1. 1. John H. Halvey and Barbara Murphy Melby; 2007 Business Process Outsourcing: Process, Strategies and Contracts, 2nd Ed.
2. 2. BPO Business Process - is a set of business events that together enable the creation and delivery of an organization's products or services to the customers. (p7, Business Processes and Information Technology, Gelinas,Sutton, Fedorowicks, 2004) Outsourcing involves transferring certain value contributing activities, processes and/or services to the premises of ones own or an agent primarily to save costs and/or for the principal to increasingly focus on its areas of key competence.
3. 3. BPO the delegation of one or more IT-intensive business processes to an external provider who, in turn, administrates and manages the selected processes based upon defined and measurable performance metrics. the management of one or more specific business processes or functions (e.g., procurement, finance, accounting, human resources, asset or property management) by a third party, together with the information technology (IT) that supports the process or function
4. 4. BPO Categories General Category Finance and accounting Investment and asset management Human resources Procurement Logistics Real estate management Miscellaneous (energy services, customer service, mailroom, food processing)
5. 5. BPO in the Philippines Major companies that already operate in the Philippines (inhouse Line of Business) include AIG, AOL, Barnes & Noble, Chevron, Citigroup, Dell, HP, HSBC, IBM, Intel, JPMorgan Chase, Motorola, Procter & Gamble, Siemens AG and Trend Micro.
6. 6. BPO in the Philippines Outsourcing Companies 1. Accenture Inc. (P28.104 billion in revenues); 2. Convergys Philippines Services Corp. (P17.281 billion); 3. JPMorgan Chase Bank N.A-Philippine Global Service Center (P10.805 billion); 4. 24/7 Customer Philippines Inc. (P7.711 billion); 5. Telephilippines Inc. (P7.241 billion); 6. TeleTech Offshore Investments B.V. (P6.978 billion); 7. Sutherland Global Services Philippines Inc. (P6.805 billion); 8. Stream International Global Services Philippines Inc. (P6.738 billion); 9. Sitel Philippines Corp. (P6.364 billion); 10. Deutsche Knowledge Services Pte. Ltd. (P5.754 billion);
7. 7. BPO in the Philippines 11. Sykes Asia Inc. (P5.617 billion); 12. IBM Daksh Business Process Services Philippines Inc. (P5.516 billion); 13. Aegis PeopleSupport Inc. (P5.445 billion); 14. TeleTech Customer Care Management Philippines Inc. (P5.402 billion); 15. IBM Business Services Inc. (P5.211 billion); 16. Telus International Philippines Inc. (P4.962 billion); 17. Shell Shared Services (Asia) B.V. (P4.821 billion); 18. HSBC Electronic Data Processing (Philippines) Inc. (P4.700 billion); 19. ePLDT Inc. (P4.147 billion); 20. SPi CRM Inc. (P3.501 billion); 21. ACS of the Philippines Inc. (P3.492 billion); 22. VXI Global Holdings B.V. (P3.266 billion); 23. Emerson Electric (Asia) Ltd. (P3.230 billion);
8. 8. BPO in the Philippines 24. StarTek International Ltd. (P3.094 billion); 25. IBM Solutions Delivery Inc. (P3.019 billion); 26. Sykes Marketing Services Inc. (P2.760 billion); 27. SPi Technologies Inc. (P2.626 billion); 28. Genpact Services LLC (P2.552 billion); 29. Macquarie Offshore Services Pty. Ltd. (P2.522 billion); 30. Thomson Reuters Corp. Pte. Ltd. (P2.265 billion); 31. AIG Shared Services Corp. Philippines (P2.357 billion); 32. Hinduja Global Solutions Ltd. (P2.194 billion); 33. Lexmark Research and Development Corp. (P1.956 billion); 34. ANZ Global Services and Operations (Manila) Inc. (P1.869 billion); 35. Maersk Global Service Centers (Philippines) Ltd. (P1.859 billion); an 36. Manulife Data Services Inc. (P1.745 billion).
9. 9. BPO in CSEZ Accountants Desk Inc. Advanpoint Inc. Analytical Support Services for Environmental Technologies, Inc. Ausphil Solutions Corporation Baele Management Group (Phils.) Inc. Clark Digital Valley Corporation Cyber City Teleservices LTD Dr. Klippe Philippines Corporation Ecell Philippines, Inc.
10. 10. BPO in CSEZ Federal Express Pacific Inc. Hexus Outsourcing Services Igo2 Group Inc. IQOR Philippines Inc. iTOP126 Inc. MDM Systems Inc. Microtel Global Solotions Inc. Montpac Global Solutions Inc. My Cloud People Inc. NCO Philippines Inc. (EGS)
11. 11. BPO in CSEZ Netcast BPO services Inc. OwensBPO Inc. S-Corp Philippines Inc. Sharesource Australia BPO Corporation Social Image Inc. Sutherland Global Services Philippines Inc. SV Human Resources Inc. Top Sellers Plus Inc. Txx Trixan Support Services Versar International Inc. Asia Pacific
12. 12. BPO in CSEZ Woods and Day International Business Services Inc. Zeniark Philippines Consulting Corporation 3MS Outsourcing and Production Inc. (Source: CFZ Locators Directory 2014)
13. 13. Call Center
14. 14. Call Center Workstation
15. 15. Reasons for Outsourcing Transferring the entire function (not just the IT component) to a qualified supplier Enhancing/improving methodologies Benefiting from industry knowledge or experience Streamlining or standardizing processes across the organization Sharing resources or technologies Committing less up-front investment to new methodologies or technologies
16. 16. Reasons for Outsourcing Obtaining flexibility with respect to the roll-out of methodologies or technologies Increasing productivity Quantifying savings or benefits Tracking customer satisfaction Enhancing shareholder value
17. 17. Integration Issues Systems Integration Existing IT Outsourcing Arrangements Vendor Management
18. 18. Vendor Selection Scope of service required Experience Resources Geographic scope of the outsourcing Technology
19. 19. Jobs in Call Centers Entry level Voice sector Sales support Chat support Travel support Banking Support Technical support representative Customer support representative
20. 20. Jobs in Call Centers Entry level Non-Voice Back office data entry Accounts payable practitioner Finance practitioner Financial accounting practitioner General accounting practitioner Travel and expense Payroll practitioner Mobility practitioner
21. 21. Jobs in Call Centers Customer assistance center agent Benefits service practitioner Learning practitioner Recruitment practitioners Employee data management practitioner Medical transcriptionist
22. 22. Jobs in Call Centers Entry level for IT Entry level programmers Help desk assistants Desktop support engineers Network administrators Business analysis Healthcare associates
23. 23. Jobs in Call Centers Entry level jobs for support functions Human resource associate Recruitment associate Training associate Employee relations associate Employee engagement associate Administrative associate Quality assurance associate Accounting associate Facilities associate Technical support associate
24. 24. Outsourcing as an Option Planning Stage
25. 25. Planning Stage Steps 1. Select and form internal outsourcing team 2. Establish outsourcing objectives 3. Obtain management support 4. Determine internal communication strategy 5. Develop and issue RFI (if applicable) 6. Review and evaluate RFI responses (if applicable) 7. Develop and issue request for proposal (RFP)
26. 26. Planning Stage Steps 8. Review and evaluate proposals relationship structure Define of any teaming relationships: Pricing structure Scope of services New initiatives 9. Select preferred vendor(s) 10. Develop negotiation strategy
27. 27. Planning Stage Steps 11. Customer due diligence: Financial Legal Regulatory Audit Tax Data-related issues Employee-related issues Site/local issues Intercompany issues
28. 28. Planning Stage Steps 12. Vendor due diligence: Pricing structure Scope of services Legal Regulatory Tax Data-related issues Employee-related issues Local issues
29. 29. Planning Stage Steps 13. Term sheet Prepare term sheet Negotiate term sheet Identify key issues 14. Service contract(s) Determine contract(s) structure Determine parties to each contract Prepare contract(s) Negotiate contract(s) Identify key issues
30. 30. Outsourcing as an Option An organization-wide directive to outsource non- core business processes An effort to globalize/standardize business processes throughout the organization An organization-wide to downsize or cut costs The reorganization of a business department , often in response to reengineering study The redirection of certain methodologies/technologies in an effort to remain competitive To enhance public perception
31. 31. Why managers choose outsourcing? As part of the reorganization of all or part of the business department As a means to cut business process costs As a means to focus more resources on business process strategy In an effort to enhance performance As part of the roll-out of new methodologies/technology In order to provide lacking expertise/experience
32. 32. Obtaining MGMT Support Particular business department Senior management Board
33. 33. Forming the outsourcing team Within a particular department being outsourced One or all of the following departments Purchasing Finance HR Legal Audit Tax Risk management Other affected areas Outside
34. 34. Guidelines and Internal Evaluation 1. Establish its top five to ten objectives for outsourcing Samples of objectives Concentrating resources on core capabilities Implementing a variable cost approach Obtaining an immediate cash infusion (typically associated with the transfer of assets to the vendor) Improving overall performance Improving efficiency Improving end user/client satisfaction
35. 35. Guidelines and Internal Evaluation Keeping pace with industry trends Providing access to new methodologies/technology Reducing risks Sharing risks Implementing tools for growth Standardizing diverse methodologies/technology Facilitating migration to new methodologies/technology Managing legacy methodologies/technology while the customer or the vendor implements new methodologies/technology Obtaining new or additional resources Providing flexibility to increase or decrease resources
36. 36. Guidelines and Internal Evaluation 2. determine whether outsourcing is desirable from a business, financial, technological, operational, regulatory, and legal perspective 3. determine whether there is any precedent for outsourcing within the organization and learn how employee, asset transfer, and other issues were dealt with in previous or contemporaneous transactions 4. investigate whether there is any outsourcing within its organization of or relating to the particular business process, who the vendors are, and the status of the relationship 5. consider how outsourcing of the particular business process will impact other areas within the organization
37. 37. Guidelines and Internal Evaluation Other considerations: initiate an investigation into whether any approvals, authorizations, notices, or other requirements are necessary pursuant to corporate ordinance, regulation, or law. outline the benefits and risks of outsourcing and assess whether the benefits outweigh the risks
38. 38. Guidelines and Internal Evaluation Benefits: Cost savings/benefits Greater ability to concentrate on core business Implementation of wide initiatives Sale of assets (moving assets off books, capital infusion) Greater resources to move to new environment/systems in a faster time frame More/varied skills and resources methodologies/technolog y Training expense reduction Greater flexibility Risks: Loss of control Difficulty in managing costs Additional liability Difficulty bringing business process back in- house Reduced flexibility
39. 39. Preparing a Time Table 2 mos 3 years Ideal set up - spend time define requirements, perform due diligence, prepare a comprehensive request for proposal, and negotiate the transaction
40. 40. Internal Communications 1. Wait until There Is a Deal 2. On a Need-to-Know Basis 3. Be Up Front from the Start
41. 41. Wait until There Is a Deal Pros: Negotiating position is not compromised by employee reactions/demands. Negotiations are not strained by fear that employees will resign during negotiations (particularly if all employees are not being transferred and severance is not an incentive to stay). Less risk of leakage to the press. Avoid false alarmif decide not to outsource. Cons: Breeds distrust among the general employee population. Employees may claim that they were not treated fairly. Allows employees little opportunity to evaluate options.
42. 42. On a Need-to-Know Basis Pros: Breeds trust with employees. Likelihood that employees will not leave until they know what the situation is. Mitigates employee claims that they were not adequately informed. Cons: Risk that employees will leave. Employees may claim that they were kept in the dark. Incomplete disclosure may result in unfounded rumors. Possible loss of negotiation leverage since it may be difficult not to outsource once announcements are made.
43. 43. Be Up Front from the Start Pros: Breeds trust/loyalty with employees. Reduces risk of claims that employees were kept in the dark. Often learning what employee concerns are helps in the negotiation process. Cons: Risk that employees will resign (particularly those who will not be transferred to the vendor). Negotiation process may be driven by employee reactions/demands. Poor employee morale may result in pressure to close the deal.
44. 44. Defining the Scope of Transaction Business Functions Be over-inclusive Include unbundle option or separate pricing for each process Sites Local Taxes and Restrictive Laws Management Structure proof-of-concept phase- where a few sites are outsourced, with the understanding that if the trial period is successful, other sites will follow
45. 45. Understanding (Customer) Existing Resources Relevant Budget Shadow Support Organizational Structure Management Structure Inventories Service Levels Critical Services
46. 46. Vendor Selection Steps for vendor identification and selection process 1. Appoint a vendor selection team (VST). 2. Establish qualifications. 3. Develop a long list. 4. Distribute the request for information (RFI). 5. Distribute the request for proposals (RFP). 6. Evaluate proposals. 7. Select a short list. 8. Select a vendor.
47. 47. Vendor Experience and Resources Making the first move Obtain vendor information from industry reports/surveys. Look at industry publications. Talk to other outsourcing customers.
48. 48. Customer Due Diligence Issuing a RFI Talking to outsourcing clients Visiting outsourcing clients sites Visiting vendor sites Checking customers previous experience with vendor Performing a newspaper search for recent articles Checking litigation involving vendor Obtaining annual reports Obtaining industry surveys/reports
49. 49. What the Customer Need to Know Vendor Reputation Vendor History Financial Security Organization Resource Distribution Experience- Customer Environment Experience Industry Roll-out Customer Base/Reference Subcontractors/Partners
50. 50. End of Chapter