Business Process Outsourcing

CFOs are increasingly viewing business process outsourcing (BPO) and IT Outsourcing as means to improve accuracy and timeliness of their current transaction processing as well as to reduce cost. In theory, corporate governance and compliance can be improved and control over the processes can be increased. The economic benefits in terms of lower costs are so substantial that firms often cannot afford not to tap into the potential of India, China and other developing countries.

BPO is usually thought of as call centres and other non-strategic, easily moved business functions. It can be seen as providing access to resources and technology, providing management expertise, gaining greater depth and breadth of resources, and improving business focus. The growing trend is for companies to migrate from technology pure-play outsourcing to applications and BP solutions in order to improve performance, streamline processes, and increase shareholder value.

IT outsourcing and BPO have many subcategories. In IT outsourcing, the subcategories include, among others:

  • Data center
  • Systems management
  • Network management
  • Desktop
  • Procurement
  • Help desk
  • Applications management and development, maintenance and support
  • Disaster recovery
  • System integration
  • Planning and consulting

The major BPO categories include:

  • Human Resources and administration
  • Sales and marketing
  • Finance and accounting, tax and audit
  • Operations

Any company considering outsourcing must decide what it should outsource and why. Typically, this decision has been made on the 'core versus chore' logic - is this a 'core' activity that the company needs to excel at and retain control of in-house or is it a 'chore', something which needs to be done but not a real competitive differentiator and not something that needs to be an internal core competence. Outsourcing decisions taken using this logic typically focus on optimising service levels, taking out cost through efficiencies and applying best practice.

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