BUSINESS PROCESS OUTSOURCING

Introduction of Business Process Outsourcing:-

Business process outsourcing is an agreement in which one company hires another
company to be responsible for a planned or existing activity that is or could be done internally,
and sometimes involves transferring employees and asset from one company to another. The
terms outsourcing which can came from the phrase outside resourcing. In simple word we can
say that outsourcing is also the practice of handling over control of public service to private
enterprises, It also includes both foreign and domestic contracting. In domestic there is some
terminology use as outsourcing include Offshoring which mean relocating its operational
process from one country to another country which has taxable relief or other such suitable
environment which is favorable for its operations. And another one is also used commonly is
Near shoring it mean transferring its operation to nearby country. Another one is Farm shoring
it refer to USA rural located country and the last one is Home shoring it is a form of IT enabled
transfer of service industry employment from offices to home based with appropriate telephone
and internet facilities. We can say that an intermediary is when a business provides a contract
service to another organization while contracting out that same services. As we talk about
business process outsourcing is to do anything which is used to satisfying the need and wants of
whole society ,to fulfill those needs and wants company take helps from another company, either
domestic region organization or international does not matter its provide services or
manufacturing industry. In real world businesses have to face lot of challenges ,due to
competition environment and every individual want better living standard, best product and
services to improve its living standard ,so in modern era business have to give its product to its
customer at lowest prices and high quality product to remain persist in challenges economy.
When the business can not meets that quality which customer want at that price then they
decided to buy that part from another company .Business process outsourcing is a contracting
out of a company noncore non revenue producing activities to specialist. It differ from
contracting in that outsourcing is a strategic management tool that involve the reconstructing of
an organization around what it does best of its core competencies. Three common types of
outsourcing which is used by company in our country these are Information Technology
Outsourcing, Business Process outsourcing and Legal Process outsourcing. Business Process
Outsourcing relates to the accounting, human resources, benefits, payroll and finance functions
and activities. All these activity fall under broad category of Knowledge process outsourcing. In
Pakistan there is most competitive and popular IT outsourcing destination in the world tops
tanking of outsourcing report, and China is in second position. Global outsourcing index is a
necessary and effective tools that offer a business community a baseline. It is a first milestone
process that should give a business and corporate communities a road map to right outsourcing
process. International whiteboards offer all the relevant information about specific countries,
their relative advantages and the specific resources capabilities. It is sub contracting process
such as product design or manufacturing, to a third party company. The decision of outsourcing
is often made in a interest of lowest price or making better use of time and energy cost
redirecting or conversing energy directed at the competencies of business or to make more
efficient use of land, labour, capital and information technology resource.
 Outsourcing become part of business lexicon during 1980s.It is essentially a division of labor.
The Economist says made its presence felt since the time of the Second World War, often
involves the contracting of a business process either operational or non- core functions, such as
manufacturing, call center support. Business process outsourcing contain s the transmission of
process along with the related operational activities and responsibilities, to third party with at
least a guaranteed the same service level and where the client contains a firm grip over the
behavior of the vendor for mutual long term success .It is positively associated to the search for
more efficient organizational design to cost decrease and productivity increase and innovation
capabilities. Normally business process outsourcing is undertaken by developed firms. Standing
on the shoulder of s of the innovation time, a new generation of the times, a new generation of
visionaries has leaped ahead. Companies are often drawn to BPO because it affords them
greater operational flexibility. By outsourcing non-core and administrative functions, companies
can reallocate time and resources to core competencies like customer relations and product
leadership, which ultimately results in advantages over competing businesses in its industry.BPO
offers businesses access to innovative technological resources that they might not otherwise have
exposure to. BPO partners and companies constantly strive to improve their processes by
adopting the most recent technologies and practices. Although BPO originally applied solely to
manufacturing entities, such as soft drink manufacturers that outsourced large segments of their
supply chains, BPO now applies to the outsourcing of services, as well.

Business Process Outsourcing Defined:-

Business process outsourcing is defined simply as a movement of

business process from inside the organization to external service provider. With the global
telecommunication infrastructure now well established and consistently reliable, Business
process outsourcing initiative often include shifting work to international providers.

“Business process outsourcing is a form of outsourcing which involve the

contracting of operations and responsibilities of a specific business function to a specific
service provider”.

“Business process outsourcing (BPO) is a method of subcontracting various

business-related operations to third-party vendors”

“There are two contrasting views of the outsourcing market, one emphasizing the
core competencies perspective and the other adopting a cost discipline views. But both views
agree that in order to be competitive companies need to outsource”

The breadth of a business' BPO options depends on whether it contracts its operations within or
outside the borders of its home country. BPO is deemed "offshore outsourcing" if the contract is
sent to another country where there is political stability, lower labor costs, and/or tax savings.
Outsourcing your non-core activities will give you more time to concentrate on your core
business processes. Offshoring can give you access to professional, expert and high-quality
services. With outsourcing your organization can experience increased efficiency and
productivity in non-core business processes. Outsourcing can help you streamline your business
operations. Offshore outsourcing can help you save on time, effort, manpower, operating costs
and training costs amongst others. Outsourcing can make your organization more flexible to
change.You can experience an increased control of your business with outsourcing.Your
organization can save on investing in the latest technology, software and infrastructure as your
outsourcing partner would be investing in these.Outsourcing can give you assurance that your
business processes are being carried out efficiently, proficiently and within a fast turnaround
time. Offshoring can help your organization save on capital expenditures.By outsourcing, your
company can save on management problems as your offshore partner will be managing the team
who does your work.By outsourcing, you can cater to the new and challenging demands of your
customers.Outsourcing can help your organization to free up its cash flow • Sharing your
business risks is possible with outsourcing.Outsourcing can give your business a competitive
advantage as you will be able to increase productivity in all the areas of your
business,Outsourcing can help your organization to cut is operational costs to more than half

Business Process Outsourcing With the Help Of Diadram:-

Element Of Business Process Outsourcing
Business Process Outsourcing in today's world is seen as a strategic management
option rather than just a way to cut costs. It helps achieve the companies their business
objectives through operational excellence and an edge in the market place. The following is a
chart manifesting the elements of BPO that can be outsourced: Every company today, has one or
more of its services outsourced so that it can focus more on its core competencies. Outsourcing's
emerging power as a business tool of unique versatility and flexibility is undoubted. Resources of
the companies need to be focused on core business functions so the non-core functions need to be
outsourced. Outsourcing gives you the right combination of people, processes and technology to
operate effectively in the Global market place without burdening your time and budget. This is
the reason why more and more companies are showing interest in outsourcing there activities to
various offshore locations. With the cost to bring a product from development to market having
increased significantly, outsourcing is seen as a potential savior. Two prime factors come into
play when searching for a reliable outsourcing provider: quality and price.
Types of Outsourcing
There are two primary types of BPO: back office and front office outsourcing.
Typical back office processes that may be outsourced include payroll, billing, logistics
and human resources. Some companies offer their services in collections, credit analysis and job
recruitment. More than ever, processes that one would never think would be outsourced, such as
claims processing at an insurance company, are being outsourced to separate companies.
Examples of front office outsourcing include technical support, customer service, marketing and
advertising

Offshouring Business Process organization

Offshore outsourcing is the practice of hiring an external organization to
perform some or all business functions in a country other than the one where the product or
service will be sold or consumed. It can be contrasted with off shoring, in which the functions
are performed in a foreign country, whether by the foreign subsidiary of the same company or a
third-party. Opponents point out that this sends work to other countries than the one the
opponents live in, thereby reducing domestic employment and domestic investment in the
countries which, because of higher wages, are subject to outsourcing by countries with lower
wages. Many jobs in the InfoTech sectors - such as data entry, computer programming, and
customer support in countries such as the United States and the United Kingdom have been or
are potentially affected.

The general criteria for a job to be offshore-able are:

 The job does not require direct customer interaction.

 There is a significant wage difference between the original and offshore countries.

 The work has high information content.

 The work can be transmitted over the internet.

 The work is easy to set up.

 The work is repeatable.

The driving factor behind this development has been the need to cut costs while
the enabling factor has been the global electronic internet network that allows digital data
to be accessed and shipped instantly, from and to almost anywhere in the world.
 Impact of Offshoring on Economy

The impact of offshoring on economy give organization an opportunity to think

about what they are stepping in to, However the disadvantages of outsourcing are less than
advantages of offshore outsourcing. When outsourcing you might not experience any
disadvantages of outsourcing of offshoring,if you find a reliable outsourcing partner. Before
outsourcing take the interest of your customer and employees in to consideration and then make
an informed decision.

Nearshore Business process Outsourcing

Many top corporate, who have adopted outsourcing and have enjoyed the benefits, are
slowly finding out the advantages of an upcoming concept of Nearshore Outsourcing. Near-
shore Outsourcing is the practice of outsourcing work to neighboring countries rather than
outsourcing them to far off countries.

For Example

Many companies in the US outsource work to Canada and Mexico.

Geographic proximity means that travel and communication is easier and less expensive,
there are likely to be more similarities between the cultures, and people are more likely
to speak the same language. This makes the outsourcing process easier.

Reasons for Outsourcing

A company may utilize business process outsourcing due to cost considerations, or

simply because they do not have the expertise to deal with certain aspects of business. Many
companies have come under criticism for using Business Process outsourcing to cut costs,
especially in regards to call centers.
Companies in western countries, particularly the United States, are finding that countries like
India offer the services they need at an excellent price. This is due to the fact that many of these
countries have a well educated labor pool, high unemployment rates and a low cost of living. In
India, which had approximately 63% of the offshore Business Process Outsourcing market in
2006, labor is cheap, and employees are sometimes better educated than higher-paid workers in
the US."
Benefit Of Business Process OutSourcing :-
 Strategy to Eliminate Noncore Functions
 Organizational Culture
 Technological Innovation
 Improve Human Resource
 Favorable environment
 Reduction in Operational cost
 Optimum Utilization Of Resources
 Competitive edge
 Productivity Improvement

Drawback of Business process Outsourcing:-

 Security Breaches
 Relationship Challenges (Communication)
 Degree of Independence

Effect of Business Process Outsourcing on Economy:-

 Unemployment within Economy

 Effect on small Business.

The Outsourcing market is growing tremendously in the coming few with increasing
years with an increasing advantage as discussed below:-

 Strategy to Eliminate non course Function (BPO)

Outsourcing your non-core activities will give you more time to
concentrate on your core business processes. Efficient business strategy is essential to
take the business to the top. Outsourcing enables the top management level to hand over
critical but non-core activities of the business to the third party. This facilitates top
management level to concentrate on the core activities. Every organization limits on the
resources available to it. Outsourcing permits an organization to redirect its resources
from non-core activities toward building knowledge sets with long-term pay back and
impact on innovation. The constant challenge is to ensure that its limited resources are
expended in the most valuable areas. Outsourcing permits an organization to redirect its
resources from non-core activities toward activities that have the greater return in
serving the customer. Most often, the resources redirected through outsourcing are
people resources. By outsourcing non-core functions, the organization can redirect these
people, or at least the staff slots they represent, onto greater value-adding activities. In
rapid growth periods, the back-office operations of a company will expand also. This
expansion may start to consume resources (human and financial) at the expense of the
core activities that have made your company successful. Outsourcing those activities will
allow refocusing on those business activities that are important without sacrificing
quality or service in the back-office. With outsourcing your organization can experience
increased efficiency and productivity in non-core business processes

 Organizational Culture

Long working hours and pressure to meet deadlines and achieve targets takes
its toll on the well being of the employees. Quality Business Process Outsoucings offer
world class channels to de-stress employees and to motivate them. Entertaining events
and parties are organized at regular intervals so that the employees are relieved and
invigorated to take the challenges head on. World-class Business Process Outsourcings
also have gym, sports and café facilities. Business Process Outsourcing employees work
hard to meet deadlines and targets. Motivation is a great booster when it comes to
delivering high end results. So to ensure that the team is motivated, team leads and
managers keep the morale of the employees high through encouraging words. Good and
outstanding work is always recognized and rewarded in the form of perks, incentives, gift
certificates, etc. in the BPO sector. At no point in time the employees feel the dearth of
guidance and warmth of encouraging words.A special significance must be attached to
change management and cultural issues and for this purpose, alignment of all functions,
businesses, levels and regional operations with the long-term outsourcing strategy has to
be ensured. Employees must be specially made aware of the importance the company
gives to the renewed goals. Importance of this task is realized by most of the
organizations, however, only a few are able to transform it from theory to practice.

 Productivity Improvement

Outsourcing lets the company focus on broader business issues while having
operational details assumed by an outside expert. For many companies, the single most
compelling reason for outsourcing is that several of the `how' type of issues are
siphoning off huge amounts of management's resources, time and attention. Too often,
the resolutions of these issues are stuck in middle management "decision gridlock". This
creates financial and opportunity costs that affect the organization's future. Outsourcing
can enable an organization to accelerate its growth and success through expanded
investment in the areas, which offer it the greatest competitive advantage BPO enables to
the corporate executive to concentrate upon core business areas. Conventionally
executives spend more time in management of details and they get very little time to
formulate strategies. Business Process Outsourcing saves time and helps the executives
to explore new revenue areas, accelerate other projects and focus on their customers.
This leads to improvement in the productivity. Better educated or skilled people perform
the task efficiently and thus improve productivity. Periods of high employee turnover will
add uncertainty and inconsistency to the operations. Outsourcing will provided a level of
continuity to the company while reducing the risk that a substandard level of operation
would bring to the company.

Example:
The human resource manager is on an extended medical leave and the two
administrative assistants leave for new jobs in a very short period of time. Outsourcing
the human resource function would reduce the risk and allow the company to keep
operating.

 Technological Innovation
Technology is the leading area of outsourcing. It makes much of the work of
modern organisation easy. Investing in new technology is very costly and often risky. As
the technology market develops rapidly, it is difficult to keep pace with the latest
innovations and solutions. Thus outsourcing to companies that have the resources,
expertise and desire to continuously update their technological solutions, offers a true
advantage of outsourcing. By the very nature of their specialization, outsourcing
providers bring extensive worldwide, world-class resources to meeting the needs of their
customers. Partnering with an organization with world-class capabilities can offer:
access to new technology, tools, and techniques that the organization may not currently
possess; better career opportunities for personnel who transition to the outsourcing
provider; more structured methodologies, procedures, and documentation; competitive
advantage through expanded skills. Today, customer expectations and preferences can
shift at the speed of a mouse click. The specialized capabilities of an outside expert are
increasingly important in building that next generation solution. As an executive from
Home Depot put it, "If we don't look at what everybody else is doing out there we'll
become complacent, we'll become less innovative." An opportunity has been unlocked by
the new technologies to work from one state to the other side of the globe as if it was on
the same stage. An entire world of services is at our disposal today. A corporation can
nowadays work with anybody on the planet to carry out its business practices and
expansions regardless of its geographical location, its volume or its main business area
 Improve Human Resource
Improved Human Resource is another great advantage of outsourcing
business processes. Cost effective manpower is yet another important factor of
importance in business process outsourcing. Companies today, require productive and
efficient human resource that can generate economies of scale. Due to outsourcing
business can save Human resource cost, depending on their priorities. Outsourcing gives
a company the ability to get access to skilled and trained man power at extremely low
rates. A large project needs to be undertaken that requires skills that your staff does not
possess. Onsite outsourcing of the project will bring people with the skills you need into
your company. Your people can work alongside of them to acquire the new skill set.
"BPOs have a vibrant environment. Generally the interiors are also done up in a way
that it makes people feel nice and energetic. This glamorous industry also involves a lot
of hard work and specialized skills to deal with all kind of customers. 24X7 work
environment: BPOs have a round the clock working culture and people work in day and
night shifts. This is because International Business Process Outsourcings offer services to
countries like US and UK that have different time zones. Perfect amalgamation: The
work culture in quality Business Process Outsourcings is a blend of professionalism and
friendliness. Humans are not treated like machines but are given equal opportunities of
growth in every sphere of learning. Business Process Outsourcings create a friendly
working atmosphere so that the employees don’t feel suffocated."

Example:

A company needs to embark on a replacement/upgrade project on a variety of

custom built equipment. Your engineers do not have the skills required to design new and
upgraded equipment. Outsourcing this project and requiring the outsourced engineers to
work on-site will allow your engineers to acquire a new skill set.

 Tax Benefit
Credit institutions need to develop customized norms for the business
process organisation industry. The availability of risk capital needs to be enhanced in
early stage ventures. Third party hosted infrastructure companies business process
organisation should be eligible to favorable tax treatment afforded to the
infrastructure
 Reduction in Operating cost
The single most important tactical reason for outsourcing is to reduce
or control operating costs. Access to the outside provider's lower cost structure is one
of the most compelling short-term benefits of outsourcing. This access to the outside
provider's lower cost structure, may be the result of greater economy of scale or some
other advantage based on specialization, it is clearly and simply one of the most
compelling tactical reasons for outsourcing. In addition, companies that try to do
everything themselves may incur vastly higher research, development, marketing,
production and employment expenses - expenses that have to be passed onto the
ultimate customer. Today's customers are too sophisticated to accept the costs
associated with an organization's attempts to maintain singular control over all its
resources. Cost savings can be significant to any business. Business process
outsourcing not only helps in reducing cost but also increase productivity and raise
revenue significantly. Cost reduction is possible through process improvements,
reengineering, and use of technologies that reduce and bring administrative and
other costs under control. Outsourcing helps the company maintain lower rates with
better service solutions, thereby giving them a better market position and even a
competitive advantage.

 Optimum Utilization Of Resources

Business Process Organization enables optimum utilisation of

resources of scarce resources. Outsourcing helps to capture new efficiencies and
reallocate the resources. This increases the efficiency and productivity. Availability of
skilled employees and adoption of sophisticated technologies leads to utilisation of
resources and productivity.

 Canter to changing customer demand

It is another great advantage of outsourcing the business processes. Many

Business Process Organizations provide the management with flexible services to
meet the customers’ changing requirements, and to support company acquisitions,
consolidations, and joint ventures.Successful organizations listen to customers’ needs
and desires for special features, a more intuitive user experience or simply better
customer service, and react quickly to get new products out to market. But in an age
of disruptive innovation, is it simply enough to put customers’ needs first. The most
innovative companies aren’t just focused on the customer’s needs right now; they’re
solving the larger problems they will face in the near future and completely
disrupting the market in the process.
 Consider the famous quote attributed to Henry Ford: “If I’d asked customers what
they wanted, they would have said faster horses.” Ford thought differently about the
customer’s needs and desires, an approach which inspired a disruptive innovation.
By thinking about its customers’ future needs rather than just focusing on their
current wants new features, faster customer service

 Competative Edge
"People from every nook and corner of the world are lured by the state-of-the-art
facilities and hefty pay packages. Apart from the culture shock there is a gold
mine prospect of rubbing shoulders with people from different educational,
professional and cultural backgrounds."Employees also need continuous
motivation and there are very few companies that understand this fact. Moreover,
to stay in this business for a long period of time every company should imbibe the
best practices of the company among its employees. In addition many employees
have no idea about the goals and visions of their companies. A failure to adopt an
alternative perspective on what customers want will leave companies vulnerable
to disruption by a competitor who is thinking differently, and a few steps ahead

If you want your organization to stay ahead of competition, concentrate on core

competencies and make use of the latest technologies, then outsourcing can help your
organization achieve all this and more. In outsourcing, the advantages of outsourcing are more
than the disadvantages of outsourcing. The pros of outsourcing have driven more organization to
step into offshoring and experience the benefits that it has to off

Drawback Of Business Process Outsourcing

Their can be several drawbacks of Business process outsourcing ,such as
renewing contract,misunderstanding of the contact,lack of communication,poor quality
and delayed services amongst other.Few of them are discuss below,

 Critisim on Business Process Outsourcing

The roll of corporations that have commenced endeavors in business process
outsourcing (BPO) and offshoring raises on a daily basis. Many of these
businesses, though, are ordained for disenchantment. A research conducted by
The Boston Consulting Group reveals that approximately half of the corporations
that take on BPO and offshoring will have unfavorable outcomes. To add insult to
the injury, a small number of of them will be able to identify where they went off
 beam or what to do about that,At times ,it is more cost effective to conduct a
particular business process rather than outsourcing it.The employee in your
organization might not like the idea of you outsourcing your process and they
might express lack of interest or lack of quality at work.Outsourcing .through cost
effective might have hidden costs ,such as the legal costs incurred while signing a
contract between companies.you might also have to spend a lot of time and effort
in getting the contract signed.

 Security Breaches
Outsourcing service such as payroll processing service and tax
preparation services your outsourcing providing will be able to see your company
information and hence is a threat to security and confidentiality in outsourcing.As
with most security-related initiatives, the first task is to get a handle on what you
need to secure. This means creating an inventory of applications that are being
developed or maintained by an outsourcing provider. This will require not only
talking to the procurement team, but also each business unit, because application
sprawl can easily occur when individual groups or departments bypass the
approved procurement processes in order to get a new project or idea off the
ground.Each identified application should undergo a risk assessment to
understand the risks it poses to the business. The application must also be
assigned an assurance level. The assurance level should take into account risk
factors such as financial loss, operational risk, sensitive information disclosure,
reputational damage and regulatory compliance violations. It should also
determine the degree of security testing the application requires, and the
acceptable threshold the application must reach in order to be ready for
deployment. These metrics need to be defined in any new outsourcing contracts,
along with service-level agreements (SLAs), which explicitly define the
organisation's security objectives and requirements as stated in its information
security policy, to supplement the standard clauses covering quality, time and
costs. Also, define the security environment in which the application is to be used
and other resources that could be exposed by a security vulnerability, so everyone
is clear about the potential risks

 Relationship Challenges
Loss of control on offshored operations is an area that clients have traditionally
been concerned of in light of the cultural, administrative and geographic distance between the
client and the service-provider. The anxiety accrues due to two prime factors respondents cite –
perceived inability to influence the quality of the service and the inability to determine what is
going wrong due to inadequate or inaccurate information. The implication of the perceived loss
of control has been on high expectations from service providers and the detailed drafting of
SLA’s with respect to quality controls and communication flows. Although SLA’s encompass all
areas of client and service-provider rights and responsibilities, the expected quality of the
service and the evaluation criteria for measuring the service delivery is the one of the most
critical aspects of the contract. In addition to the traditional metrics of quality such as accuracy
levels, rejection rates, field error rates, turnaround time etc., the role of softer aspects of quality
such as client and end-user satisfaction is being highlighted. This change is being stressed in
light of the maturing drivers of offshoring, moving away from a pure cost-saving objective of one
enhancing overall productivity and quality of service. Although leading service providers invest
continually in quality initiatives such as six sigma, COPC, lean-service models, respondents
foresee that in the years to come, these initiatives will progress from being service differentiators
to ‘must-haves’. To corroborate adherence to the defined quality standards, respondents state
that the role of presenting accurate, consistent and timely information has also become critical.
Dashboard and MIS report structures are defined for each stage of the project clearly specifying
aspects such as frequency, time, content, initiator, participants and medium. In addition,
escalation timelines and levels are specified to insure de-bottling of communication flows. In
terms of operational communications, immense importance is being attached to the
documentation of communication flows between the clients and service providers.By outsourcing
,you might forget to canter to the needs of your valuable customers as your focus will be on the
business process that is outsourced.

 Degree of Indepence

When you being to outsource your business process you might find it difficult the
offshore provider when compared to managing processes with in your
organization.Offshoring can create potential redundancies for your
organization.In case ,your offshore service provider become bank rupt or goes out
of business your organization will have ti immediately move your business
process in house or find another outsourcing provider.your outsourcing provider
might not be only providing service fot your organization ,since your provider
might br catering to thr need of several companies there might be not be complete
devotion to you and your company.In outsourcing you may lose your control over
the process that is outsourced.While outsourcing ,your organization might suffer
from a lack of customer focuses

Business Process Outsourcing Impact of Economy

 Employment Issue with In economy

A part from the above-mentioned advantages, favorable policies of
Indian government are also a huge advantage for foreign companies. Government is
pulling a lot of FDI (foreign direct investment) into the country.

 The liberalization and deregulation initiatives taken by the Indian government are
aimed at supporting growth and integration with the global economy. The reforms
have reduced licensing requirements and made foreign technology accessible.
The reforms have also removed restrictions on investment and made the process
of investment easier.
  The government is actively promoting FDI, investments from NRIs (Nonresident
Pakistani) including Overseas Corporate Bodies (OCB's) owned by the NRIs
 Amendments have also been proposed in the Pakistani Evidence Act, Pakistani
Penal Code and the RBI Act. The mechanism of digital signature has been
proposed to address the issues of jurisdiction, authentication and origination.
 Recognizing the importance of Venture Capital Funding, the Ministry of
Information Technology has set up a National Venture Fund for the Software and
IT Industry with a corpus of Rs.100 crore in association with the Small Industries
Development state Bank and Industrial Development Bank of Pakistan. The aim
of the Fund is to provide Venture Capital to start up software professionals and
IT units in the small-scale sector.

The abundant skilled manpower has made India a target destination for multinationals to back
end their operations in our country. Pakistan ranks high in areas such as qualifications,
capabilities, quality of work, linguistic capabilities and work ethics, and thus is ahead of
competitors such as China, Philippines, Ireland, Australia, Canada, India etc.

 Impact of outsourcing on small businesses

The concept of outsourcing is familiar to most small businesses and
entrepreneurs. When you need assistance, you hire an outside resource to address the
current and or anticipated need(s); this principal works for any number of business
support services such as…

• Payroll;
• Accounting;
• Web Design;
• Human Resources; and
• Tax Return Preparation.
While outsourcing is a key component of the strategic management of most
business, if you are not applying outsourcing tools properly, you are not taking
advantage of effectively managing your business, thus constraining its full potential.
Effective outsourcing allows you to focus on the core competencies you possess and can
employ to build your business, rather than focusing your energy on the day-to-day
managing of it. Is it reasonable for you to be expected to be an be expert at leading your
company toward the strategic vision you established, as well as being skilled in and
responsible for the accounting, employee recruitment and separation, web design, and
the myriad of other support functions your business requires daily, No one can be expert
in every aspect of business. As the leader of your company, it is far better for you to focus
at the strategic level and employ your core strengths and income-generating processes
while assigning responsibility for specific operational areas to outside providers who
excel in their area of expertise. Find the right resource to help you and leverage the
provider’s talent, capacity, and effectiveness to maintain or enhance your operational
functions.
 Outsourcing boomed in the 90’s as a way of addressing the economic crunch, when
companies desperate to save money started hiring less expensive resources overseas to
cut costs. For some companies the strategy worked well, but for many, they may have
gone too far. To this day, clients and customers complain about offshore customer
service centers with poorly trained employees and hard-to-understand accents. Those
functions core to your company’s success should be tightly controlled; such as the type
and quality of customer service you provide your clients or customers. However, the
various parts of your operation that are less visible and minimally impact your clients or
customers, but are no less important to the day-to-day operations of your business, often
can be easily transitioned to an outside resource; such as accounting, HR, and benefits
management

Final Words on Outsourcing

BPO is a breakthrough concept that has entirely changed the way business as usual is
conducted. Geographical distances have shrunk and markets have expanded both for businesses
and individuals. Brain drain, a dilemma for developing countries, has also decreased to an
extent due to abundance of opportunities to the skilled professionals in their homeland.
Outsourcing of business processes has transformed organizational structures, cultures and
processes and employee – employer relationship as a whole. Through this project report, author
has endeavored to inform the reader regarding various dimensions of the BPO concept and
gauged its impact on organizational structure, culture, business processes and motivation of the
workforce, which can be considered asbeing encouraging and promising. BPO is largely
dependent on strong and reliable ICT infrastructure; therefore, government should strengthen IT
and Telecom infrastructure. Given the availability of young and educated human resource,
Pakistan can reap tremendous benefits through this unconventional sector of economy, if it is
ensured that the bottlenecks in its way are removed by improvement of infrastructure

Recommendations
BPO means the ability to do more with less
Business Process Outsourcing is there to cut costs and provide maximum
value per resource consumed. This is the single sentence which delivers the message of
heaves of literature dedicated to the study of Business Process Outsourcing. Every project to
outsource a function must begin and end on this single note and this is the only criteria for
taking on an outsourcing project. There is always a tendency among managers to run after
buzz words but a wise manager will and must think about outsourcing with cost reduction
and performance optimization in his mind.
 Strengthening of Professional Knowledge of BPO
Business Process Organization as a field is so much benign that it is prone to
shakes and brakes; its foundations need to be strengthened by development of specialized
training institutes and special interest groups where experts could exchange their
experiences and newbies may get a clue regarding the essentials of success in this
profession.

Reaping full benefits of the Global Village

The world has indeed turned into a global village where there is no traditional
limitation or bottleneck to production or provision of a service. Outsourcing evolved out of
this very opportunity and doing business across nations simply seems like operating in a
small city or a village to be exact where you are provided limitless options and alternatives
to choose from and that too with added advantage of reduced costs and improved quality. An
organization must do well to reap the maximum benefits offered by this phenomena and must
be continuously on the lookout for such opportunities.

Outsourcing does not only mean working beyond country’s borders

The bottom line for entering into an outsourcing arrangement is to slash costs and
in no way it means that it can only be done by working outside borders of your country or
continent alone. A country’s economy is a combination of unevenly developed areas. For
example in the United States, not all the states or all the cities earn equally or provided equal
economic benefits. There are always areas where there is quality human capital available
and is not utilized. By utilizing such opportunities, outsourcing can still deliver and that too
by keeping the money within the home country’s economy.

Strategic vs. sort-term outsourcing

You never kill a sparrow with a tank. That is true for business environment
as well where there is clear divide between short term and long term outsourcing decisions.
Short term outsourcing decisions are random, less detailed and of a summary nature. Long
term / strategic outsourcing decisions; on the other hand have to be circumspect, detailed
and in-depth with plenty of meetings, paperwork and headache. Company’s mission
statement is viewed and reviewed, cost considerations are analyzed and product / service
portfolio is overhauled. Companies which are able to understand and act accordingly by
keeping these differences in mind usually come out as winners in outsourcing ventures.

Management of Cultural, Language and Political Differences

Business does not operate in a vacuum, it has to respond to and interact with
the cultural elements as well. Language and specifically the accent play an important role
when outsourcing contact centre or call centre operations. European and American
companies were severely hit initially when their services were outsourced to India where a
large chunk of available workforce can communicate in English language but in their own
strange accent altogether foreign to the European or American accent and ignorance of
cultural dimensions such as salutations or other elements of speech which added insult to the
injury and made outsourcing ventures counterproductive. Whereas political turmoil in
countries like Pakistan, Bangladesh and Srilanka have put those countries at a disadvantage
despite their being available a useful English speaking (and that too in right accent)
workforce. Companies have become cautious of these facts however late but it is always
better than never having to become aware of these factors.

Selection of Vendor and Relationship Management

A comprehensive criteria must be developed for hiring the services of
outsourcing vendors keeping in view the company’s strategic financial and operational goals
and in-depth, comprehensive TORs (terms of reference) should be chalked out. So that only
those vendors which meet the requisite criteria are selected and contract is written according
to the TORs developed in congruence with the company’s mission and objectives. Criteria
and TORs must be developed by a team of staff hailing from all concerned business areas for
example Finance, IT, Production, TQM, Customer relation and Marketing etc. Outsourcing
is a sort of paper-marriage and relationship management is more complex as compared to
other contractual obligations. The managers must take on new roles and attitudes to make
this relationship a successful one because; in this connection general management skills play
a more effective part as compared with technical or operational management tactics.
Negotiation, communication and commercial savvy people are most effective for the
longevity and effectiveness of this unique relationship.

Academic Qualification of BPO Workforce

It was noticed that majority of surveyed BPO workforce was highly qualified. The
need however, is to turn BPO sector in an open for all area where all professionals; highly
qualified or technically trained, may offer their services in order to broaden the spectrum of
services and to attract greater amount of foreign exchange to the country.

BPO and Organizational Structure

Today’s organizations need to be very much organic in nature in order to absorb
the changes brought by Business Process Outsourcing. Departmentalization does no more
need to be strongly infused in the body of the organization; rather it must result in loosely
based work teams who may at the discretion of management and on the requirement of the
situation take on any responsibility for the benefit of the organization.
 BPO and Organizational Culture
Strong cultures always resist changes of content and context. It is the characteristic
of growing organizations that their cultural dynamics are flexible enough to be mounded as
per changing scenarios and market factors. Organizations aspiring for BPO must be change
tolerant so that inception of BPO may result in least friction.

Motivation of Workforce
Motivated workforce always acts in the favor of the organizations which in turn are
able to achieve their objectives in a smooth and effective manner and turn out to be market
leaders. Workforce must never be left in a lurch; nor should they be kept in dark when changes
are taking place in the organization; as it may create negative energy that proves detrimental for
the cause of the organization.

Communications Management
Workforce is a very precious asset to be depreciated or disposed off. Changes
in organizations happen in a routinely manner but those transformations affecting the
work or life of the workforce must not happen behind the closed doors or in hideous
manner. Whenever an organization considers outsourcing, this matter must be discussed
with the affected members of the staff, they must be given all information regarding the
change and if it (the change) is supposed to have an impact on their work or life in any
manner it must be openly communicated to them and reasons for so doing must be stated
to them. In this way, the change will occur with least negative repercussions and the staff
would either feel secure or esteemed (if their positions are not going to be secured).
Secondly, when a process / activity is moved beyond the organizational borders, it
essentially means that organization’s policies, objectives, quality goals, customer
preferences have also to be moved to that place i.e. the organization who is to provide the
outsourcing service. For example, if a car manufacturing company has outsourced the
manufacturing of seats used in its automobiles, it must make it clear to the outsourcing
service providing organization that it will not settle for less than what was previously
being manufactured when the seats were being manufactured in its own plant. Because
the customer would be demanding the same level of quality and comfort that he got when
the seat was manufactured in-house. For this purpose, specifications and procedures
must also be communicated to the outsourcing service provider. This is usually done by
adding the suppliers to the extranet of the organization so that it could obtain necessary
information in a timely manner.