Business process outsourcing for midmarket companies

Nobody can be a specialist in everything: hence the growth in outsourcing of standard business processes. So far business process outsourcing (BPO) has been dominated by large enterprises. Now M enterprises are moving to exploit its benefits.

Growing maturity of the BPO market is enabling medium enterprises to take advantage of new opportunities. Phil Fersht, at the time vice president of the BPO Group at Everest Research Institute, lays out the case for how BPO works for medium enterprises.

How BPO can provide business value to the middle market
The term BPO is used when an organization transfers management and operational responsibility of core business processes over to a third-party provider to manage. Typically, these business processes form part of the General and Administrative (G&A) functions, namely Finance and Accounting, Human Resources and Procurement. Other G&A functions we typically see outsourced include customer care services, logistics and industry-specific processes, for example insurance claims processing and payments processing. The Everest Research Institute views a BPO contract as one that combines at least two core processes in a business function (three for HR).

Mid-market buyers can benefit from BPO in a number of ways:

Administrative cost-savings
Some buyers can downsize the G&A function as a result of the services being administered by a third-party. Moreover, they can also deploy labour arbitrage in some cases and have more costly staff in higher cost locations (i.e. North America or Western Europe) replaced by much lower-cost staff in near-shore, rural-shore or offshore locations (for example, Canada, South America, Eastern Europe, China or India).
Access the latest technology at lower costs

Typically, mid-market organizations are not blessed with enough resources to deploy the latest technology solutions and staff to support their G&A IT needs. Most of today’s BPO providers are deploying BPO offerings that are underpinned by a technology platform that can be delivered to mid-market customers with relative ease, in terms of time and cost. Often a BPO engagement can enable a mid-market buyer to solve its technology needs to support a particular G&A function in a single swoop. The key for suppliers is to deploy a platform with common standards that the buyer can change its process to as it is going through the outsourcing transition process.

Increased business focus by retained organisation
Organisations need to adapt to outsourcing to take full advantage of having more focused internal staff that can channel their time and energies on making strategic business decisions. For example, do businesses really care where their general ledger is being reconciled? If they are receiving their GL information quicker than they were pre-outsourcing (and at the same or better quality), then their accounting staff can focus on applying the GL data fluctuations to help support business decisions, rather than spend their time collecting and reconciling administrative data processes.
More fulfilling career paths

Outsourcing can provide more fulfilling career paths for professionals, and does not mean they will lose their jobs (for example, IT outsourcing has ultimately led to increased opportunities for IT professionals). Globalisation is here to stay and today’s professionals – especially in the G&A areas, will benefit from sourcing and vendor management experience as they develop their careers.

Comments

[business process outsourcing]

Good informative blog.Thanks for this info.

[Caitlin Calida]

The BPOs in India face an enormous challenge in reducing attrition rate and this being a nascent industry needs to draw parallels.Before we proceed its important to understand the underlying reasons for high attrition rates, which are pretty steep and are around 40-50%. Currently it is about 35% in non-voice and 45% in voice call centers. About 80% of them look for better careers within the same industry.

[Loans]

I have outsourced before and generally found it to be a struggle.