BPO

Unlike the outsourcing of tasks assuming transfer on the party of separate projects with limited terms and the budget, business process outsourcing can not have temporary restrictions and the fixed budget. Within the BPO organization transfers to the outsourcer not just separate tasks, but the closed functional area in the business.

Determination of BPO

Despite quite accurate determination of BPO as transfers on outsourcing of any process activity, often it is meant this term narrower fields of outsourcing. So, transfer of industrial production (in fact – a kind of BPO) is often selected in separate type production (or industrial) outsourcing. The term BPO is seldom applied to determination of outsourcing of the servicing processes, such as cleaning of premises or food providing the organizations.

In most cases the abbreviation of BPO means outsourcing of high-level processes which are, as a rule, connected with management of finance, personnel, marketing or legal providing the organizations. Very often business process outsourcing is understood as transfer of function, connected with information technologies and management of corporate information systems.

Advantages and shortcomings of BPO

Advantages of application of BPO practically do not differ from advantages of use of outsourcing of separate tasks. In both cases the main objective of outsourcing comes down to cost reduction which is reached due to higher competence of the contractor of business processes or tasks or processes which are transferred to it. However, unlike outsourcing of tasks, cost reduction in case of BPO is more considerable, it is reached in the long-term period and often requires serious basic training.

In certain cases the main incentive to use of BPO is even not cost reduction, and desire to make them controlled and predictable. In case of BPO the predictability of costs is reached at the expense of the clear financial conditions regulated in the agreement and the agreement on the guaranteed level of service (SLA).

It is possible to refer comparative complexity in implementation to the main shortcomings of BPO – to tell to the third-party contractor not just specific objectives, but full business processes it is much more difficult. Thus, this type of outsourcing requires more serious preliminary analysis when choosing the contractor and also possible adaptation of business processes to their transfer on the party.

As the economic benefit at BPO is reached due to higher competence of the contractor of non-core business processes of the organization, BPO is seldom applied to transfer of specific business processes. In most cases, within BPO the processes characteristic of all organizations, such as personnel management, calculation of taxes or salary are transferred to the outsourcer. Generally, BPO has much narrower area of applicability, than simpler outsourcing of tasks.

When using BPO big functional areas are transferred to the third-party outsourcer, and the customer company practically always has concerns for quality and safety of the provided services. This circumstance is one more restraining factor of BPO as high expectations of customers are not always approved with reputation and popularity of the service providers who are present at the market.

Examples of BPO

Today in the world there is a set of types of BPO, many of which are successfully applied also at the Russian enterprises. Depending on specifics and the industry of each specific organization processes which are transferred to the third-party companies can differ significantly from each other. Nevertheless, there are several characteristic examples of BPO inherent for almost all enterprises of rather large size.

In general, advantages and shortcomings of BPO almost do not differ from features of any other types of outsourcing. Being the deepest form of outsourcing, transfer of business processes is capable to bring to the organization the maximum advantages, however has more essential shortcomings and less wide area of applicability.

Outsourcing of processes in the field of personnel management

Any company is forced to solve the problems connected with personnel management – hiring of employees, calculation of compensations and tax statements. At the same time the vast majority of the organizations are not recruitment agencies, and have no specific competence in personnel management. For this reason practice of outsourcing of HR processes (HRO, Human Resources Outsourcing) purchased considerable popularity.

In most cases the processes connected with selection and search of employees are transferred to the party (and also leasing of personnel and outstaffing), is more rare – processes of personnel administration and payroll.

Practice of outsourcing of personnel management processes is widespread in Russia. Examples of the companies providing services in set and hiring of personnel are different recruitment agencies. In the field of personnel management and personnel administration in Russia it is much less enhanced service providers of outsourcing, among them it is possible to select the companies UCMS Group and Intercomp.

Outsourcing of processes in the field of customer relations and outsourcing of call centers

One more widespread example of BPO is outsourcing of processes in the field of customer relationship management (CRM) and, in particular, outsourcing of processing of telephone calls and transfer on the party a call Centro. The vast majority of the western companies use this BPO type, placing expensive call centers in places with cheap labor power and, often, even in other countries.

Traditionally it is considered that India capable to provide to the western companies acceptable quality at the lowest prices is leading service provider on outsourcing of call centers (at the expense of cheap labor power). Rather often offshore call centers are placed in countries of Eastern Europe and also in some Arab states (for example, in Egypt).

Outsourcing of call centers in Russia is also rather widespread, however has several other form. Requirements to Russian practically exclude placement of call centers in foreign countries and even in some CIS countries. Therefore many domestic companies prefer to transfer customer service centers to the Russian country towns with rather cheap labor power. For management of call center the separate legal entity which allows to call this process outsourcing is often created. At the same time, at the market there are also independent companies providing complex services in outsourcing of call centers.

Outsourcing of financial and accounting processes

Specifics of outsourcing of financial processes and accounting are in many respects similar to outsourcing of processes in personnel management. In both cases not specific functions characteristic of one and all companies of any sizes and the industries are transferred to the contractor.

Theoretically and practically, the outsourcing company can perform completely all functions of enterprise accounting up to execution of bank payments and drawing of primary documents to partners. However it does not exclude a possibility of creation enough difficult and flexible business processes using the external companies and own employees for achievement of maximum efficiency.

One of obvious shortcomings of outsourcing of financial processes and accounting are concerns of customers for safety of the financial information belonging to them, for correctness of maintaining and providing financial and tax statements in regulating authorities. And though the large outsourcing companies have the corresponding competence and bear responsibility to the customer for correctness and timeliness of providing information, nevertheless, finance division and accounting of the customer answer to the state for correctness and timeliness of the reporting. As a result, big customers in Russia reluctantly go for such outsourcing preferring to conduct accounting independently. As a result, a crucial asset of any outsourcing company is its reputation in the market and responses of already taken place clients.

Outsourcing of IT processes

It is possible to claim with confidence that universal penetration of IT systems led to growth of availability of many BPO types due to sharp reduction of time and cost of interaction between the customer and the outsourcer. Moreover, before information revolution of the 90th years some types of outsourcing (for example, offshore outsourcing of call centers) were extremely difficult to be implemented technically. As a result, the term outsourcing often is associated with the IT sphere though directly these concepts are among themselves not connected.

In the modern IT industry it is possible to meet the mass of examples of BPO. So, production outsourcing and also developments of a program code very was widely adopted. The traditional leader in the field of IT production is China, and the leading offshore developer of a program code – India, countries of Eastern Europe and Russia. During 2007-08, at once several leading IT corporations opened own development centers in Russia.

Rather often the term IT BPO is understood as outsourcing of IT processes of the organizations which are not connected with the IT industry directly. Complex IT outsourcing within which all IT infrastructure of the customer is transferred to the contractor is widespread in the western countries. In Russia such approach is used extremely seldom, limited options of IT BPO, such as hosting of applications or support of the corporate websites prefer to use the companies. At the moment the main providers of outsourcing IT services in our country are traditional system integrators for which BPO is not core business. At the same time, the Russian market of IT services is actively entered by the largest world players: IBM and HP.

Outsourcing of placement of IT systems (Software on-Demand)

Outsourcing of placement of IT systems (the "software on demand" model, Software on-Demand, SoD) is a kind of outsourcing of IT processes. Unlike a normal hosting, within the concept of SoD, the outsourcer not only provides the physical equipment for placement of information systems, but also provides their installation, support and updates.

Within the SoD model customers pay not for ownership of the software as such, and for its lease (i.e., its use via the web interface). Thus, unlike the classical scheme of licensing of software, the customer incurs rather small recurring costs, and he does not need to invest essential means in acquisition of a system. The scheme of periodical payment assumes that if need for the software temporarily is absent – the customer can suspend his use and freeze payments to the developer.

The scheme SoD clearly demonstrates interrelation between different types of BPO. The company developing SoD-systems on personnel management or accounting can be at the same time provider of BPO services in these directions. It is possible to give UCMS Group company which provides the platform on personnel management of Quinyx in a complex with outsourcing services of payroll and personnel administration as an example.