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How to Benefit from Business Process Outsourcing

Business Process Outsourcing, known as BPO for short, is a growth market in Western countries. Companies turn to BPO as a means of achieving consistent...

Freddie Pierce
|Nov 24|magazine12 min read

Business Process Outsourcing, known as BPO for short, is a growth market in Western countries. Companies turn to BPO as a means of achieving consistent quality in certain areas of their business which, in turn, allows them to focus on growth throughout the rest of their operations.

Today, organizations outsource back office and front office functions, including call center operations, finance and accounting, and human resources in order to turn their attentions to the core functions.

WORKING IN CLOSE PARTNERSHIP
Sandeep Aggarwal, executive vice president, sales, solutions and transitioning at Intelenet Global Services, the BPO service provider, says that by outsourcing some functions to BPO companies as an organization acquires scale, there is more time to devote to quality and strategy.

“The BPO industry has grown from a sunrise to a sunshine industry in recent years,” acknowledges Aggarwal. “The drivers for this have been a steady increase in scale and depth of existing service lines, the addition of newer vertical-specific and emerging niche business services and continued expansion of service portfolios and higher value processes.

“BPOs have emerged as an effective means of entrusting specialists with the task of consistently delivering the desired high levels of quality – leaving the client organizations to focus on their core businesses,” he adds.

Of course, achieving such consistently high levels of quality through outsourcing can be risky, as Supply Chain Digital has reported previously. However, assuming your suppliers deliver to the required standards, then BPO can be a highly efficient system.

Kamini Bhawnani, head of financial services UK & Ireland at BPO specialists MphasiS, told Supply Chain Digital that transparency, governance and mutual respect “are the foundation to a good relationship between outsourcer and customer”.

In fact, the services companies expect from their suppliers have changed over the years. Aggarwal acknowledges that while most companies outsource in order to reduce costs, they now expect more than simply monetary returns.

“Customers view and want BPO partners who would own the entire process, consult on various aspects of the business and provide a holistic perspective,” he explains. “Cost containment strategy and sharing risk in the evolved business scenario is an example of this.”

REGIONAL OUTSOURCING HUBS
In October this year, the Philippines won the Outsourcing Destination of the Year Award 2010. The National Outsourcing Association (NOA) recognized its contribution to the global outsourcing industry for the third time; the Philippines having received the same award in 2007 and 2009 respectively. It beat other nominees including Egypt, Sri Lanka and the Ukraine.

So why have these regions, and others, emerged as outsourcing hot spots?

"With its abundant graduate workforce, the Philippines is becoming a veritable offshore giant for the UK BPO market," the NOA said at the awards ceremony. The country’s 450,000 graduates who leave university each year are highly qualified and have the ability to not only understand English, but also speak the language with a neutral accent.

Of those 450,000 graduates, at least 100,000 leave with finance and accounting degrees or qualifications.

The country has also positioned itself competitively within the outsourcing market, offering a flat 5 percent income tax rate on gross income for locators’ office buildings and installations accredited as Philippine IT economic zones, after the initial four to six years of Income Tax Holiday has passed.

Last year, the Philippines’ BPO industry reported revenues of $7.2 billion, up an impressive 18 percent from 2008’s $6.06 billion. Growth is expected again this year, with anticipated revenues of $9.5 billion.

Much of its success can be attributed to the fact that the Philippines has become the location of choice across a number of fields: legal and medical transcription; customer service; backroom operations for finance, logistics and accounting; software development and animation.

SPEAKING THE LANGUAGE
Similarly, Latin America is emerging as an important region to outsource to. U.S. companies in particular have turned to it in the last few years for their nearshore outsourcing needs. Not only is its proximity to America the reason for such growth, but many countries in Latin America are Spanish-speaking. This has also seen European companies outsource call center operations to countries like Colombia, Mexico and Chile.

“Outsourcing vendors are scouting business beyond English-speaking regions,” says Aggarwal. “There is a marked increase in offering multi-lingual solutions, which essentially means acquiring business in newer geographies and setting up new capabilities.”

The BPO market shows no sign of declining. Countries like the Philippines are actually upping the competition in the outsourcing industry, leading where others are sure to follow. Demands from companies are also becoming increasingly diverse and the relationship between businesses and suppliers forms the basis for the success of any outsourced contract.