BPO REVIEWER (Module 1) Part-Based Activities

- Automobile components
Definition of OUTSOURCING - Cruise-ship rooms
- everytime we buy something from somebofy - Airplane abionics
rather than producing it ourselves, we have - Desktop build and configuration
essentially ‘outsourced’ the production of that
good or service. What is being Outsourced?
- contracting of a service provider for the
delivery of a process or service Support or Auxiliary Services
- Cafeteria
Why Companies Oursource? - Janitorial Service
- Copy Center
Capacity Management - Building Maintenance
- Need to acquire/buy/hire (temporary) capacity - Trucking/ Shipping
- Demand chasing (one day 50 employees - Security
needed, next day only 10 are needed) - Payroll
- Legal
Lower Cost
- Replace expensive local or in-house resources Routine activities or activities that can be
with less expensive resources from external automated at larger centers
service providers - Small banks outsourcing check processing to
- Tax with differential or government incentive larger banks, riding on ATM base of multi-
programs in other locations leading to lower bank network
cost - Small vendors using amazon.com as data
center, marketing, and payment processing
Better Performance platform
Use of Specialization external providers which - Banks using common/multi-bank core banking
can deliver service with better quality, services of large technology providers
innovation, in new platform:
- Sales force providing web-based sales IT Services
management - Application Development
- PeopleSoft providing employee-facing tools - Application Maintenance and Management
- Production/ Data-Center Operations
Faster and Continuous Service - Production Technical/ Systems Support
- Greater output from work being done around - Helpdesk
the clock - Software as a Service (SaaS): Shared
- Offshoring market research support to application software
locations in reverse time zones - Cloud Services: Shared data storage facilities,
- Offshoring processes of bills of lading to database management
centers in other time-zones to complete task
faster
Advantages and Disadvantages of Outsourcing
Advantages
*Employer Perspective
- The Service Provider (BPO Company)
determines most efficient number of resources,
process, and supervision, to achieve output
- Service Provider may have more expertise/
capability than the buyer
- Buyer can leveraage economies of scale of the
Service Provider
Service Provider may have more expertise/
capability than the buyer
Example:
Technical Support - Accounting - Animation
Buyer can leverage economies of scale of the
Service Provider
Example :
Techincal Infrastructure - Human Resource -
Techincal Expertise
Disadvantages
*Employer Perspective
Cost can be higher because provider may add
premium for risk in case processes are not well
defined
- Example Problem: Vaguely defined task as
“provide clinic service”
- Example Solution: Redefine tasks 2
full-time nurses and 1 full-time doctor, 8
am to 5 pm, providing emergency,
medicine (to what extent), and, emergency
care equipment (or not)
Buyer does not have full control of resources
doing work
- Example: Can your agency provided office
assistant also do this extra errand bring pet
to the vet clinic, bring clothes to the dry-
cleaner, pick-up kids from school?
- Solution: Do not use outsourced office
assistant like your personal assistant.

*Employee Perspective
- “Work Abroad, Live Here”
- Be near your friends and family
- Work in the country and support Philippine
growth
- Professional Growth
- Financial Independence
- Employee Assistance
- Enjoy your favorite food
BPO REVIEWER (Module 2) Strategies for Outsourcing

The Two (2) Types of Outsourcing Multisourcing

- Multiple vendors for client’s outsourced
Third-Party project.
- Owned by a service provider, a local entity or
part of global group Example:
- Providing Services to clients of the provider - GM’s Brazillian e-commerce site. Vendors:
Oracle, AT &T, Microsoft, Cisco, EDS
Examples: (now HP Enterprises and Services), IBM
- Accenture - GM’s 2007/ $7.5B IT outsourcing contract
- AEGIS with EDS (HP Enterprises and Services),
- Convergys IBM, Capgemini, and Wipro Ltd.
- EGS (NCO/APAC)
- IBM Crowdsourcing
- Sitel - Company puts out a call for a project; best
- SPI Global solution/ submission is accepted and
- Stream Global contracted.
- Sutherland - Crowdsourcing: “… outsourcing to an
- Sykes undefined, generally large group of potential
- Tele Tech offerers in the form of an open call.” (Jeff
- Teleperformance Howe)
- Telus
Onshoring
Shared Service Center (SSC) - Vendor in the same home country as client
- Wholly- owned by the mother company
- Providing services entirely to affiliates and Advantages:
subsidiaries, or more rarely to clients of the - Allows immediate response: product
mother company designers in same country respond to
market feedback quickly
Examples: - Local contractors have same market
- ANZ Bank knowledge, culture, language,
- C h a r t i s Te c h n o l o g y a n d O p e r a t i o n s communication, style; minimizes culture
Management issues
- Chevron
- Citigroup Disadvantages:
- Dell - Risk of inadequately selected, trained,
- DKS supervised staff- i.e, less skilled because
- HP contactor staff are lower paid
- HSBC - Risk of higher attrition (lower business
- J.P Morgan Chase acumen/process knowledge) than internal
- Maersk staff; less motivation to deliver quality
- Manulife
- Shell Shared Services Asia Example: New York bank contracting start-up
- Thomson Reuters security service firm in New York
Nearshoring
- Vendor in a country “close” (geographic and/
or cultural proximity) to client’s home country
Advantages:
- Fee-for-service variability rather than fixed
compsensation costs
- Significant labor cost arbitrage
Disadvantages:
- Additional coordination costs, sourcing
management communications
- Transfer pricing/ tax margin requirements
Example: Hong Kong retail firm offshoring
garments manufacturing in Manila
Offshoring
- Vendor and client in different countries
Key Technologies that Support Outsourcing
Video Conferencing:
- HP - Halo (8.5 min. video)
- Cisco - Telepresence
- Sun - MPK20: Project Wonderland
Web-Based Conferencing and workflow tools:
- WebEX
- MS Windows Meeting Space
- MS Sharepoint
- Google Applications
Fundamentals of Outsourcing (Cycle)
Business Process Outsourcing Engagements
Managing Outsourcing Transitions
BPO Operations Management
Issue Management and Critical Situation Control

Advantages:
- Allows company to focus on core business
- Fast ramp-up/down at reasonable cost
- Opportunity to expand into new areas cost
effectively

Disadvantages:
- Data privacy/confidentiality issues
- Lack of right business acumen/right
market knowledge in offshore location
- Cultural differences leading to delays and
miscues
- Risk of high attrition in service provider,
weak staff selection/training
BPO REVIEWER (Module 3)
Client-Service Provider Relationship:
Attributes
Client Company is concerned with:
- Quality transition of processes
- Efficient operation of business functions that
were once handled in-house
Service provider company is concerned with:
- Scope of Service
- Performance measures
- Benchmarks to ensure objective standards in
assessing work quality
Therefore, as a result of these relationship
attributes, the BPO Contract is a unique, “tailor-
fit” agreement captured in a document that
resembles a performance contract.
The BPO Contract
- A business proces outsourcing (BPO) contract
is a formal agreement between a client and a
service provider to take over a “pre-agreed
portion” of the client’s business operations
- This “pre-agreed portion” is documented in
the contract as the scope of work (SOW)
- The BPO contract, with all its attachments,
assumptions, and documented agreements, is
referred to as the master services
management (MSA)
The BPO Contract:
Master Services Agreement
Definition: Covering agreement that summarize
terms applicable to every job-order with the
service provider
Main Elements:
A. Service to be provided
B. Performance managament, issues, change
management
C. Country Laws
Groups (A) and (B) are the “operational”
elements, used day to day. Group (C) generally
“just-in-case” terms
Scope of Work
Definition: Describes specific work to be
delivered, by when, at what cost
Considerations:
- Can be similar to a “job order”
- Is generally an attachment/addendum to a
Master Agreement, points to covering terms
- May state that in case of terms inconsistency,
the SOW or Master Agreement supersedes
Core Elements
- Service to be rendered or provided as
documented in the Scope of Work (SOW)
- Out-bound sales calls
- In-bound inquiries or subscriptions
- Delivering food or flowers or mall
- Performance standards expected from the
service provider; ervice Level Agreements
(SLA), and, Key Performance Indicators (KPI)
- “Handle Time” and “Average Handle
Time”
- Sales attainment
- Customer satisfaction rating
- Timeline of the contract; start dates (“go live”)
and, duration
- It is a detailed scheduled of when the
transition period starts and when the
service provider assumes control of the
contracted processes
- In terms of type per duration; most
contracts are typically multi-year contracts,
however and when deemed most effective,
on-demand contracts may also be put into
effect

- Cost to the client

- Refers to the payment made by the client
to the service provider for honoring
contractual agreements

- Other Specific Operations Requirements:

- Who will provide the service
- Qualifications of personnel
- Location of Operations
- Outline of reporting procedures, decision-
making, and escalation of problems
- Legal provisions (e.g., non-competition,
confidentiality)
BPO REVIEWER (Module 5)
BPO Operations Management
Topical Overview
• Operations Management
• Components of Operations Management
• Process Mapping
Course Norms & Rules
You are responsible for your own learning:
• Come on time, all the time
• Be participative - ask questions, share your
thoughts and opinions, take notes
• Be supportive - assist your peers as long as
they are willing to assist themselves
• Do all assigned tasks to the best of your
ability
• Be enthusiastic, energetic, and, fun
• Keep all distractions away in your bag -
mobile phones on silent mode, tablets,
laptops
Module Learning Objectives
• Define what is operations management
• Explain the value or importance of operations
management
• Enumerate and discuss the components of
operations management
• Identify process mapping and notation shapes
• Explain the value or importance of process
mapping
• Be able to satisfactorily map process
BPO: Operations Management Overview
- The main strategy that the BPO sector applies
is what is called; “End-to-End Service Level
Management.”
- The theoretical and practical aspects of
designing and implementing End-to-End
Service Level Management (SLM) in any BPO
relationship is through a formal agreement - a
contract with the client
- The Service Level Agreement (SLA), is a
formal agreement between the client and
service provider for a common understanding
on aspects including service quality,
responsibilities, performance metrics,
penalties, and commitments.
SLM is a regular and systematic review of
service provider performance against the
agreements.
BPO: Operations Management 6 Components
Performance Management
- Is the systematic process by which an
organization involves its employees, as
individuals and members of a group, in
improving organizational effectiveness in the
accomplishment of mission and goals
- Employee performance management includes:
- Planning work and setting expectations,
- Continually monitoring performance,
- Developing the capacity to perform,
- Periodically rating performance in
assummary fashion, and
- Rewarding good performance
Metrics and Reporting
Operational Goals and Metrics
Increase Responsiveness
- turnaround time
- quality of service provided through
customer contact
Increase Lead Generation
- Leads generated per hour if it is an
outbound process
Meet Operational Budget
- Transaction volumes/ Forecast
- Target Average Handle Time
- Cost per seat/ hour/ transaction
Reduce Waiting Time
- % of transactions hadled at a specific time
- Abandon Rate %
- Average speed of answer
Reduce Repeat Transactions
- First time resolution %
- Resolution Rate
Limitations of Service Level Agreement (SLA)
- Lack of end customer focus
- Lack of emphasis on business objectives
- Over emphasis on efficiency rather than on
effectiveness
- Lack of sub-process metrics to ensure
consistency
Professional Development
Approach to Personal Development:
• Case Study Method
• Consultation
• Coaching
• Communitites of Practice
• Lesson Study
• Mentoring
• Reflective Supervision
• Technical Assistance
Professional Development
- Refers to skills and knowledge attained for
both personal development and career
advancement
Value
- Lifelong learning, a sense of moral obligation,
to maintain and improve professional
competence, enhance careeer progression,
keep abreast of new technology and practice,
or to comply with professional regulatory
organizations
Quality Monitoring and Analyzing
Quality Specification:
• Total Quality Management (TQM)
• Total Quality Circles (TCM)
• ISO 9001
• Six Sigma
Primary Elements of TQM:
• Customer Focus
• Total employee involvement
• Process-centered
• Integrated System
• Strategic and Systematic approach
• Continuous improvement
• Fact-based decision-making
• Communication
Total Quality Management (TQM)
- Is a management system or approach to long-
term success through cutomer satisfaction. In a
TQM effort, all members of an organization
participate in improving processes, products,
services, and the culture in which they work
through the use of; strategy, data, and effective
communications to integrate the quality
discipline into the culture and activities of an
organization
Total Quality Circles (TQC)
- Means having organized Kaizen activities,
involving everyon in a company - managers
and workers - in a totally systemic and
integrated effort toward improving
performance at every level
- It is lead to increased customer satisfaction
throught satisfying such corporate cross-
functionals goals as quality, cost, scheduling,
manpower development, and new product
development
ISO 9001
- Is a very flexible quality standard that is
readily applicable to many industries, as well
as to all sectors of IT-BPM industry, hence its
popularity in the Philippines even with small-
scale business.
- ISO 9001 is part of a series of International
Standards for Quality Systems, it is primarily
focused on quality systems as models for
quality assurance in design/ development,
production, installation and servicing
Six Sigma
- Is a set of qualitative and quantitative
(statistical) techniques to systematically
improve processes by eliminating defects and
process variation.
- It is byproduct of decades of quality
improvement methodologies such as Statistical
Process Control (SPC), Total Quality
Management (TQM), and, Zero Defects.
Six Sigma asserts that:
- Process variation is an obstacle to reliably
delivering high quality products and services,
as defined by the customer,
- Continual focus on reducing process variation
is the foundation for business improvement
and success,
- All business processes (manufacturing,
service, administrative, etc) can be measured,
analyzed, controlled, and improved,
- Effective problem solving can only be
achieved by data driven decision-making, and,
- Achieving and maintaining quality
improvement requires an organizational
commitment that comes from senior
management
Productivity Monitoring and Control
Employee Productivity
- Is amount of outputs (usually regulated by
requirement and quality) which can be
produced by employee per period of time,
utilizing the given resources. The more stable
and elaborated the process of production (the
less X-factors or varying inputs it involves),
the smoother level of productivity is expected
from employees operating it.
Guidelines for monitoring Employee
Productivity
• Measuring
• Comparison
• Identification
• Feedback
Continuous Improvement Initiatives
5S Process
- Or more simply “5S”, is a structured program
to systematically achieve total organization,
cleanliness, and standardization in the
workplace.
- 5S was invented in Japan, and represents five
(5) Japanese words: Seiri, Seiton, Seiso,
Seiketsu, Shitsuke
Benefits
• Improve Safety
• Decrease down time
• Raise employee morale
• Identify problems more quickly
• Develop control through visibility
The 5S Process Lean
- Is a process management framework and
Seiri - Tidiness methodology derived mostly from the Toyota
- Throw away all rubbish and unrelated Production (TPS). It aims to optimize the flow
materials or speed of production goods and services by
removing the traditional “8 deadly wastes”
Seiton - Orderliness
- Set everthing in its proper place for quick - Lean implementation (or transformation, as it
retrieval and storage is commonly called) leverages tools for
assessing process flow and delay at every step
Seiso - Cleanliness in a process. The focus is on separating value-
- Clean the workplace; everyone should be a added from non-value-added activities
janitor eliminating the root causes and cost of non-
valued-activities. Lean methods are used to
Seiketsu - Standardize quantify and eliminate the cost of complexity.
- Standardize the way of maintaining cleanliness

Shitsuke - Discipline Process Mapping & Notation:

- Practice “Five S” daily, make it a way of life; Basic Shapes - Flow
this also means commitment
Flow
- Represents; sequence flow. Connects the tasks,
shows/ indicates the flow direction
KAIZEN:
- It is a Japanese management concept for Examples:
incremental (gradual, continuous) change • Check for duplicate invoices is followed by
(improvement) generate accounts payable entry
- It is a way of life - a philosophy, assuming that
every aspect of our life deserves to be Group of Tasks
constantly improved - Represents; a group of task. It is literally a
- Kai means Change and Zen means good visual indicator that the included tasks are
within a logical group
Key elements of Kaizen:
• Quality Examples - Pay Supplier group can include:
• Effort • Generate balance sheet entries (credit cash,
• Involvement of employees debit accounts payable)
• Willingness to change • Issue check-payment request
• Communication • Pay supplier
• Get official receipt
(REVIEWER - ASSIGNMENT)
Types of Pricing Model used in Outsourcing
Contract
1. Fixed Price
- Fixed price model is the most popular and
most efficient software development
agreement. Companies use it as a perfect
solution for short-term and small software
development projects with clear requirements,
set specifications and defined timelines. It is
necessary that the team receives a detailed
specification describing each part of the future
product. You should also be clear about the
options to be implemented because such
contract type does not imply changing the
tenor of development.
- Fixed price strategy is a silver bullet for those
ones who are interested in the off-the-peg
product and do not care of means used for
creating it. This type of IT outsourcing models
assumes no active client's involvement in the
workflow. The process is entirely controlled
by the project manager hired by the
outsourcing company.
Pros:
★ No overpayments. The entire amount is
agreed before signing the custom
software development agreement.
★ No supervision. Coordination of the
development process is carried out by the
project manager. If desired, the client may
also participate.
★ No turn-ups. You have a signed statement
which describes the terms when a certain
portion of the functionality should be
implemented.
★ No distrust. There is no need to worry
whether the working hours are used
efficiently. The contractor is highly
motivated to deliver the quality product in
the shortest terms.
★ Low risk. All in all, you play it safe. If the
product does not meet the requirements
you still have the right not to pay for it.
Cons:
o Time for preparations. Be ready to spend
a few days up to 2-3 weeks documenting
all the requirements and deadlines.
o Minor control over the process. Of
course, you can make your adjustments,
however, management is mainly executed
by the team member.
o Lack of communication. This model does
not involve frequent interaction between
the client and team. Nevertheless, it does
not mean that you will be excluded from
this outsourcing contract management.
2. Time and Material
- Time and material IT outsourcing agreement is
very flexible and is ideal for the long-term
cooperation. At the regular meetings, the
representatives of the team substantiate the
hours spent on the implementation of each
function and explain the specifics of the
development.
- Working on Time-and-Materials basis is thus
more flexible. Under Time-and-Materials
contract, a client can be 100% sure he gets the
solution fully corresponding his expectations.
Following this pricing model, a client has a
total control over both the deliverables and the
budget.
Pros:
★ Flexible budget. You can negotiate with
the team on the question of the relevance
of particular features and ways of their
implementation taking into account your
budget possibilities.
★ Part-payment opportunity. The total
amount will be split for you to pay it step
by step for each completed piece of work.
★ Easy start. There is no need to sound the
final requirements so you can directly
proceed to the development process.
★ No costs for preparations. There is no
need to make any pre-arrangements. All
the discussions will be considered as a
part of the workflow.
★ Agile. Outsourcing contracts that follow
T&M model perfectly cohere with the
Scrum methodology, in particular, such
elements as a sprint, daily and
retrospective meetings, etc.
Cons:
o No deadlines. In fact, you are not exactly
aware of the time when a finished product
will be delivered. The timeframes are
quite blurry.
o Low budget control. Even though each
segment of work is discussed you do not
have a full imagination of the final sum
you are going to pay.
o Time for participation. Since you will be
directly involved in the management of
the project, be prepared to allocate time
for it.
Capital Expenditures vs. Operational
Expenditures
Capital expenditures, commonly known as
CapEx, are funds used by a company to acquire,
upgrade, and maintain physical assets such as
property, buildings, an industrial plant,
technology, or equipment. It is an expenditure
which results in the acquisition of permanent
asset which is intended lo be permanently used in
the business for the purpose of earning revenue.
These expenditures are 'non-recurring' by nature.
Assets acquired by incurring these expenditures
are utilized by the business for a long time and
thereby they earn revenue.
CapEx is often used to undertake new projects or
investments by the firm. Making capital
expenditures on fixed assets can include
everything from repairing a roof to building, to
purchasing a piece of equipment, to building a
brand new factory. This type of financial outlay is
also made by companies to maintain or increase
the scope of their operations.
Capital expenditures might include:
▪ Plant and equipment purchases
▪ Building expansion and improvements
▪ Hardware purchases, such as computers
▪ Vehicles to transport goods
CapEx Formula:
CapEx=ΔPP&E+Current Depreciation
where:
CapEx=Capital expenditures; ΔPP&E=Change in
property, plant, and equipment
Operating expense, often abbreviated as OpEx,
is an expense a business incurs through its
normal business operations. One of the typical
responsibilities that management must contend
with is determining how to reduce operating
expenses without significantly affecting a firm's
ability to compete with its competitors.
Operating expenses are the costs for a company
to run its business operations on a daily basis.
Examples include:
▪ Rent & utilities
▪ Salaries and pension plan contributions
▪ Any expense considered sales, general, &
administrative expenses (SG&A) on the
income statement
▪ Research & development
▪ Property taxes
▪ Business travel
As operational expenses make up the bulk of a
company's regular costs, management typically
looks for ways to reduce operating expenses
without causing a critical drop in quality or
production output. In contrast to capital
expenditures, operating expenses are fully tax-
deductible in the year they are made.
Components of Process Cost
In accounting, process costing is a method of
assigning production costs to units of output. In
process costing systems, production costs are not
traced to individual units of output. Costs are
assigned first to production departments. Then
assign the costs to units of output as they move
through the departments. The process costing
method is typically used for processes that
produce large quantities of homogeneous
products.
A. Direct costs are directly attributable to the
object. In construction, the costs of materials,
labor, equipment, etc., and all directly involved
efforts or expenses for the cost object are direct
costs. In manufacturing or other non-construction
industries, the portion of operating costs which is
directly assignable to a specific product or
process is a direct cost.[1] Direct costs are those
for activities or services that benefit specific
projects, for example salaries for project staff and
materials required for a particular project.
Because these activities are easily traced to
projects, their costs are usually charged to
projects on an item-by-item basis.
Direct costs typically include:
▪ Direct materials used in manufacturing
▪ Direct labour
▪ Direct expenses, e.g. a royalty payment to
a patent holder for a specific production
process
B. Indirect costs are, but not necessarily, not
directly attributable to a cost object. It should be
financially infeasible to do so. Indirect costs are
typically allocated to a cost object on some basis.
In construction, all costs which are required for
completion of the installation, but are not directly
attributable to the cost object are indirect, such as
overhead. In manufacturing, costs not directly
assignable to the end product or process are
indirect. These may be costs for management,
insurance, taxes, or maintenance, for example.
Indirect costs are those for activities or services
that benefit more than one project. Their precise
benefits to a specific project are often difficult or
impossible to trace.
Regulatory Requirements
1. Board of Investment
The Board of Investments (BOI), an agency
under the Department of Trade and Industry
(DTI), is the lead investments promotion agency
of the Philippines. As such, it is at the forefront
of the government’s efforts to attract direct
investments into the country to contribute to
economic growth and jobs creation, to help uplift
the general economic welfare of the Filipinos.
The agency is designed to promote inward
investments and assist local and foreign investors
in their venture of the desirable areas of business,
defined in the annually-prepared Investment
Priorities Plan (IPP). The BOI is mandated
through the Omnibus Investments Code
(Executive Order No. 226) to encourage
investments through tax exemption and other
benefits in preferred areas of economic activity
specified by the BOI in the IPP.
The Board of Investments (BOI) provides tax
breaks and other incentives to registered entities
that engage in activities identified as investment
priorities or those which promote the general
economic development of the Philippines and
those that are export-oriented (where export is
more than 50% of production or 70% if the
enterprise is more than 40% owned by foreign
investors). The main advantage for an eligible
BOI-registered firm are 4 to 8 year income tax
holidays and 4 to 6 year exemption from local
business taxes for pioneer and non-pioneer
industries. To be eligible for BOI incentives,
foreign investors will need to have an equity
investment in a Philippine corporation.
2. Philippine Economic Zone Authority
Philippine Economic Zone Authority (PEZA) is a
government agency in the Philippines attached to
the Department of Trade and Industry created to
help promote investments in the export-oriented
manufacturing industry into the country by
assisting investors in registering and facilitating
their business operations and providing tax
incentives. PEZA also assists investors who
locate in service facilities inside selected areas in
the country (areas are called PEZA Special
Economic Zones) which are usually business
process outsourcing and knowledge process
outsourcing firms. Other activities also eligible
for PEZA registration and incentives include
establishment and operation within special
economic zones for tourism, medical tourism,
logistics and warehousing services, economic
zone development and operation and facilities
providers.
Data Privacy Law/Act
The Data Privacy Act (DPA), or Republic Act
No. 10173 was passed by the Philippines
Congress in 2012 and finally implemented five
years later in 2016. RA 10173 assures the “free
flow of information to promote innovation and
growth”(Republic Act. No. 10173, Ch. 1, Sec. 2)
while protecting the users’ fundamental rights to
privacy. RA 10173 protects and maintains the
right of customers to confidentiality by setting a
legal list of rules for companies to regulate the
collection, handling, and disposal of all personal
information. Companies legally responsible for
keeping their customers’ data protected from
third parties or any form of misuse, internally or
externally.