Submitted by gc on Mon, 02/18/2013 - 10:27
With time, every industry starts following certain best practices as it develops and matures. The best practices followed in the BPO industry include:
- Companies outsource critical but non-core business processes that are not strategic to the firm's vision.
- An inefficient process is not outsourced to a third party vendor without any re-engineering.
- Companies gather support from its employees before taking the outsourcing plunge. The first step towards this is early communication of the outsourcing decision to the employees and even the shareholders.
- Sourcing advisors are consulted for negotiating a deal.
- Vendor is selected based on various criteria such as quality commitment, cost, transparency of operations, data security, etc.
The advantages offered by outsourcing in general are valid for BPO as well, and these advantages act as internal drivers for BPO. In addition to these internal drivers, companies are lured to choose the BPO option due to the following external drivers:
- Robust IT and telecommunications infrastructure: The developments in IT and telecommunications infrastructure has enabled companies to transfer data to any place in the world instantaneously at very little cost. This infrastructure also allows them to increase their ROI and shareholder value.
- Pressure to lower costs: Companies are facing huge competition from their competitors to provide better services, and at the same time lower their costs. Companies are constantly innovating the way they are conducting businesses and BPO allows them to partner with external specialized vendors for efficient operations. Offshore BPO is cheaper than onshore BPO and many companies are now moving their operations to offshore locations, India being the most preferred destination.
- Little infrastructure for automation: The IT revolution has not achieved success in automating business processes and most of the business processes still need human labor for productive delivery. In such a scenario, resorting to BPO, which provides human labor at a lower cost, enables companies to maximize their ROI.
The perceived risks of outsourcing act as a big inhibitor for BPO. Some of these risks have been described below:
- Loss of control: Companies perceive the risk of losing control over the operations of their processes. Also, if the (trained) employees in the vendor firm leave the job, the buyer may be at risk.
- Financial instability of the vendor: If the vendor becomes financially unstable in some years, the buyer will have to search another vendor; the operations being at risk, if it does not search the new vendor fast.
- Loss of expertise: Customers may lose the expertise and knowledge of carrying out the outsourced processes with time.
- Data security: Data confidential to the customer may be prone to theft if the vendor firm does not have stringent security policies.