Introduction of BPO/ Challenges

Introduction of BPO

Business-process outsourcing is generally for back-end administrative functions that are necessary to run a business but are not a part of the core business. The terms IT Enabled Services (ITES) and Business Process outsourcing (BPO) are used interchangeably now days. ITES is basically a subset of BPO.

Definition:

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider.

Business process outsourcing (BPO) is the contracting of non-primary business activities and functions to a third-party provider. BPO services include payroll, human resources (HR), accounting and customer/call center relations.

BPO is also known as information technology enabled services (ITES).

Benefits of BPO

· Productivity Improvements.

· Improved HR.

· Focus on Core Business.

· Increased Capability and Quality.

· Skilled work force.

· Effective utilization of resources.

· Cost restructuring.

· Cost Savings (link to new tab)

The Outsourcing Growth drivers

BPO partners with global clients to shape their innovation agenda and identify growth opportunities. In an interview with the Shared Services & Outsourcing Network discusses the key drivers of outsourcing in the current economy. Infosys BPO combines consulting, operations and technology to drive bottom-line growth with outcome-based models.

The main drivers of the BPO phenomenon are globalization, economics and geopolitics.

The second driver of the BPO phenomenon is the economic aspect

The third driver of the BPO phenomenon is the geopolitical aspect

Finally, the BPO phenomenon has also been driven by demographics

BPO Vendors

Classification of BPO vendors

BPO vendors can be classified into three distinct types depending on the history or origin of the company, expertise etc.

1. Traditional IT services/IT Outsourcing companies:

These are big companies that already have a good track record of services in traditional IT areas. They have started offering BPO services to leverage their expertise and the client relationships that are already in existence. In India, large IT services companies like Infosys, WIPRO, Tata Consultancy, Satyam etc. have started offering BPO services either directly or through their subsidiaries.

2. Consulting firms:

Consulting firms have the distinct advantage of working with several companies and are hence exposed to the best practices followed worldwide. Their domain knowledge gives them tremendous competitive advantage as also the CEO level relationships that they have built over the years. Hewitt, Accenture and Ernst & Young are some of the consulting firms in this category.

3. Pure play BPO vendors:

These companies have been set up exclusively for undertaking BPO contracts. Such companies have mushroomed in the past couple of years, especially relatively lower and Transcation BPO providers and Niche providers. This growth is especially in the areas of transcription, call centres, e-accounts etc.

World's Best BPO Vendors

Num. Vendor

1. IBM Global / Daksh

2. Accenture

3. Hewlett Packard

4. MphasiS

5. Ernst & Young / Capgemini

6. Wipro Spectramind

7. ICICI One Source

8. eFunds Global Outsourcing

9. Convergys

10. Affiliated Computer Systems

Evolution of BPO

Table : Evolution of BPO

Years Process

1960s Time sharing

1970s Data processing

1980s Entire IT operations

1990s Shared business services

2000s B2B partnerships via Internet

2000s Process outsourcing via Internet

2000s IT-enabled offshore services

10 Common Challenges of BPO Industry

The growing numbers paint a nice picture for the BPO industry but it is not so always. The top management has to face lot of challenges when working in the BPO industry and constantly think of solutions to these challenges. Some of the common challenges faced by the BPO industry are listed here:

1. Changing Political Scenarios

Political situations in regions of America and Europe can affect the BPO industry drastically. Citizen protests, wars, falling economies, etc. can force the governments to pass certain bills which prevent outsourcing to other countries. This can have a major effect on the BPO companies.

2. Exceeding Customer Expectations

Providing customers with complete satisfaction has always been a difficult task for all BPO companies. Various social media channels and increasing competition in the market has resulted in increasing customer expectations to the roof and proves to be quite a challenge for the BPO industry.

3. Shoestring Budgets

One of the major challenges faced by the BPO industry is the budget. Most of the times outsourcing companies are expected to produce the best results with minimal cost. They are forced to get the maximum out from a limited number of resources.

4. Health Concerns

Most of the outsourcing companies are situated in regions which come under different time zones, hence the resources may be working at all times of the day. This can result in major health concerns among the employees and reduce their efficiency drastically.

5. Customer Attrition

At some point of the project, the client may just terminate the deal and hand over the project to your competitor for different reasons. The cost of such sudden deal termination can be huge and can affect most BPO companies to a large extent.

6. Scarcity of Talent

One of the major challenges in BPO recruitment is to find the right talented workforce to work in the industry. According to a recent survey it was noticed that only a fraction of graduates are actually suitable and ready to work in the BPO industry.

7. Employee Attrition

It is quite notable that the employee attrition rate in the BPO industry in quite high. The companies are not able to convincingly retain their employees for long and thereby suffer huge losses every time they have to train new employees. The cost of hiring a new employee and training that person for the job is again time consuming and expensive.

8. Communication Channels

The number of communication channels has increased drastically over the past decade. People have moved on to social media channels to send messages apart from the usual calls and mails. This proves to be quite challenging for the BPO companies to decide which channel to concentrate on when interacting with their clients.

9. Frequent Disruptions

Call traffic management, poor internet connection, unclear phone lines, power shutdowns etc. may result in disrupting the various processes. BPO companies usually work in 24/7 schedule and are expected to be available at all times. Such disruptions can cost the companies a lot and can be very challenging to the industry.

10. Brand Equity

Brand building is an important task performed by the HR professional. This is one of the common challenges for HR managers. They are expected to provide adequate training and a good working environment, so when they leave the company they are the brand ambassadors of the company. If the employees are unhappy, it can easily lead to negative word-of-mouth, thereby leading to diminished brand equity.