Republic of the Philippines

Polytechnic University of the Philippines

College of Business Administration
A. Mabini Campus, Anonas Street, Sta. Mesa, Manila

WRITTEN REPORT

What Is So Revolutionary about BPO?

Additional Topic # 1

SAMONTE, RAISSA MAE E.

BSBA-HRM 2-2

DECEMBER 19, 2020

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Table of Contents

WEEK 18: What Is So Revolutionary about BPO?

BPO Overview ……………………………………………………………………………….. 3

BPO: A SOCIO-TECHNICAL INNOVATION ……………………………………………… 4

DRIVING FACTORS …………………………………………………………………………. 5

Educational Attainment ……………………………………………………………… 6

Broadband Internet …………………………………………………………………… 7

Abundant Data Storage ……………………………………………………………... 7

Analytic Software …………………………………………………………………….. 8

Internet Security ……………………………………………………………………… 9

Business Specialization …………………………………………………………….. 10

BPO TYPES ………………………………………………………………………………….. 10

Offshore ………………………………………………………………………………. 11

Nearshore……………………………………………………………………………... 12

Onshore……………………………………………………………………………….. 12

SUMMARY……………………………………………………………………………………. 13

References…………………………………………………………………………………… 14
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BPO Overview

Business Process Outsourcing (BPO) is a business innovation practice of

contracting a specific non – critical core function/s from an organization to external
service provider. The services can include payroll, accounting, telemarketing, data
recording, social media marketing, customer support, and more.

Major part of what gives life to the business innovation called Business Process
Outsourcing is with the help of information and computer technology that was
constructed over the past few decades and entering the internet era this become
revolutionary.

In the Philippines, the operation of BPO started in 1992 where an International

Global Resource Center has initiated the beginning of local BPO industry in the country.
Because of this, three years after, the Congress passed the Special Economic Act – an
act providing for the legal framework and mechanisms for the creation, operation,
administration and coordination of special economic zones in the Philippines. As a
result, it paved the way for the creation of the Philippines Economic Zone Authority
(PEZA) and a gate way to for international BPOs in the country.

BPO initiatives often include shifting of work to international providers with the
help of now well-established and reliable telecommunications infrastructure. There are
five BPO top hotspots globally, although firms from many other countries are
specializing in various business processes and exporting services:

1. India. Engineering and Technical

2. China. Manufacturing and Technical

3. Mexico. Manufacturing

4. United States. Analysis and Creative

5. Philippines. Administrative
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Each of these countries has complex economies that span the range of business
activity, but from a BPO perspective they have comparative advantages in the specific
functions cited.

The few back-office function processes that organizations of all sizes have been
able to outsource to others who specialize in those areas are payroll and benefits
administration, customer service, call center and technical support. Removing these
functions enables to reduce payroll and other overhead costs.

When it comes to BPO, location attractiveness refers to a metric you can use to

determine where to take your outsourcing and staffing needs. This takes into account a
range of factors: from the overall skill of the population, to how easy it is to
communicate and conduct business, to how the state of the country itself could affect
your new team.

BPO: A SOCIO-TECHNICAL INNOVATION

BPO is a socio-technical business innovation that provides a rich new source of

competitive advantage. By socio-technical we mean that BPO requires skillful
management of people and technology (hardware and software). Many managers
prefer to stay away from this concept of BPO as they believe it quite wrongly to be
technological innovation and better left to the Chief Information Officer. 

The manager who initiates a BPO strategy must find effective ways to introduce
people to technology and vice versa. If left solely in the hands of technical specialists, a
BPO initiative is likely to fail for lack of paying attention to the soft issues of human
relationships, change management, and organizational culture. If left solely in the hands
of nontechnical managers, a BPO initiative is likely to fail for unrealistic expectations
about the potential and limitations of the enabling technologies.

BPO is one of those interdisciplinary workplace innovations that require a diverse

set of skills in order to be successful. The initiation and implementation of a BPO project
in an organization requires focused attention on several human factors, both within the
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organization initiating the project and within the outsourcing vendor. These
human/social factors cannot be ignored and must be handled correctly in order for the
project to succeed. Human factors include the following:

 Developing various teams to manage the BPO initiative throughout its life cycle
 Reassuring staff of their role in the company
 Training people on the new way of doing business
 Dealing with job loss and/or reassignment
 Keeping morale high throughout the change process
 Encouraging people to participate in decision making
 Understanding cultural differences between the organization and BPO partner

The initiation and implementation of a BPO project also require attention to

technology issues. Among these are the following:

 Compatibility of systems between the BPO buyer and vendor

 Data and system security
 Backup and recovery procedures in the case of system failure
 Data interface challenges and strategies
 Software and database compatibility challenges
 Data and knowledge management

DRIVING FACTORS OF BPO REVOLUTION

There are two types of change: evolutionary and emergent. Evolutionary

changes are those that a system is likely to produce based on its current design and
goals. However, the complex systems develop structures that are not predictable from
their goals and current state. These phenomena are called emergent, the system
features or capabilities that would not have been predicted in advance based on the
understood design and goals of the system.

BPO is claimed revolutionary because it is such an emergent phenomenon. It is

Emergent, as far as we can tell, no one set out to design the potential for organizations
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to use BPO. BPO is emerging from a set of driving factors that have unintentionally
converged in this particular time to enable the shifting of work to its lowest-cost/highest-
quality provider regardless of the provider’s physical location. BPO is a business
innovation that leverages these driving factors and applies them to practical business
problems.

Educational Attainment

Educational attainment refers to the degree or level of completed education of a

person on the basis of the followings: elementary, high school, technical vocational,
bachelor's degree in college, Masterate in Graduate School and Doctorate in Post
Graduate Studies.

The United States still dominates the world in the quality of its higher education,
but the rest of the world is catching up quickly. As for K – 12, level it has long been
noted that the United States lags behind other countries, especially in technical areas
such as math and science as measured by standardized test scores. Back in 2012, the
government of the Philippines changed the educational curriculum to K – 12 which aims
to enhance learners' basic skills, produce more competent citizens and prepare
graduates for lifelong learning and employment. And also to compete globally as there
are more Asian students are pursuing technical degree than Americans. Ironically, the
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United States is not only relocating its coveted technical jobs to these foreign locations,
but it is also preparing many of the workers who fill those jobs.

It now makes sense for U.S. firms to rely on foreign providers of highly skilled
labor. The logic is simple: The quality of talent is high and the cost is low. Educational
attainment around the world will drive BPO innovators to seek new ways to tap that
talent for business purposes.

Broadband Internet

The age of broadband internet connection is in full swing now. Broadband refers
to high-speed Internet access that is always on and faster than the traditional dial-up
access, allowing larger chunks of information to flow with fewer congestion issues. The
internet connectivity speeds usually in the range of 2 megabits/second using high speed
transmission technologies such as: Digital Subscriber Line (DSL), Cable Modem and
Fiber, Wireless, Satellite, and Broadband over Powerlines (BPL).

With broadband, workers in different countries can share data, while consumers
can surf the Web for the latest bargains. The growth in broadband connectivity is
knowingly fast in different regions where internet users’ scattered. Broadband
spreading around the world is driven by the creative and business behaviors of users.
Broadband users are extraordinarily active information gatherers, multimedia users, and
content creators. The users with six or more experience using internet are most likely to
switch to high speed access.

Abundant Data Storage / Inexpensive Data Storage

Storing data has always been a critical resource for businesses. In the days of
paper-based data storing, data was primarily located in file cabinets, closets, and
overstuffed basements. Nowadays, computerization of data gradually replaced the
paper-based data storing first using punch cards, magnetic tapes and then disk-based
storage. As the information age progresses, firms that had envisioned growing rich by
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supplying online data storage on an as-needed basis have discovered that storage has
become a commodity—it is nearly as limitless as the Internet. It is rare now to find
someone walking with a floppy disk, rather, most of the people today know how to
transfer data online where they can be retrieved and deleted a file wherever and
whenever they want.

In an era of storage overcapacity, an embarrassment of riches awaits intelligent

executives if they can move beyond the scarcity mindset. Data protection and access
controls must continue to play a role in a storage-rich environment. It is important to
safeguard important information from corruption, compromise or loss as the amount
of data created and stored continues to grow at unprecedented rates.

One danger of shifting work to a third party is the potential loss of organizational
learning. It is when a process is executed internally, the organization’s employees
handle the related transactions and, over time, are able to discern and adapt to specific
patterns or trends. And, when these transactions are no longer executed internally,
there is potential for this vital learning to be lost.

Analytic Software

Software is a major source of business competitiveness in BPO industry, a tool

for us to work with and has been designed to perform work for us. The software tools
that can perform tasks for us are: expert systems, decision support system and artificial
intelligence. Business analysis tasks were formerly the domain of human logicians,
administrators, and executive decision makers. However, since the development of
analytic software capable of re-creating and possibly improving on human decision
making has revolutionized the power of the desktop computer. Where in the ideal of it
was to eliminate the need for human thinking through mechanical design and improve
the human thinking through software design.

Online analytic processing (OLAP) has created a wide range of new possibilities
in workplace structure, including effects on hiring practices, organizational design, and
productivity. OLAP is a technology behind business intelligence applications, a powerful
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technology for data discovery, including capabilities for limitless report viewing, complex
analytical calculations, and predictive “what if” scenario planning. It has enabled some
human resources to be eliminated and also placed a premium on individuals who can
use the sophisticated output and create new value with it.

Many of the middle-level roles in an organization, which role is to

implement the tasks, may displace from the transition of analyst jobs from the
organization to outsourcing partners. In fact, it is likely that the swath of job shift in
middle management will grow wider and reach ever-higher levels of the organization
chart.

Internet Security

Internet security refers to the ability to send information and data (including
voice) over the Internet without fear of leakage, espionage, or outright loss. It is critical
for companies to be certain that their data integrity will be maintained despite its
movement around the globe in the servers, routers, and computers that make up the
World Wide Web.

In the past, the executives were reluctant to conduct any back-office business
transactions online with the fear of security risks. However, in today’s world they are
become computer educated, open to know more about technology and have better
understanding about security protocols now available.

Most BPO providers adhere to one or more of these standards and have
received the appropriate certifications. Several global and national compliance
benchmarks include the following:

 BS 7799
 ISO17799
 HIPAA

In the Philippines, we have Republic Act 10173 or the Data Privacy Act of 2012,
an act protecting individual personal information in information and communication
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systems in the government and private sector. This regulation sets out a data
privacy accountability and compliance framework that will cover wide range issues such
as governance, data security, training, third-party affiliations, and breach notification.

Even with these security standards, organizations should be aware of security

best practices and ensure that the BPO vendor they choose has the capability and
processes in place to meet and exceed security needs.

Business Specialization

Adam Smith, a capitalist economist said that the benefits of specialization are a
key to productive exchange among economic agents. He also said if people have each
specialization a greater output in the process would occur. As it turns out, in a world
where business-to-business (B2B) services have become as common part of the
economy as business-to-consumer (B2C) products and services, the basic economic
agent can as readily be construed to be a business firm as it could be a person.

In the popular book Competing for the Future, Pralahad and Hamel called on
businesses to focus on their “core competency.” The idea of focusing on core
competence, if pursued logically, leads to the idea that a business organization should
operate as few non–revenue producing units as possible.

If a business truly focused only on its core competence, it would not operate
those units that are not tied directly to meeting customer needs and generating revenue.
This mind shift could easily be overlooked as a driving factor of the BPO revolution, but
it is crucial. Transformational organizational changes paradigm shifts, if you will – often
cannot occur until a sufficient number of managers and executives have changed their
thinking about the form and function of their organization.

BPO TYPES

Companies around the world provide BPO services to other organizations, BPO
can be divided into different types based on the service provider's location and
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specialized function. There are three types of BPO: offshore, onshore, and nearshore.
The table below illustrates how these types are differentiated.

Organizations are prone to use any or all of these types, depending on their
needs and the BPO initiative being implemented. In some cases, firms use a
combination of types to achieve their objectives. The following sections look at each
BPO type in more detail.

TYPE LOCATION FUNCTIONS

Offshore India Manufacturing
China Programming
Philippines Financial Analysis
Russia Call Center
Nearshore Mexico Manufacturing
Canada Call Center
Central America
Latin America
Onshore U.S.A HR Administration
Call Center

Offshore

Offshore is a type of BPO that outsourcing work to a far-away foreign country.

This type of BPO is the most challenging type of approach to conducting business but
potentially the most rewarding. It began with the movement of factory jobs to the
overseas location and has been made both popular and infamous with stories of
suddenly prosperous geographic regions mixed with stories of exploitative labor
practices. These manufacturing plants/ factories can be found in Vietnam, India, China,
and elsewhere have active criticism for American companies, including Nike, Apple, and
IBM. Despite the criticism at some companies, they still outsource business processes
and functions overseas, the advantages of doing so continue to overweight the
disadvantages.

Filipino workforce is efficiently known in offshoring. Accenture is one of the

successful offshoring ventures in the Philippines and have 39.6 billion USD revenue as
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of 2018. Accenture is a global services and consulting company, the first company to
establish business process outsourcing in the Philippines. They currently offers five
business services: Accenture Strategy, Accenture Consulting, Accenture Digital,
Accenture Technology, and Accenture Operations. They serves clients from more than
200 cities in 120 counties.

Nearshore

Nearshore is the outsourcing of business processes, especially information

technology processes, to companies in a nearby country, often sharing a border with
the target country. Nearshore outsourcing allows companies to test the BPO waters
without the level of risk associated with going offshore. Firms that go with a nearshore
strategy are often seeking cost savings, but they are also occasionally able to find best-
in-class providers of the services they need.

An example of nearshoring is nearshoring manufacturing, it entails the action of

moving some manufacturing operations to a nearby country to cut costs, benefit from
better shipping, etc. For instance, Ford Motor Co. is one of the many brands in the US
that has moved its manufacturing to Mexico.

Onshore

Onshoring is the exact opposite of Offshoring, it refers to the relocation of

business processes to a lower-cost location inside the national borders. Functions and
processes are often located near the customers, this is often the case with big clients,
as close proximity may a condition of the working agreement. 

 An example could be suppliers of the automotive industry and manufacturing

industry. Working in close proximity (often directly next to the factory premises of their
customers) allows a business to provide the quickest possible service, one that is
tailored to suit their market needs and therefore supply customers based on the just-in-
time principle.

SUMMARY
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 Business process outsourcing (BPO) is simply the movement of business

processes to the highest-skill/lowest-cost provider.
 There are talent hot spots around the world, including India, China, Mexico, the
Philippines, and the United States.
 BPO is a socio-technical revolution in that it is both a social shifting of jobs and a
technology-based method of doing so.
 BPO is an emergent phenomenon to the extent that it is a result of several
driving factors, none of which was intended to create the potential for BPO.
 There are six primary driving factors of the BPO revolution: educational
attainment, broadband, data storage, analytic software, Internet security, and
business specialization.
 There are three types of BPO: offshore, onshore, and nearshore.
 A BPO initiative requires both technical and nontechnical managers in order to
implement it properly.
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countries-for-outsourcing-bpo-in-2020

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services/220414/
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We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program.

Follow. (2011, May 24). Business Process Outsourcing. Retrieved December 17,
2020, from https://www.slideshare.net/WelingkarDLP/introduction-to-bpo

What is Nearshore Outsourcing?: BPO Glossary. (2019, August 07). Retrieved

December 17, 2020, from
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What is the Definition of OLAP? OLAP Definition. (n.d.). Retrieved December 17, 2020,
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