Busi­ness process out­sourc­ing

Finweek English Edition - - Economic trends & analysis - BENE­DICT KELLY

THE CON­CEPT of busi­ness process out­sourc­ing (BPO) is one that con­tin­u­ally ranks high on the list of “hot trends for the near fu­ture”.

BPO in­volves a com­pany find­ing an ex­ter­nal sup­plier and let­ting it take con­trol of a key func­tion pre­vi­ously han­dled inside the or­gan­i­sa­tion. The idea is that cer­tain tasks within any com­pany add no value, they are sim­ply there be­cause they al­ways have been.

A typ­i­cal ex­am­ple is pay­roll. While it’s vi­tal that peo­ple are paid and taxes de­ducted, the de­part­ment doesn’t gen­er­ate money for the com­pany.

A BPO ser­vice provider would fo­cus on, in this case, pro­vid­ing pay- roll ser­vices and, by us­ing the same in­fra­struc­ture and sys­tems to ser­vice mul­ti­ple com­pa­nies, it can cre­ate economies of scale to do the job cheaper than any com­pany could do it it­self.

Pay­roll is one ex­am­ple but the ben­e­fits of BPO can ap­ply to other ar­eas, in­clud­ing hu­man re­sources, call cen­tres and IT help desks.

This en­ables com­pa­nies to pay for ser­vices they use with­out wor­ry­ing about ad­di­tional ca­pac­ity when times are good or cut­ting back when times are bad.

The ex­treme of this con­cept is that a man­u­fac­turer could re­tain its sales, re­search & de­vel­op­ment and mar­ket­ing teams but out­source all other as­pects of the busi­ness to part­ners scat­tered across the world. This is made pos­si­ble by the pro­lif­er­a­tion of high-speed data net­works that al­low a call cen­tre agent in In­dia to ap­pear as though he’s sit­ting in Dal­las, Texas.

One risk of this strat­egy is that by frag­ment­ing the or­gan­i­sa­tion, se­nior man­age­ment has to spend more time man­ag­ing the BPO ser­vice providers, which could de­tract from its fo­cus on de­liv­er­ing value to the busi­ness.

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