Development and Basis for BPO

Development and Basis for BPO

Picture of Daven Michaels

Daven Michaels

New York Times Bestselling Author, 30-year business veteran, and Executive Chairman of CurrentC Group.

globeBPO (Business process out sourcing) examines the process and deliberates back end administrative functions that are necessary to run the business to both re-engineer and outsourcer theses at the same time. It involves functions such as transaction processing, policy servicing, claims management, HR, finance and compliance to outsourcing company. These outsourcing deals involve multi-year contracts that can run into hundreds of millions of dollars .The outsourcing provider then directs these functions to agree service standards and implements guaranteed cost for task. Some of the BPO contracts call for performance-based pay outs, tying vendor payments to business performance or overall cost savings.

Business Process Offshoring involves the transfer of business tasks (medical transcription) or business processes (call centers) to a low-cost country like India or the Philippines. The communication is conducted over telecom networks and the Internet. Offshoring normally include tasks like transaction processing, accounts processing, credit card processing, call centers, translation, and Medical transcription. Most of this work can be sent without the need for in-person interaction. The support functions of offshoring are still relatively new. The offshoring began with IT/software services in early 1980’s and stepped up in the 1990’s with the Y2K hysteria. With decrease in global economic, offshoring has vaulted ahead as an effective cost-cutting technique that takes advantage of labor price differentials and favorable skill/performance ratios.

Business Process Outsourcing (BPO) provides the transmission of processes along with the associated operational activities and responsibilities, to a third party with guaranteed equal service level, where the client contains a firm grip over vendor for mutual long term success.

Many businesses are provided with the Offshore Outsourcing like low labor costs benefit the businesses with the opportunity to benefit the lower labor costs. Outsourcing is flourishing in increasing product quality or substantially lowering firm and consumer costs.

Outsourcing is a trend that had become common in IT and other industries for services to manage a business covering an array of operations, While in some cases, the entire information management of a company is out sourced including planning, business analysis as well as the installation, management, servicing of the network and workstations. The services include right from finance, banking, insurance, human resources development and training to health care, mortgage and credit card services, asset management, customer care, logistics and distribution, engineering, procurement, real estate, sales and marketing and web-related services.

Outsourcing involves co-ordination between the outsourcer and its client in decision making, which would involve a two way exchange of information.

The process of outsourcing generally encompasses four stages:

  1.     Strategic thinking, to develop the organization’s philosophy.
  2.     Evaluation and selection, to decide on the appropriate outsourcing projects and service provider to do it.
  3.     Contract development, to work out the legal, pricing and service level agreement (SLA) terms.
  4.     Outsourcing management, to refine the ongoing working relationship between the client and outsourcing service providers.

BPO are categorized into two types of outsourcing: back office outsourcing and front office outsourcing, Front office includes internal business functions such as billing or purchasing, and front office outsourcing includes customer-related services such as marketing or tech support. BPO that is contracted outside a company’s own country is sometimes called offshore outsourcing. BPO that is contracted to a company’s neighboring country is sometimes called nearshore outsourcing.

Reasons for Outsourcing:

Cost savings: This over all cost of service to the business will be low, which involves reducing the scope, defining the quality levels, re-pricing, re-negotiation, cost re-structuring.

Improve quality This will achieve a step change in quality through contracting out the service with a new service level agreement.

Knowledge Access to intellectual property and knowledge.

Customer Pressure. Customers may see benefits in dealing with your company, but are not happy with the performance of certain elements of the business, which they may not see a solution to except through outsourcing.

Commodification The trend of standardizing business processes, IT Services and application services enables the businesses to intelligently buy at the right price.

Time zone A sequential task can be done during normal day shift in different time zones to make it seamlessly available 24×7.

Catalyst for change An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.

Outsourcing success depends on three factors: executive-level support in the client organization for the outsourcing mission; ample communication to affected employees; and the client’s ability to manage its service providers. Both the client and provider sides need a combination of skills in such areas as negotiation, communication, project management, ability to understand the terms and conditions of the contracts and service level agreements (SLAs).

Daven Michaels is an award-winning outsourcer and author of the book, ‘Outsource This!’ Daven has been honored more than any other individual or outsourcing organization. You can get more information on outsourcing by visiting

1 thought on “Development and Basis for BPO”

  1. Before implementation of the BPO services organization need to create performance metrics. Metrics consist of quantitative and qualitative data. Quantitative data include project costs, time involved, and opportunity costs while qualitative include effect on morale, impact on goodwill etc.


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