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Academic year: 2010-11 BHARATI COLLEGE Teacher Incharge: Mrs. Hari Krishani Mentor: Mrs. Krishna Singhal Submitted by: Payal Uppal Roll No.: 595
The project is based on my understanding of the subject and has not been copied from any published source or website. hereby declare that I have completed my project titled “Business Process Outsourcing(BPO)” in the academic year 2010-11. a student of Bharati College. Roll No-595.Com (H) Second Year. Payal Uppal.Declaration I. pursuing B. ___________________ Signature of the student (Payal Uppal) 2 .
Also. Hari Krishani and Mentor.Mrs. I would like to thank my parents and friends who provided me unstinted support and invaluable suggestions for the improvement of the project.Acknowledgements I am grateful to the University of Delhi for providing its students a valuable opportunity to widen their knowledge and research on a topic of their choice. 3 . Krishna Singhal for the encouragement. which she took in answering my queries. Mrs. I extend my sincere thanks to my Teacher incharge. guidance and time invested with me for the development of my project. I feel highly obliged for the efforts.
10. No. 5. 7. 9. 4. 8. 2. Particulars Concept Of Business Process Outsourcing The Outsourcing Guide Benefits Of Business Process Outsourcing Disadvantages of BPO Why Outsource Outsourcing of different types Services Key Factors in successfully outsourcing Business Process Business Process Outsourcing in India – Government Support SWOT on India’s BPO Industry References Page No.Table Of Contents S. 5 6 7 7 8 8 9 10 11 12 4 . 6. 3. 1.
In an outsourcing agreement there are two parties-the client company or outsourced which want to outsource a business process.K. Finance and accounting services. train and pay workers on permanent basis to undertake non-core. routine jobs. payroll services. it can save costs on employee benefits and free its existing staff for other duties.The idea of business process outsourcing originated from the theory of core competence suggested by C. controls and provides the service to the company. and advertising services are some of the business processes and functions which are outsourced. By contracting out activities in which a business firm does not have expertise. who then owns and manages the selected business process based on defined measures of performance. It involves delegation of one or more business processes to an external provider. it encompasses the overall responsibility and day-to-day administration. processes or functions. deliver and operate one or more business activities. Also known as Business Process Outsourcing (BPO). in 1889. Business process outsourcing may be defined as “the contracting out of a company’s in-house function to a preferred vendor with a high quality level in a particular task area”. Outsourcing enables a company to concentrate on its core activities by contracting out non-core and routine activities to outsiders. a corporation has to get non core functions performed by outside agencies. CONCEPT OF BUSINESS PROCESS OUTSOURCING To outsource means to engage the services of an outside agency to manage. operation and management of one or more supporting business processes. if 5 . It means having an external vendor who provides on recurring basis a service that would normally be performed within the organization. outsourcing implies the transfer of an enterprise’s non-core business process to an external provider. recruitment selection and training of human resources. Prahlad. “BPO is the delegation of one or more IT enabled business processes to a third party that owns. For example. In order to utilize its strengths and resources fully for its core competencies. administers and manages the business processes according to a defined set of metrics”. The term ‘outsourcing’ was coined by Eastman Kodak Inc. According to this theory a business enterprise should identify the areas of its core competence and focus only on them. manages. There is no need for the company to recruit. and the vendor or external provider which designs. According to Gartner.
What is a good starting point for an outsourcing programme? The sensible approach is to start small. For instance. or outsourcer. Are there enough external service providers available in the market? It’s fairly intuitive: the more providers there are in the market. Are you building a relationship for the long term? Don’t look at it from a one-to-two-year perspective. prepare and release advertisements on its behalf. Most organizations tend to be uncomfortable with the idea of losing control over their operations. Reliance is the client company which outsources advertising service and ABC Advertising is the vendor or external provider. make sure the outsourcer truly understands the products and markets served by your firm. 3. Are you convinced about the quality? Ensure that the quality of service offered by the provider is at least better than what you already had in-house. you could be running a hospital reputed for its heart surgeries. 2.Reliance Industries Ltd. 1. That’s easier than done. 5. the service provider probably isn’t leveraging scale or may be your in-house costs are lower. 6. THE OUTSOURCING GUIDE (OR WHAT TO CONSIDER BEFORE YOU TAKE THE LEAP) You have to be alert to at least three things: selection of the right activities to outsource. identification of the right supplier of services and the right governance approach (service legal agreements) for the relationship. The Outsourcing pyramid 6 . 4. Now since payroll and IT aren’t among your core areas. Plan for the long term. Besides. outsource these first. it also allows you the option to switch. Are you getting the benefits of scale economies? Outsourcing offers sustained cost savings by aggregating the business from different clients. To reduce the anxiety levels. Is your corporate culture ready for it? Outsourcing demands a high level of trust and a spirit of partnership. See whether the outsourcer can grow with you in case you expand operations or of global. So if it doesn’t work out cheaper. Wants to outsource advertising service for its ‘Vimal’ brand of clothing and it appoints ABC Advertising to design. Check to see if its systems and people can be scaled up quickly. Scrutinize the service providers’ track record and speak to a few of his clients. the better position you are in for negotiating a deal. if the need arises. Here’s quick checklist.
Division of labour and greater specialization helps to maximize productivity and profits. but the processes are still routine. The company is free to terminate or review the contract depending on the quality. physical and financial resources. every function is performed by the organization mist competent to do it. Freedom of choice: The Company can choose the best outsourcing agency. It can make better use of its human. reliability and efficiency of services offered by the agency. Level 2: Moves into areas where company can gain strategic initiatives and skill levels get higher. 5. 7. Economic Progress: Due to outsourcing. fleet management etc. Convenience: The firm is saved the problem of hiring and maintaining labour force for jobs that can be hired to outsiders. 2. Therefore charges paid to outsourcing agent will be much less than what the enterprise would itself spend on the performance of routine activities and functions. These include pay-roll and HR administration. Less Investment: The firm need not invest money in creating and maintaining systems for routine and non-core activities. The areas would include management and R & D. Reduction in cost: Outsourcing agencies are specialist in their activities. Therefore it can focus on matters which are more crucial to its success. security.Focus on key functions: Outsourcing enables an enterprise to concentrate its time and efforts on its key activities.” 7 . BENEFITS OF BUSINESS PROCESS OUTSOURCING 1. The enterprise is freed from performing routine and non-core activities. This is the cost reduction phase where the company gains no strategic initiative. 6. Specialization: The outsourcing agent provides expert advice and assistance to the client company for better management of concerned functions.Level 1: The commodity level. Outsourcing contributes to economic growth by enabling everyone to utilize his potential to the maximum. DISADVANTAGES OF BPO 1. 3. Level 3: At this level. They can perform the same job at a lower cost. Skill level needed are basic as the processes outsourced are catering.Hampers confidentiality: There is always a risk of information being leaked out to competitors. the outsourced processes require high level of skills and can directly affect bottom lines. 4. It can have outsourcing contract with the agency for a limited period.
Financial Services: Outsourcing service providers may be hired for maintaining books of accounts. When a company needs to raise finance by way of issue of shares and debentures. Sweat Shopping: The outsourced may be accused of unfair labour practice because the outsourcer indulges in exploitation of labour in his own country. which is one of the biggest costs of running ATMs. have the expertise needed to manage a complex network of ATMs. for raising debts and other financial activities. especially the smaller ones. diagnostics and ATM knowledge as technology evolves. Potential Competition: The outsourcer may start business in competition with the outsourcee due to outsourcing over a period of time. 4. Expertise: Not all banks. expert valuers are required.2. They are experts in advertising and outsourcing advertising services to them provides benefits of specialization to business firms. arrange space and time for advertising and produce advertisements. 4. 3. Merchant banks. the outsourcer may employ child labour and women on low wages. for issue of securities. issuing houses and investment banks provide financial services to business enterprises. Advertising Services: Advertising service is generally outsourced. when a company wants to takeover another company or when two companies want to merge together. These agencies design the advertising copy. Business firms hire advertising agencies to design and carry out advertising campaigns for them. Some of these services are given below: 1. OUTSOURCING OF DIFFERENT TYPES OF SERVICES A wide variety of routine activities and services can be outsourced. WHY OUTSOURCE 1. Upgrades: A service provider is able to provide state-of-the-art tools. 8 . Costs: Better cost management lowers currency-carrying costs. several formalities have to be performed. 3. 2. Resentment: Outsourced may have to face resentment in his own country because people feel hat outsourcing is reducing job opportunities for the local citizens. 2. Service: Round the clock and remote monitoring helps minimize outages and thus provide better customer service. For example. These formalities are cumbersome and require specialized knowledge and skills. Similarly.
both revert and penalties. They are doing brisk business. etc. 3. Business firms hire couriers to send letters. Large companies may have their own customer support service departments. Couriers carry letters and parcels at low charges and deliver them more quickly and safely than post office.3. television sets. Alternatively. and can determine the cost savings of outsourcing over a specific time period. employee welfare services (E. Outsourcing is a measure undertaking that benefits from careful advanced planning. the time period to close the books etc. they may outsource customer support services to outside agencies. Thoroughly analyze your process so you know your cost. and so that the expectations of both parties are clear. Have measurable performance objectives.g. payroll administration. 5. are required to provide after sale services to their customers. 2. 4. air conditioners. Prompt. courteous and effective after sale services is essential for survival and growth of business in this competitive world. These agencies are experts and can ensure complete customer satisfaction and theory enhances the goodwill of the client companies. A large number of courier service firms have come up in big cities and towns. Defines roles and responsibilities in the outsourcing partnership.The speed of transactions. Courier Services: Courier Service is essentially postal service provided by private firms. KEY FACTORS IN SUCCESSFULLY OUTSOURCING A BUSINESS PROCESS 1. orientation and training. 9 . Couriers offer desk-to-desk service under which the articles to be dispatched are picked up from the sender’s place and delivered to the receiver’s place. for meeting those objectives. so there are no surprises. transport and food for the staff) are examples of such services. Develop a detailed transitions plan to ensure a smooth hands off. documents and samples of products from one place to another. Customer Support Services: Producers and sellers of durable house-hold products such as washing machine. 4.and establish performance incentives. Human Resource Services: Several services concerning employees are now-a-days outsourced. Recruitment and selection.
Later as their confidence grew. so there is an annual review of an outsourcer’s performance. Spectramind are some of the example of India a BPO firms which have moved up the value chain. therefore. they started trusting more valuable functions like payable accounting. Tracanail. 6.Resolution process to handle issues as they arise. The trend was started in India by GE when it setup its facility in Gurgaon in the end 1990s. Wipro.5. Establish a clear disputes. India has emerged as a measure hub for back office operations. Monitor results for continues improvement. Swissair and British airways have centres at run frequent fliers programs out of India. Apicentre. This makes for smoother operation and does not make every issue a contractual or legal problem. EXL service in noida handles underwriting insurance and claims processing functions on behalf of Conseco (USA). American Express. For example. BPO is accelerating quite fast in India. Small companies are gobbled up by large players from outside. Daksh. Satyam and HCL technologies have entered BPO operations. It has setup a third facility at Bangalore.GOVERNMENT SUPPORT Business process outsourcing is progressing quite fast in India. Large firms are consolidating their businesses. India has low cost but highly qualified English speaking labour. Indian business process outsourcing and call centres and IT enabled services are coming of age. While MNCs still dominate the outsourcing scene in India. and human resource development to Indian firms. Citi Bank standard Chatered also have BPO operations in India. several Indian firms have now started playing a roll. customer care. Initially only a few corporations in the United States and Europe outsourced small relatively low grade jobs like storage of old records. The main drivers of outsourcing 10 . BUSINES PROCESS OUTSOURCING IN INDIA. HSBC. It also handles significant bank office operation for three other clients are mortgage bank. Today it has over 6500 seats in two centres Hyderabad and gurgaon and employs over 12000 peoples. The first companies to start experimenting with India as an outsourcing base were multinationals who started company owned back office operations and call centres. Infosys. Arrange long term contracts on a yearly renewal basis. and e-tailor and a consulting firm. Very soon they began outsourcing far more complex functions from India. BPO industries are in transition.
Duty free imports of capital goods (under the export promotion of capital goods scheme) For BPO sector have been permitted. Under the Income-tax act. exemptions has been allowed on several IT enabled products and services. technology and reliability. Companies are scaling up. These parks also provide single legal window clearance for all regulatory procedures and formalities. 4. looking at technology. Government of India has promoted several Software Technology Parks (STPs) which offer ready-to-plug IT and telecom infrastructure. 5. Government of India removed various procedural bottlenecks that were hampering the growth of BPO. 2. software solutions) market by 2010 WEAKNESS -Manpower shortage -Local infrastructure -Political opposition from developed countries THREATS -Competition from other low cost destinations -Slowdown of demand 11 . The Indian software and in service industry under the leadership of the National Association of Software and Service Companies (NASSCOM) has also taken several steps to make India a global huge for outsourcing. Foreign direct investment up to 100 percent of the equity has been permitted in BPO companies. Government of India has announced several policy initiatives and concessions to encourage the growth of the IT enabled outsourcing sector. 3. In view of the vital role of BPO. STPs have been established in most measure cities across the country. Some of the steps taken by the Government and the industry for BPO are given below: 1. quality. SWOT OF INDIA’S BPO INDUSTRY STRENGTHS -Abundant manpower -Operational excellence -Conducive business environment OPPORTUNITIES -$69 billion ITES business by 2010 -$97. tie-ups and quality certifications.are cost.5 billion IT (consulting. On the recommendations of NASSCOM.
REFERENCES 12 .
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