended Offshore Outsourcing Model (BOOM) methodology provides a blended approach towards IT outsourcing for Small-Medium Project Management Enterprises (SME). The BOOM provides dual advantage to the client by shifting the non-critical stages of the project life-cycle to the Offshore Development Center at Hyderabad (India) while still retaining project coordination & control at the client site Supported and Coordinated by an Onsite Project Manager and Account Manager from Acme Systems Inc. US headquartered at Naperville, Illinois. However, the project is closely monitored and controlled by the Offshore Project Manager (located offshore) through regular coordination with the Onsite Project Manager who interacts regularly with the Project Manager of the Customer.

This model is geared specifically towards the Small-Medium project management Enterprises (SME) in the United States. The methodology is built on the PMBOK architecture and therefore is compatible with most of the Project Management methodologies used in the US. The methodology also provides a good price to performance ratio by reducing major share of workload from onsite to offshore.

Blended Offshore Outsourcing Model (BOOM)

From the above it is evident that BOOM recommends only the non-critical parts of the project to be done offshore. Following are the phases of the BOOM Methodology:

  • Project Initiation – Onsite
  • Project Planning – Onsite
  • Project execution – Offshore
  • Project Controlling – Onsite
  • Project Closing – Onsite

Why Do Companies Outsource?

For many managers and decision-makers, the Outsourcing opportunity is accompanied by rising bewilderment. To navigate through the uncharted topography of Outsourcing, managers will need to answer three principal questions:

  1. What is the right business model for my Outsourcing strategy?
  2. How can my organization create the right relationships?
  3. What steps must my business take to ensure we meet our business objectives?

The relationship between the outsourcing organization and the outsourcing provider is a critical factor in realizing the expanding potential of Outsourcing. With the advent of reliable, cheap global communications, the Internet, and the abundance of skilled labor forces in many developing countries, offshore service centers have become both feasible and real. Many banks and others in the financial industry have already moved IT operations abroad, and some have started business process off shoring efforts in which whole processing tasks are exported.
The power of the Internet revolution lies in the way it changes the internal structure and processes of companies. The concept of a monolithic, vertical, integrated enterprise that owns all products, services, and channels is rapidly becoming obsolete. To become more flexible in a changing business landscape, enterprises are developing a complex spectrum of outsourcing relationships, ranging from mundane payroll outsourcing to more complex business-critical services.

Consider the following:

  • Banking Industry – HSBC plans to migrate 4,000 finance jobs to India, China, and Malaysia to slash costs by 2004. Lloyds TSB, Prudential, and Aviva have already moved to Asia.
  • Insurance Industry – In 2001, Guardian Life Insurance began outsourcing IT to India. They expanded their outsourcing scope to include help desk, desktop support and disaster recovery. The result is an annual savings of $12.5 million, with no loss of productivity.
  • Automotive Industry – GM announced that it is setting up a $21 million technology center in Bangalore to carry out CAD and CAE research.
  • Investment Banking Industry – J.P. Morgan Chase is offshoring some of its stock market and equity research to India, signaling possible new arenas for the offshore outsourcing trend. The firm expects to hire Indian MBAs who will do the heavy-duty number crunching.

These examples illustrate a mega-trend: offshoring (companies establishing their own captive offshore centers) and offshore outsourcing (companies outsourcing to external vendors who perform the work overseas). Sourcing work from anywhere in the world at the best prevailing prices is now becoming a mainstream practice for a variety of business processes.

Offshoring opportunities are increasing due to the availability of low-cost, educated, English-speaking manpower, and strong computer skills in countries such as India, China, and the Philippines.

BPO/ITES/Offshore Outsourcing Methodologies

BPO/ITES/Offshore Outsourcing Methodologies

Outsourcing became a catchphrase in business areas in the 1990s. It was a well appreciated addition to the business lexis This market comprises 9 business functions of human resources, procurement, finance and accounting, customer care, logistics, engineering/R&D, sales and marketing, facilities operations and management and training. Outsourcing is a corporate strategy that companies adopt to enhance competitiveness of the company. By outsourcing non-core part of business operation and only concentrating on the core competence, companies can increase the productivity and efficiency in management.

Outsourcing as strategy is not new. Some examples of Outsourcing, such as GM and EDS, Xerox and EDS, Kodak and IBM, are more than a decade old. Over the years, the scale and scope of Outsourcing has evolved considerably. It has also migrated from primarily Fortune 500 companies to large and midsized companies.

Since the 1970s, many Western companies began manufacturing products in offshore locations such as Japan, Korea, Thailand, and Taiwan. Despite the relatively high cost of transporting the goods by sea and air, it was cheaper to make them in the Far East (and in Mexico after the NAFTA treaty) than to keep manufacturing in the United States or Europe.

Most companies are now adjusted to manufacturing being done offshore. What took place in manufacturing is now occurring in back-room processing and services. Ten years ago, if anyone had boldly predicted that by 2003 we would begin to see back-room service centers and call centers housed in India or the Philippines, they would have been laughed at. How could high-touch customer service agents who interact directly with customers work halfway around the world? The cost would be prohibitive given that monitoring the agents would be impossible and every call would be international.

Manufacturing and service outsourcing have changed over the years. It is a macroeconomic trend to which every company needs to react. If your competitor can make a product and provide associated services for less than you, then you need to follow, or risk being put of out of business.

Although initially low-skilled jobs such as manufacturing, call center, and computer coding were shifted abroad, as more companies expand their offerings into outsourcing, new functions like human resources and knowledge skills like technology are being outsourced. As the worldwide migration continues and the movement overseas matures, more high-skilled jobs such as accounting and engineering will likely be sent abroad.

As functions are outsourced, more standards in processes are created. Just like in ERP where business processes such as finance and manufacturing were standardized, a similar thing will happen in HR, logistics, and accounting processes. Also new technologies such as Business Process Management and self service portals will help accelerate the push to outsourcing.

Managing Indian Resources from outside

The other day I was interviewing this guy for a part time web content development consulting project. This guy is very sharp, young (about 25 years) and based in INDIA. Since I am based in USA, I usually chat online using yahoo messenger. I was interviewing him for my company’s BPO operations. I was interested in outsourcing some content development for this website. I wanted him to develop one page content  for every BPO company in our directory.

The chat went like this:

Day one:

Me: I want one page profile for each CRM company. I need the description, service offerings and Contact information.
Candidate: No problem sir, I can do that.
Me: How much will you charge per page? you may need to spend around X minutes per page
Candidate: sir I have no idea
Me: well you know you can do X pages per day so divide your daily rate by X
Candidate: sir let me do the work first and you can pay based on how I did
Me: I don’t work like that. I need to know before so I can sign a contract for you
Candidate: hmm.. I don’t know
Me: how about Rupees XX per page?
Candidate: ok sir I can do that
Me: Great, I’ll send you the statement of work. Can you start working from tomorrow?
Candidate: Sure, sir I can do that.
Me: Great we will chat again tomorrow.

That night I sent him the statement of work, by email. Next day I was hoping to see few web pages developed.

Day two:

Me: So did you get a chance to go thru the document I sent you?
Candidate: yes sir, I did.
Me: I haven’t received any content from you
Candidate: sorry sir, I am bit busy
Me: Thats fine, when can I expect to see some pages?
Candidate: sir, I just moved into this new apartment. I have to do all work like cleaning, cooking
Me: You did not answer my question
Candidate: sir I did not understand
Me: I mean, when can I expect to see some work
Candidate: sir I’ll tell u tomorrow
Me: fair enough
Me: deliverables for tomorrow: 1. You will tell me when you will be able to start the work
Candidate: sure sir
Me: can we chat tomorrow morning? Say around 8 AM?
Candidate: sir the internet shop will not be open by then
Me: Ok lets chat again same time tomorrow night.

The moral of the story is, as a manager of outsourced resources, you need to:

  • Be very clear on dates and times. Many Indians programmers do not have clear sense of time. Especially the less experienced. They tend to measure time by words like “soon”, “shortly”, etc. Do not succumb to that. When they say soon, ask how soon. Qualify that ‘soon’ with an exact date and preferably a time.
  • Always negotiate the money first. Never agree to let them finish the job first. On the other hand never pay in advance, unless you have done business with them before.
  • In India, work day begins at 10 in the morning. Generally all shops are closed till around 10 AM. So the preferred time to do business is 10AM to 8PM. Yes they stay late! Generally many Indians in ITES and BPO services Industry work long hours from 10AM to 8PM every weekday including Saturday. Sunday is the only holiday. Average work week is about 50 to 60 hours.
  • Even though Indian programmers have different  work culture, the rewards are very high if one can understand them and learn to work with them. Be patient and try to slowly transform them to suit to your work culture. They are very adept at transformation and learn new things quick.

Skills required for BPO and Outsourcing Careers

  • Quality and metrics experts – The most effective way to control any operational activity is to measure it on various parameters. Most outsourcing companies take this very seriously. They have sophisticated measuring, metrics and reporting functions that enable the management and client to track performance accurately. Quality and metrics experts typically have a statistics background, or have considerable expertise in the operational area.
  • Risk and Business Continuity Planning (BCP) experts – Outsourcing an operation is also an effective way to reduce business continuity risks. However, outsourcing companies also have to manage their own business continuity risks, as clients want to ensure continuity of operations. People involved in the Operational risk and BCP areas play this role. They create, test and manage detailed plans to ensure continuity of operations in the event of a disaster.
  • Training and development experts – The single most important element in a successful migration is the training of people who will be performing the function from the offshore location. On-going training is also very important to ensure service quality. Training and development experts wear many hats – oversee the process training, train on soft skills like communication, team work, team leadership, etc.
  • Administration experts – Running an outsourcing centre isn’t just about hiring employees and buying PC’s. It takes a complex logistical and administrative department to keep it running. This is because the demands of an office of an outsourcing company are very different – transportation arrangements for night shift, 24 hour cafeteria, frequent travel arrangements, and many ad-hoc tasks. An administration expert takes care of these things, and it can be a rewarding experience for someone with background and interest in this area.

Roles and Skills needed

Role Key skills
Transition manager Project Management
Relation manager Client management skills, RM experience
Six Sigma and Process re-engineering experts Six sigma certification, process consulting experience
Quality and metrics professional Process knowledge, statistical expertise
Risk and BCP experts Risk management/ BCP experience
Training and development experts Degree in HR, Training experience
Administration experts Administration experience, including event management, event logistics.

Outsourcing is a rapidly expanding industry, and it offers several exciting opportunities. And with the various services being outsourced now, choices are no longer limited to customer support – one can choose the industry and field of choice to work in. As the industry matures, there will also be ample opportunity of growth, and to play a management role in an outsourcing company. The time to take the leap is now!

Making a Career in BPO and Outsourcing

Outsourcing as an industry is rapidly coming of age. The February 2005 issue of Harvard Business Review noted the following for Outsourcing: “Outsourcing has become strategic – yet many executives remain unprepared. A new era of capability sourcing will trigger organizational redesign and a new set of managerial skills.” The number of companies providing outsourcing services is increasing rapidly, methodologies and procedures are maturing fast, and more and more people are hopping on to the outsourcing bandwagon.

An important fallout of this maturing of the industry is that one can now consider making a career in outsourcing seriously. While call centre or operational jobs are available aplenty, not many middle level managers or highly qualified people from the more traditional banking, accounting or other industries are willing to take them up. Part of this is because outsourcing is often considered synonymous with call centers, due to early growth and publicity in that area. However, changes in the industry are opening doors for everyone. Consider these significant changes, and how they are throwing up new opportunities.

Expansion of the range of services provided

Outsourcing is not limited to call centers or medical transcription anymore. As the industry matures, the value of services provided is also increasing. Now, there are companies doing equity research, hedge fund accounting, advance scientific research, and many more specialized activities. For example, Intel and GE are doing high end scientific research, JPMorgan and Morgan Stanley are involved in Equity research, McKinsey is sourcing consulting support – the examples are numerous and increasing every day. Now one can work for the best names and the area of choice, thanks to outsourcing.

Demand for Specialization

As companies expand both in employee strength and range of services provides, they need experts in various fields. Some of the highly specialized career options now available are:

  • Transition managers – these are experts in Project Management. The role of transition managers is to help migration of the function from overseas locations to the offshore location. This involves understanding the existing process, determining the best migration methodology and overseeing the migration project.
  • Relationship Managers – This is typically a middle/ senior management role in any outsourcing company. These managers are the single point of contact for the client, and their responsibilities sometimes span across teams and departments.
  • Six Sigma and Process Re-engineering experts – One of the most significant non-cost benefits of outsourcing is the opportunity to re-engineer the process – thereby improving the process and/ or deriving further cost saves. By undertaking various projects, Six Sigma and Process re-engineering experts play the key role in this.

Benefits of BPO Continued

With the increasing presence of Globalization, many companies are turning to offshore outsourcing. Outsourcing increasingly has taken the shape of Business Process Outsourcing, where whole business processes (such as support and development) are outsourced. Worldwide spending on Business Process Outsourcing (BPO) services will increase to $682.5 billion in 2008, with a compound annual growth rate of 11 per cent, says a study by analyst firm IDC.

The growing backlash against BPO mirrors the public protests against the loss of jobs in manufacturing in the 1970s and 1980s – with one difference. Workers in IT and high-tech are numerically fewer but they are more powerful and have a greater visibility than the organized labor of the 1980s. Whatever the management consultants may say about the larger benefits of outsourcing to the U.S. and the U.K. economies, rising unemployment among IT workers will lead to political and social lobbying that will compel corporations to go slow on outsourcing. The sword of globalization will be fought bitterly by the IT community in the U.S. Irrespective of the logic of globalization, the favored locations for BPO cannot hope to benefit freely from the drive to relocate services.

Cross-border Business Process Outsourcing is an emerging field in which the Indian subcontinent has moved forward aggressively and is one of the leaders in the field. India, one of the leaders in the Business Process Outsourcing sector in the world today, owes a robust growth of 8% in its economy to BPO. The past few years have seen major IT companies from the United States outsourcing their work to the subcontinent. All around the world, however, countries now compete to offer BPO services to large multinational organizations.

The driver of this next stage in automation is not technology per se, but changes in competition and how businesses operate and execute their strategies. The Internet may be the agent of change, but the engine of change is a need to cut costs and improve core business processes in increasingly competitive global markets.

Benefits of BPO

Business Process Outsourcing (BPO) has been found beneficial to the businesses with the results of increased customer satisfaction. More efficient operations, access to global capabilities, increased cash flow, and faster time-to-market are also the very feasible outcomes of BPO.

Non-core business processes, such as human resources, finance and accounting, are critical, but also resource-intensive, time-consuming, and costly. Outsourcing improves operational efficiencies and drastically reduces costs without large, up-front capital investments. Business Process Outsourcing provides quantifiable benefits through improved efficiencies, lower overhead, reduced payroll and benefit expenses, and fewer capital investments.

Companies seeking the Business Process Outsourcing benefits generally engage themselves in a systematic process led by the outsourcer and well designed to ensure a positive and mutually beneficial experience for both client and provider.

BPO allows organizations to move non-core business processes to a services provider so that they may focus on the more important strategic, revenue-generating programs that create profitable growth and sustain business success. BPO provides access to proprietary workflow systems, process re engineering skills, and innovative staffing and delivery models, combined with world-class technology delivered by experts. Business Process Outsourcing provides the flexibility to respond to a rapidly changing marketplace and scale operations up or down as conditions dictate.

How big is this Business Process Outsourcing affair really? The first question is about the size of the ITES/BPO business in the years ahead. There is such a wide range of estimates put out by consultancies and private research agencies that credibility is at a premium. An estimate prepared by IDC that NASSCOM cites sees global ITES business rising from $570 billion in 2002 to $1,200 billion in 2006. The recent E-Commerce and Development Report 2003 cites a Goldman Sachs figure of $570 billion in 2005 for global BPO contracts and a Gartner estimate of $300 billion of ITES revenue in 2004. Another research agency, Forester, says that because of unreliability of suppliers, the global BPO business will rise to only $145 billion by 2008.

Key Elements of BPO

Business Process Outsourcing in today’s world is seen as a strategic management option rather than just a way to cut costs. It helps achieve the companies their business objectives through operational excellence and an edge in the market place.

Every company today, has one or more of its services outsourced so that it can focus more on its core competencies. Outsourcing’s emerging power as a business tool of unique versatility and flexibility is undoubted. Resources of the companies need to be focused on core business functions so the non-core functions need to be outsourced. Outsourcing gives you the right combination of people, processes and technology to operate effectively in the Global market place without burdening your time and budget.

This is the reason why more and more companies are showing interest in outsourcing there activities to various offshore locations. With the cost to bring a product from development to market having increased significantly, outsourcing is seen as a potential savior. Two prime factors come into play when searching for a reliable outsourcing provider: quality and price.
elements of BPO

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