Archive for

Business Process Outsourcing – Not a Fairy Tale Any More

The term Business Process Outsourcing or BPO has been in favored usage for a good part of two decades and more. No other business process has been in dominance in corporate and technology circles in a very long time. However after many years of ‘being in the news’, it is experiencing a downward trend globally of late. But it will not completely become irrelevant is evident from the benefits it still affords companies and continues to still be a viable business option.

The concept of outsourcing may have been around for many decades, but it was accorded formal recognition as a strong business strategy only in the late 1980s. In the ensuing years different forms of outsourcing came about in the business world, each with its unique strategies and accompanying terminologies. Business Process Outsourcing soon became a key sub-category of the concept of outsourcing and gained immense growth through the 1990s and into the New Millennium. The numbers of companies embracing BPO business models and third party vendors providing strategic services simply multiplied overnight.

As we know, BPO refers to the delegation or contracting of key operational areas of a business to a third-party service provider. These functions included specific critical operational areas such as Accounting, Finance, Procurement, HR, Front Office Customer Service, IT Operations and many others.

The concept quickly flourished globally when businesses realized that they were in a position to free non-critical business functions to third party service providers in offshore locations at much less contracted rates compared to paying local workforces, thus saving on costs incurred in staffing, infrastructure, technology, systems etc. They were also in a position to make effective use of conducive geographical locations to do business and enjoy benefits both locally and globally without having to set up roots everywhere.

Expectations not met?

However, it soon became evident that this new business process was not meeting the expectations of companies and businesses, for various reasons. Corporate circles today are wary of the subject of BPO despite the significant benefits it provided and the attention it generated over the last few decades. Business Process Outsourcing was touted as the mantra to achieve organizational efficiency at all levels; however, in many well publicized instances, it did not quite deliver the desired results and fell well short of the expectations of many business houses.

In the US especially, outsourcing became a national issue because jobs sent offshore to low-cost destinations resulted in huge numbers of local people unable to keep their jobs or find suitable employment.

It’s not hard to see why BPO failed to meet the high expectations; there are several very obvious reasons for that.

• Ill-defined contracts between service providers and businesses with many gray areas
• Unspecified and unclear goals and targets leading to constantly changing schedules
• Completely contracting out competence and intelligence specific areas to third parties resulting in disastrous consequences and loss of capabilities to parent company
• Inactive management and control over the relationship
• Ineffective process alterations
• Substandard service delivery
• Delayed milestone deliveries
• Quality assurance failures, etc.

Benefits are certain

The BPO may be slowly losing relevance in today’s competitive marketplace; however, the concept of BPO is not entirely without business drivers and benefits especially for small and medium sized businesses in several areas, the most important of all being the significant cost savings when compared to conventional business models. But to gain these significant savings, companies have to be involved in the BPO set up and management, more so in areas such as staff training, networking infrastructure, communications and technology, quality initiatives, conforming to required standards etc. BPOs can certainly provide companies with nearly 40% savings in infrastructural and operational costs provided the business model is sound, the processes are specifically defined and implemented and the relationship between company and vendor is managed well. The savings to companies accrue in the areas of process reengineering, process improvement and optimization and reduction of operating costs.

An Overview of Business Process Management

Business Process Management, or BPM, now more and more driven by software, has been a management discipline for a long time, and it would seem to be rather straightforward to implement an automated system. In reality it is not. For one thing, business process management involves people to a large extent, and it can be very difficult to standardize a rather complex process in which people are deeply embedded. In addition, the terminology used in BPM is not as standard as one might suppose. In fact, if one were to specify a BPM software application, and leave it at that, Business Performance Management software could be what turns up on the doorstep.

As companies have automated aspects of their business process models, each has tended to go their own way, and today’s management systems are far different from the document driven systems of 20 years ago.

Getting back to basics, where there is an area of generally common agreement, business process management is generally defined as a discipline that governs the business process environment with the aim of improving business operation performance, while at the same time providing flexibility and agility when dealing with change. Most processes in place today, especially in larger corporations, tend to be highly structured, replete with software tools, metrics, and policies and procedures designed not only carry out business but to continuously optimize the process.

An Example Of Past And Present – Highly automated business management systems that are being put into place today usually need to address both person-to-person and system-to-system processes. One only needs to visit a doctor’s office to see such a system, on a smaller scale perhaps, in action. In the course of the consultation, the doctor, through his laptop or notebook, can review a patient’s past history, view past and present lab tests, document exam or diagnostic results, set up appointments with other physicians, and e-mail prescriptions to the pharmacy of the patients choice. Just a few short years ago, that portion of a doctor’s business management process involved locating and pulling a sometimes very fat folder containing the patient’s records from the files, sending an aide to pick up lab test results, writing prescriptions, and negotiating appointments over the phone.

A business process management system used in a large corporation has to interact with many different organizations as well as outside companies, clients, and vendors, making certain among other things that all communications received are routed to the appropriate party or parties, and tracked. Since contemporary automated BPM systems are often based on preceding, non-automated processes, it is little wonder that there is no such thing as a one-size-fits-all system application.

Business Process Management

Business process management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims. This basic definition needs to be expanded as manager’s carry out the managerial functions of planning, organizing, staffing, leading and controlling. Management applies to any kind of organization. It applies to managers at all organizational levels. The aim of all managers is to create a surplus. Managing is concerned with productivity implying effectiveness and efficiency.

Many scholars and managers have found that the analysis of business process management is facilitated by a useful and clear organization of knowledge. In studying management, it is helpful to break it down into five managerial functions involving planning, organizing, staffing, leading and controlling. The knowledge that underlies those functions is organized around these five functions.

Managers are charged with the responsibility of taking actions that will make it possible for individuals to make their best contributions to group objectives. Management applies to small and large organizations, to profit and not-for-profit enterprises, to manufacturing as well as service industries. The term enterprise refers to businesses, government agencies, hospitals, universities and other organizations. In business process management, all managers carry out managerial functions. However, the time spent for each function may differ. Top-level managers spend more time on planning and organizing than do lower level managers. Leading, on the other hand, takes a great deal of time for first-line supervisors. The difference in the amount of time spent on controlling varies only slightly for managers at various levels.

Business process management, like all other practices such as medicine, engineering or baseball, is an art. It is know-how. It is doing things in light of the realities of a situation. Yet managers can work better by using organized knowledge about management. It is this knowledge that constitutes a science. Thus, managing as practice is an art; the organized knowledge underlying the practice may be referred to as a science.