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Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain.[1] In the contemporary context, it is primarily used to refer to the outsourcing of business processing services to an outside firm, replacing inhouse services with labor from an outside firm. BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing which includes customer-related services such as contact centre services. BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called nearshore outsourcing. Given the proximity of BPO to the information technology industry, it is also categorized as an information technology enabled service or ITES. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry.
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BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline. Important centers in India are Bangalore, Hyderabad, Chennai, Kolkata, Mumbai, Pune, Patna and New Delhi. The top five Indian BPO exporters for 2009-2010 according to NASSCOM are Genpact, TCS BPO, WNS Global Services, Wipro BPO, and Aegis Ltd..[3]
[edit] Threats
Risk is the major drawback with Business Process Outsourcing. Outsourcing of an Information System, for example, can cause security risks both from a communication and from a privacy perspective. For example, security of North American or European company data is more difficult to maintain when accessed or controlled in the Sub-Continent. From a knowledge perspective, a changing attitude in employees, underestimation of running costs and the major risk of losing independence, outsourcing leads to a different relationship between an organization and its contractor.[14][15] Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, minimizing risks and avoiding any threats, a Business continuity management (BCM) model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.[16] Another framework, more focused on the identification process of potential outsourceable Information Systems, identified as AHP, is explained.[17] L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical IT- processes.
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Outsourcing Offshoring Nearshoring Homeshoring Globalization List of call centre companies Banking BPO Services Recruitment Recruitment Process Outsourcing Software testing outsourcing BPO security Business process outsourcing in India Business process outsourcing in the Philippines Website Management Outsourcing Captive service Offshoring Research Network Legal outsourcing
[edit] References
Outsourcing: The Knowledge Potential, Information Systems Management, Vol. 21, pp 715
5. ^ Gilley, K.M., Rasheed, A. 2000. Making More by Doing Less: An Analysis of
Outsourcing and its Effects on Firm Performance. Journal of Management, 26 (4): 763790.
6. ^ Kakabadse, A., Kakabadse. N. 2002. Trends in Outsourcing: Contrasting USA and
engineering business processes through application service providers - challenges, issues and complexities. Business Process Management Journal Vol. 9 No. 6: 776-794
8. ^ Leavy, B. 2004. Outsourcing strategies: opportunities and risk. Strategy and
the enterprise [online]. Strategy+Business, Available from http://www.strategybusiness.com/press/16635507/11153 [Accessed 5 February 2008]
11. ^ (Leavy 2004, 20-25) 12. ^ Michel, Vaughan, Fitzgerald, Guy. 1997. The IT outsourcing market place: vendors
http://www.nationalcallcenters.org/pubs/In_Queue/vol3no21.html
14. ^ Bunmi Cynthia Adeleye, Fenio Annansingh and Miguel Baptista Nunes. "Risk
management practices in IS outsourcing: an investigation into commercial banks in Nigeria", International Journal of Information Management 24 (2004): 167-180.
15. ^ K. Altinkemer, A. Chaturvedi and R. Gulati. "Information systems outsourcing: Issues
and evidence", International Journal of Information Management 14- 4 (1994): 252- 268.
16. ^ Forbes Gibb, and Steven Buchanan. "A framework for business continuity
Europe and the USA: Assessment issues", International Journal of Information Management 15- 5 (1995): 333- 351. Retrieved from "http://en.wikipedia.org/wiki/Business_process_outsourcing" View page ratings
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What is business process outsourcing (BPO)? BPO is the process of hiring another company to handle business activities for you.
What is Outsourcing? which
What is Offshoring?
BPO is distinct from information technology (IT) outsourcing, focuses on hiring a third-party company or service provider to do IT-related activities, such as application management and application development, data center operations, or testing and quality assurance. In the early days, BPO usually consisted of outsourcing processes such as payroll. Then it grew to include employee benefits management. Now it encompasses a number of functions that are considered "non-core" to the primary business strategy. Now it is common for organizations to outsource financial and administration (F&A) processes, human resources (HR) functions, call center and customer service activities and accounting and payroll. These outsourcing deals frequently involve multi-year contracts that can run into hundreds of millions of dollars. Often, the people performing the work internally for the client firm are transferred and become employees for the service provider. Dominant outsourcing service providers in the BPO fields (some of which also dominate the IT outsourcing business) include US companies IBM, Accenture, and Hewitt Associates, as well as European and Asian companies Capgemini, Genpact, TCS, Wipro and Infosys. Many of these BPO efforts involve offshoring -- hiring a company based in another country -- to do the work. India is a popular location for BPO activities. Frequently, BPO is also referred to as ITES -- information technology-enabled services. Since most business processes include some form of automation, IT "enables" these services to be performed.
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An offshoot of BPO is KPO -- knowledge process outsourcing. Considered by some to be a subset of BPO, KPO includes Outsource by Region those activities that require greater skill, knowledge, education and expertise to handle. For example, whereas an insurance company might outsource data entry of its claims forms as part of a BPO initiative, it may also choose to use a KPO service Outsource by provider to evaluate new insurance applications based on a set Industry of criteria or business rules; this work would require the efforts of a more knowledgeable set of workers than the data entry would. The current definition of KPO encompasses R&D, Outsourcing Strategy product development and legal e-discovery, as well as a number of other business functions.
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Also coming into use is the term BTO -- business transformation outsourcing. This refers to the idea of having service providers contribute to the effort of transforming a business into a leaner, more dynamic, agile and flexible operation. Useful Links The Basics of Business Process Outsourcing
http://www.sourcingmag.com/content/c060405a.asp Reducing Operational Risk in Business Process Outsourcing http://www.sourcingmag.com/content/c060802a.asp Move from Tactical to Strategic Sourcing http://www.sourcingmag.com/content/c050914a.asp
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