Written Report:

IT BPM Outsourcing, Definition of Rationale for Outsourcing

Functions and/ or Services being outsourced
Advantage and Disadvantages of outsourcing

Submitted by:
Group 1 – BSBA- HRM 2-2D

FRANCISCO, Rosemarie (Leader)

DINCO, Rendell Regit (Assistant Leader)
ALFARAS, Abigail
ANDARINO, Kassell
CABILI, Jyra
CARIAGA, Janine Clarisse
MEDINA, Ivan
SEMORLAN, Christine Joyce

Submitted to
Prof. De Guzman
Subject Advisor in Fundamentals of Business Process Outsourcing

Date Submitted:
July 3, 2019
 IT BMP OUTSOURCING, DEFINITION OF RATIONALE FOR OUTSOURCING

Outsourcing – “the strategic use of outside resources to perform activities traditionally handles
by internal staff and resources”; is also known as Business Process Outsourcing or BPO. This is
the process of hiring another individual or company, either domestically or internationally, to
handle business activities for the firm. It has become a common business practice that allows
small and medium-sized businesses to gain services and skills they would usually find hard to
develop, because of either financial or manpower restrictions, or possibly a combination of both.

Companies that outsource overseas

1. APPLE 2. NIKE

* IT-BPM is when businesses outsource processes like human resources, accounting, customer
service, legal, research, health information management, IT and more.

Samples of Frequently Outsourced IT Services are:

 Application/Software Development  Database Management
 Web Development  Telecommunications
 Technical Support/Help Desk

BPO Companies in the PH:

 Concentrix  Teleperformance  Eperformax

Why Do Companies Outsource?

1. Capacity Management. It's associated mainly on manpower and area of expertise.

2. Lower Cost. cost or lower cost has a lot to do with a company's sustainable capacity to
effectively produce or deliver its primary product or products and services. Cost reduction
or more correctly financial management is essential to the profitability of any business.

3. Better Performance. better performance in one regard has a lot to do with manpower
and the associated expertise of that workforce. Imagine how efficient and profitable a fast-
food delivery business would be if the work of the; order-taker, cook, bagger, motor-cycle
rider was combined into one job and all these tasks are to be performed by just one
individual.

4. Faster and Continuous Service. If you about the previous hybrid job of order-taker who
is also the cook and the bagger and motor-cycle rider, than this next item of faster and
continuous service delivery becomes easier to understand. Another example to illustrate
this item would be: imagine the nearest gas station, just the way it is - multiple pumps, a
small parts store, a small convenience store, a service bay for washing and waxing, and,
of course the cashier’s booth - this time managed again by one employee.
 5. Part-based activities. part-based activities are closely related to operational efficiency.
Perhaps one of the best ways to illustrate this point is through passenger car assembly
lines. The entire assembly or production line is clearly sub-divided into specific tasks or
stations. Each station then having its own; specialized personnel, equipment or
machinery, raw materials, and, cycle-time.
This work segmentation allows for numerous benefits such as; greater degree of control,
inventory management, troubleshooting, and, forecasting to mention a few.

FUNCTION AND/OR SERVICES BEING OUTSOURCED

Types of Outsourcing Models:

 Professional Service Outsourcing – refers to firms that provides specialized services or
handles complicated task and processes from other company in exchange for monetary
gain; these includes services such as I.T, Human Resources, Legal and Accounting.
Example: Manpower agency or Recruitment Agency; Siegen Solutions, provides
employers or firms with efficient and quality talents for recruitment.

 Manufacturing outsourcing – is a type of outsourcing wherein its services is centered in

catering an industry that produces goods or items; in terms of assembling products.
Example: Apple Inc., manufactures their iPhones, iPads and other Apple products in
China.
Example: Automotive industry; outsource other services in assembling their vehicles, for
instance contracting another firm to install windows in their automobiles.

 Process Specific Outsourcing – Outsourcing service can also be specific to an internal

procedure or unique process. This is a suitable option for service organizations where the
specific areas of the service can be contracted to another organization, so that the
business can concentrate on the core areas of the service.
Example: An example of a bakery would normally outsource their delivery of their baked
goods to a courier company such as UPS or FedEx.

 Operational Outsourcing Service – This type is normally associated with the

manufacturing industry. That’s because there’s normally quite a bit of operational tasks
and steps required to be taken for the end result to be achieved properly.
Example: the equipment repairs, and machine maintenance is very commonly
outsourced to a 3rd party that specializes in such tasks.

What are being outsourced? I.T Services.

1. (Software Development) Programming services – IT companies create new programs
that Fit to the organization’s needs. These could be a program to manage the workforce
or software to monitor and track stock. The IT company create, test, and install the new
programs in the computers of the client.
 Example: A database created to monitor inventory. An apps made to make it easy for the
customer to access service of a business-like grad food, gcash, micab, etc. A website
created to connect and inform people about your business.

2. (Security Management) Security – With the ever-growing threat of hacking and other
cybercrimes, companies end on IT firms to provide security services. The IT companies
have specialists in the field of IT security who can create secure systems and install
software to monitor and disable potential threats.
Example: To protect the website, apps and database of the company they hired an IT
expert to protect these from potential hacking. IT expert create a program that are no easy
to access the information of the company by the hacker. Having a security program will
help you ensure the confidentiality, integrity, and availability of your client and customer
information, as well as your company essential data.
Example: Companies like Symantec, FireEye and blackberry provide an IT expert to
protect the website, apps and database of The company from potential hacking. IT expert
create a program that the hacker doesn’t have a chance to access. Having a security
program will help you ensure the confidentiality, integrity, and availability of your client and
customer information, as well as your company essential data.

3. (System Support) Solving I.T problems – Whether software or hardware, IT specialists

are the ones depended upon to troubleshoot and resolve issues with computers in an
organization. The IT companies offer the services on a contractual basis, or they may be
called in only when a problem arises.
Example: If the company computer won’t start or the screen is blank and functioning
operating system or software are not acting normal, an IT specialist to solve these
problems, so can easily contact expert to do the job for you

4. (System Maintenance) Maintaining I.T systems – It regards with ensuring that the
systems are operating at optimum performance, running a regular diagnostic and repair
or maintenance activity.

5. (Data Management and Online or Cloud Services) Collecting and storing data – Service
that is related to data protection, disaster recovery and back-up; which are designed to
help clients or firms to preserve and store critical database from being corrupted or
accidentally lost. It also involves utilizing online or cloud storage service in managing data
for retrieval and secure personnel access.
Example: ‘Microsoft One Drive’ – is a file hosting service and synchronization
service operated by Microsoft as part of its suite of Office Online services.
Example: ‘Google Drive and Photo’ – similarly provides online storage facility for Apple,
Android, Windows Phone user.

6. (Software as a Service) Setting up new systems – When new IT systems are brought
into the organization, it’s IT companies that are called in to set them up.
 7. (Help desk) Maintaining a help desk – IT companies offer the services of a help desk
where customers can call in with IT ems and receive advice on how to tackle them. It
forms a part the IT firms’ mission to ensure customers are well served.

ADVANTAGES AND DISADVANTAGES OF OUTSOURCING (EMPLOYER AND EMPLOYEE

PERSPECTIVE

Advantages of Outsourcing (Employer’s Perspective)

1. Outsourcing saves time – When companies plan to add services, this involves days of
research. Companies must find the right person for the vacant job created by the service. Not
only that companies must implement training for the hired personnel. BPO firms usually offer
these services all in one contract.

2. Outsourcing cuts costs – transnational companies prefer outsourcing their business

process in developing countries like Philippines. This cuts cost because in developing
countries the cost for labor is lower compared to the cost of labor in well developed countries.

3. Overall development of the company – If these processes and services are handled by
other parties, the company itself can focus on critical aspects of the company. Which means
that more attention will be allotted in further developing your company.

4. Broader knowledge – In outsourcing you get to be partners with people who are experts in
different fields. If that is so weaknesses existing in your company could be eliminated.
Different parties offer different point of view, and it helps to see the various angles of your
company.

5. Competitive advantage – The key purpose of growth and development is to be better than
your competitors, Multiple factors must be considered, and outsourcing gives us a few steps
ahead of our competitors if used properly.

Disadvantages of Outsourcing (Employer’s Perspective)

1. Loss of Managerial Control and Possible Quality Issues
- Because of hiring an outsourcing as third party in your companies, they will have an
authority/ power to manage the department given to them. They will perform exact task as
to the company employee and act in behalf of the company itself.
- Your company and the outsourcing company don’t have the same standards that drives
your company. The outsourcing company is motivated to make a profit from the services
that they are providing.

2. Hidden Costs
- When outsourcing already signed a contract between the company, there is a detail services
covered by the company. As to hidden cost explains, it is an additional service and charge
not covered in the signed contract.
3. A Tie to the Financial Well-Being of the Outsourcing Company
- Once the outsourcing company tied up to the company, they can have an authority/ power
to request financial statement of both companies.
- They will check the status and stability of it. Once they’ve found out that the company
underperform, they will immediately file for bankruptcy and seek protection from its
creditors.

4. Threat to Security and Confidentiality

- Once the outsourcing company already tied up in the company, they have the power to
access files and others like confidential file. It’s always safe that the contract itself has a
proper “clause” limiting the outsourcing company to access information in the company.
Examples for Confidential Information:
a. Payroll Data/ Information
b. Customers Personal Information
c. Medical Records

5. Impact on Employee Morale

- Because of its authority and power to handle specified department in company, the
employees of the company itself will have to worry that they would lose their job in presence
of the outsourcing employees.

Disadvantages of Outsourcing (Employee’s Perspective)

1. Deals with IRATE customers - Those customers who express their frustrations by aiming
their complains at the outsourcing employee. Customers who do not get what exactly they
wanted/ the satisfaction.

2. Shifting Schedules - Employees who start their shift during the wee hours of the night
(graveyard shift), which may also affect their health. It may not be suitable for those who
have weak immune system.
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