BUSINESS PROCESS OUTSOURCING

• Entire business function outsources to be handled by a third party
• Mar Roxas is the Father of BPO
• Karen Batungbacal is the Mother of BPO
• Two types of outsourcing

  • Back-office – hr, finance, accounting
  • Front-office – call center, customer service
• Philippine Revenue: 25 billion USD

  2016
• Philippine Revenue: 30 billion USD

  2023
• Offshoring involves transferring activities or ownership of a complete business process to a different country from where the company receiving the services is located
• Outsourcing involves hiring a party outside a company to perform services or create goods traditionally done in-house
• Y2K PROBLEM – computer malfunction
• IT-BPM Industry Snapshots in the Philippines

  • Contact-Center
  • Back-office and KPO
  • Software development
  • Animation and Game Development
  • Engineering Design
• Reasons why companies outsource

  • Capacity management: Need to acquire or hire capacity
  • Lower cost: Replace expensive resources with less expensive ones
  • Better performance: Use of specialized external providers
  • Faster and continuous service delivery: Greater output around the clock
  • Part-based activities: Outsourcing specific tasks
• What is being outsourced

  • Support or Auxiliary Services: Cafeteria, Janitorial service, Copy Center, etc.
  • Routine activities that can be automated: Small banks outsourcing check processing, etc.
  • IT services: Application development, Helpdesk, Cloud services, etc.
• Advantages of outsourcing from an employer perspective

  • The service provider determines the most efficient resources, expertise, and economies of scale
  • Service provider may have more expertise than the buyer
  • Buyer can leverage economies of scale of the service provider
• Advantages of outsourcing from an employee perspective

  • “Work abroad, Live here”, Professional growth, Financial Independence, Employee assistance, Enjoy your favorite food
• Disadvantages of outsourcing from an employer perspective

  • Cost can be higher due to provider premiums for undefined tasks
  • Buyer may not have full control of resources
• Disadvantages of outsourcing from an employee perspective

  • Shifting schedule, Dealing with irate customers
• Disadvantage of outsourcing from an employee perspective

  • Shifting schedule
  • Dealing with irate customers
• Types of outsourcing

  • Third Party - owned by a service provider, a local entity, or part of a global group
  • Shared-Service Center - wholly owned by a mother company
• Third Party outsourcing companies

  • Accenture
  • Aegis
  • Converys
  • EGS
  • IBM
  • Sitel
  • SPI Global
  • Stream Global
  • Sutherland
  • Sykes
  • TeleTech
  • Teleperformance
  • Telos
• Shared-Service Center companies

  • ANZ Bank
  • Chartis Technology and Operations Management
  • Chevron
  • Citigroup
  • Dell
  • DKS
  • HP
  • HSBC
  • J.P Morgan Chase
  • Maerks
  • Manulife
  • Shell Shared Services Asia
  • Thomson Reuters
• Strategies for outsourcing

  1. Multisourcing - multiple vendors for clients outsourced projects

  2. Crowdsourcing - company puts out a call for a project; best solution/submission is accepted and contracted

  3. Onshoring - vendors in the same home country as the client. The business operations are being relocated to the outsourced countries

  4. Nearshoring - the transfer of business to a nearby country, often sharing the same border

  5. Offshoring - vendor and clients in different countries
• Core activities, tasks, processes


  • Primary process or product of the business
  • Tasks that deliver the primary product, the unique value proposition of the company
  • Focus on the efficiency and effectivity of the services
  • Focuses on clients
  • Design
  • Product development
  • Process
  • "Recipe"
• Non-core activities, tasks, processes


  • Support activities, processes, functions
  • It focuses on employees
• What to outsource: well-defined/documented tasks, standard outputs
• Typically outsourced activities, tasks, processes

  • BPO
  • IT outsourcing
  • Support functions
  • Routine activities or activities that can be automated at larger centers
  • Seasonal requirements
  • Part-based activities
• Client company is concerned with quality transition of processes and efficient operation of business functions that were once handled in-house
• Service company is concerned with scope of service, performance measure, benchmark to ensure objective standards in assessing work quality
• IT-BPM contract is a formal agreement between a client and a service provider to take over a "pre-agreed portion" documented in the contract
• Core elements of IT-BPM contract

  • Service to be rendered or provided as documented in the scope of work
  • Performance standard expected from the service provider: Service Level Agreement (SLA) and Key Performance Indicators (KPI)
  • Timeline of the contract: start dates and duration
  • Costs to the clients
  • Other specific operational requirements
• Service to be rendered or provided as documented in the scope of work

  • Outbound-sales calls
  • Inbound inquiries or subscriptions
  • Delivering food or flowers or mails
• Performance standard expected from the service provider: SLA and KPI


  • Handle time and average handle time
  • Sales attainment
  • Customer satisfaction rating
• IT-BPM pricing models

  • Fixed price - easy to plan and more predictable than other pricing models
  • Time
• Service provision considerations

  • Qualification of personnel
  • Location of operations
  • Outline of reporting procedures, decision-making and escalation of problems
  • Legal provisions
• IT-BPM Pricing Models

  • Fixed Price
  • Time and Material
• Fixed Price pricing model is easy to plan and more predictable than other pricing models
• Time and Material pricing model is based on the time and material used, suitable for flexible and unpredictable services
• IT-BPM Contract Financials

  • CAPEX (Capital Expenditures)
  • OPEX (Operational Expenditure)
• CAPEX is a business expense incurred to create future benefit (e.g., physical space, machinery, equipment)
• OPEX is the money spent by a business to turn inventory into output, including operating expenses like depreciation of plants and machinery
• Components of Process Cost

  • Labor Cost
  • Direct Costs
  • Indirect Costs