Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Business Administration
Department of Human Resource Management

Debulosan, Angelene Mae N. Fundamentals of Business Process

Outsourcing 101
BSBAHRM 2-2D Assessments 1-6

Activity/Assessment #1

1. Explain the nature of business for IT-BPM Industry.

Business processes including finance, customer support, human resource, research,

legal, customer medical services, information technology, etc. are outsourced to internal
business units or third-party service providers through the IT-BPM process. Outsourcing
entails transferring work from one organization to another.

Nowadays, the Information Technology and Business Process Management (IT-BPM)

industry in the Philippines has emerged as one of the best-performing and employment-
producing industries. The industry's optimistic growth pattern is demonstrated by its
global dominance in voice-based operations along with ongoing developments in non-
voice and advanced outsourcing services. The Information Technology and Business
Process enabled people to push for better policy reforms that will strengthen employees'
professional growth and keep a competitive business environment for the economy to
solidify its standing in the global IT-BPM industry.

2. Explain the advantages and disadvantages of outsourcing.

It is crucial to analyze the advantages and disadvantages of outsourcing as it will help

companies to comprehend how outsourcing may impact corporate culture. Here are
various pros and cons of outsourcing that could help businesses assess if outsourcing is
something that may work for your organization or not.

Advantages:

 Greater Opportunity in the Marketplace

Businesses can utilize information, talents, and their entire supply chain through
outsourcing. Furthermore, outsourcing can assist a company to become more adaptable
and flexible, allowing it to respond effectively to difficulties and evolving business
circumstances while achieving financial benefits and higher service levels.

 Cost-Effective
Outsourcing enables businesses save money and free up funds to invest in other sectors
of their operations.

Also, businesses can frequently obtain high-caliber talent through outsourcing at a

cheaper labor cost. Finding the ideal talent at the ideal price is simpler when
companies explore a global talent pool.

Lastly, outsourcing doesn’t require companies to bring a talent to the company. Therefore,
businesses might reduce cost on everything from training to benefits.

 Greater Talent Pool Access

Normally, hiring is limited to a small and local talent pool. But for a better access for quality
talents, outsourcing enables businesses to have access to employees throughout the
world.

 Increased Attention to Key Business Activities

By allowing employees to concentrate on their primary responsibilities and long-term
strategy, outsourcing can free up a company to work to its strengths. This is because a
corporation can obtain a more productive, efficient, and frequently higher-quality service
by selecting an outsourcing company that is skilled in the operation or service they require
them to perform for the business.

Disadvantages:

 Financial and Reputation Risks

There may be instances where outsourcing gives you inaccurate or careless services,
which may result in monetary losses and a poor reputation with clients.

 Issues with Communication

The communication between the business and the outsourcing company may experience
problems with the time zone, method of communication, and internet connectivity that
may possibly be one of the biggest drawbacks for the business.

 Risks related to Data Privacy and Confidentiality

When businesses outsource tasks that involve personal information, they run the danger
of disclosing that information to third parties, compromising the privacy of their customers
or the security of their operations.

 Lacking of Control
When tasks formerly handled out by corporate employees are outsourced, the quality
could decrease, the production schedule could be thrown off, or there could be a breach
in the contract.

3. Explain the significant contribution of the IT-BPM industry to the Philippine

economy.

The excellent capabilities of the Philippine workforce are largely responsible for the
Philippine IT-BPM industry's international reach. Filipinos have a competitive edge in
voice-based operations because of their proficiency in English communication, strong
commitment to providing excellent customer service, and skill for intercultural
understanding. There are numerous organizations in the Philippines offering non-voice
and advanced services including offshore financial advising, business intelligence, and
healthcare data management.

IT-BPM Industry creates a career and succeed in a resilient sector. Internal growth, basic
encoding, and programming were applied to launch IT-BPM in the Philippines in the
1980s. After more than 30 years, the business today provides increasingly complex and
diversified operations that exceed to what is typically done in call centers and make use
of various digital platforms and solutions. It is regarded as being one of the major private
sector companies in the country and the biggest job creator, providing employment to 1.3
million Filipinos while impacting another 4.2 million people nationwide.

Additionally, IT-BPM locates a job that meets your requirements and professional skills.
People with a variety of skill sets have several options in the sector. It consists of nearly
1,300 businesses divided into six subsectors, such as healthcare information
management, IT and software development, contact centers, global in-house centers,
and animation and game development.

Lastly, it advances the knowledge of Filipinos and makes them a world-class professional.
The most vital resource in the IT-BPM sector has been and will remain to be talents.
Therefore, the industry invests significantly in the training and development of its
employees, paying five to ten times as much as other sectors do on ongoing training
programs, adoption of international best practices, and lifetime learning. Additionally,
workers usually receive greater pay and extra benefits as a result.

4. Explain the reasons why companies outsource and what activities are being
outsourced.

Organizations are better off using outsourcing as a part of their main business models
because it can provide the company a competitive advantage. To add, businesses
outsource their work or operations due to a number of reasons, like it reduces operational
and labor expenditures, reduces operational risks, reduces time and labor, and increases
attention to essential competencies.
  Reduces Operational and Labor Expenditures
Businesses may obtain the labor and resources needed for operations by using business
outsourcing. BPO provider assists businesses in finding highly skilled employees
worldwide at a small percentage of the cost of local talents.

Employees abroad are cheaper because there is also cheap cost of living in the vast
majority of low-cost outsourcing nations like India and the Philippines. A baseline of $500
a month, with incentives and perks included.

Businesses' service provider would also take control of the space and equipment needed
for your full operation. This covers office space and supplies, phones, and desktops.

 Scaling Reduces Operational Risks

The regulations and legalities necessary to establish a new office will be handled by
outsourcing businesses. They make that the employees will be in an appropriate office
setting with enough room for work, high speed internet, and a strong phone connection.

The training, supervision, and compensation of employees may also be handled by

the outsourcing organizations.

Businesses have the authority to immediately scale back their full-time staff when demand
for a particular task declines.

 Reduces Time and Labor

Typical duties like email replying, data encoding, and accounting might easily take up an
entire shift that may affect the team’s effort, creativity, and energy by these
responsibilities.

Even worse, multitasking might reduce employee productivity to meet the necessary
standards of quality. That is why businesses are outsourcing these monotonous duties to
freed up the time and labor of the team, allowing them to focus on their primary
responsibilities.

 Increases Attention to Essential Competencies

An outsourcing approach is constructed to save capital, work, and energy that enables
businesses to concentrate on their company's key competencies.

By assigning minor, routine activities to an outsourcing companies, outsourcing enables

a company to concentrate more on its key skills. When used wisely, it provides a balance
between work and life in addition to some influence over opponents.

Activities:

Diverse activities are being outsourced since it helps businesses to perform better and
entrust crucial duties to experts without needing to significantly expand their full-time
personnel. These include the following activities:

 Accounting
 Human Resources
 Research
 Marketing
 Shipping and Logistics
 Sales
 Manufacturing
 IT Management
 Customer Service
 Administrative Task

Activity/Assessment #2

1. Explain the types and strategies of outsourcing.

  Operational Outsourcing

Activities like machine maintenance or repairs are included in operational outsourcing.

On the other hand, service-based businesses could also gain from operational
outsourcing for operations involving delivery and landscaping.

 Professional Outsourcing

This kind of outsourcing comprises, legal, accounting, purchasing, IT, and administrative
assistance. It is a condition where the business only charges for the operations that are
actually rendered while having access to top-notch resources, which greatly lowers
overhead costs.

 IT Outsourcing

IT outsourcing entails collaborating with a third-party company to manage a company's

IT responsibilities, which can encompass everything from programming to maintenance
and support. For several organizations, acquiring an outside IT management team
are cheaper than creating an internal one. To store and maintain data, numerous
organizations use IT outsourcing, but the majority of big businesses usually outsource a
small percentage of their IT operations.

 Guaranteed Service Agreement

An agreement for outsourcing services is a written contract between a business and the
third-party service provider it employs to carry out services on its behalf. This may include
administration of order fulfillment, delivery, or other commercialization activities.

Outsourcing service agreements safeguard both the rights and obligations of the hired
service provider and a corporation's purpose in conducting business successfully and
effectively. Supply chain management, design or advertising services, and human
resources management are all included by outsourcing agreements.

 Process-specific Outsourcing

Process outsourcing involves collaborating with other organizations or agencies that

concentrate in a certain service to conduct business operation-related issues. This can
include information on expenses, client connections, and delivery schedules, allowing
each business to concentrate on its internal capabilities and improve the customer
experience while saving money and time.

 Project Outsourcing

Project outsourcing entails collaborating to a third-party provider to turn over all or even
just a piece of a project. This is a popular tactic used mostly by businesses when they
lack the resources, time, or experience to finish a project. The design of a webpage, the
writing blog contents, and marketing strategies are some examples of project
outsourcing.

 Guaranteed Capacity Agreement

In this kind of outsourcing, the third-party company promises ensure that a specified
number of resources will be utilized solely by the client. These resources usually
comprised of a significant pieces of computer equipment, such as a mainframe, and
several employees who are responsible for utilizing the devices and related applications.
The customer can frequently instruct the outsourcing company to use the resources in
the business' preferred manner. The quality of the services to be delivered can be more
completely calculated by the consumer.

 Manufacturing Outsourcing

Companies use manufacturing outsourcing to cut costs associated with maintaining a

facility, employee salaries, purchasing equipment, infrastructure maintenance, and raw
material purchases. Manufacturing outsourcing has become important for businesses as
product life cycles in various sectors tend to shorten. This kind of outsourcing is crucial
for improving production cycles without compromising quality.
2. Explain the outsourced activities-task-process.

 Direct selling by telecalling – Outbound Calls

Direct selling through outbound call is about contacting potential clients proactively to
offer or market a product. Prior to placing the call, outbound salespeople normally go
through a protracted collection of information and assessing possible prospects.
  Direct selling by telecalling – Inbound Calls

When a customer calls a company for the first time, direct selling through inbound calls
is a great business strategy. Handling queries from customers and supplying
detailed information are the employees' obligations. Outsourced employees must
understand the demands of the client and how their offering might help. The buyer may
decide to purchase something with the assistance of the information offered to them.

 Customer Grievance Handling by Receiving Calls

Reassuring clients that a company respects their opinion and is devoted to addressing
their concerns in an ethical, fast, and efficient manner are all parts of handling customer
complaints over the phone. This aims to clarify the process for filing an official request,
detail the stages involved in talking about, responding to, and resolving complaints, and
list a variety of possible solutions that will help the clients.

 Customer Support by Telecalling

Customer service representatives address concerns and complaints regarding goods and
services of the company. They assist people with upgrades, refunds, and order
completion to enhance the overall customer experience, and they usually offer necessary
technical support.

 Medical Transcription

The fundamental of medical transcription in the BPO outsourcing sector is the

transcription of prerecorded message from physicians and other healthcare workers into
text form. The output appears to be presented in text format.

 Legal Process Outsourcing

It is the practice of contracting with a third-party law firm to handle work-related to the law
while reducing expenses and collaborating with greater expertise
  Technical Support to Sales Team through Inbound Calls

Technical assistance that occurs from an external source is known as inbound support.
Sales team are responsible to answer the calls of the clients, answering an email
submitted to the business, or cater a client through live chat.

 Billing Support and Management

This makes it easier to make people pay for online purchases and invoices. This
contributes to more effective billing management that saves both money and time.
Reports, tax calculations, and follow-ups on quotes or invoices are handled by billing
support and management.

 Accounts Management

In order to increase customer satisfaction, assistance, and process improvements and to

maximize loyalty, cross-sell, and upsell opportunities within the customer base, an
organization works in partnership with other third-party account management companies.

 Human Resource Management

They are tasked to preserve the relation between the employer and the employee. This
needs to be accomplished at every stage of the recruitment and selection process, from
hiring and orientation to exit planning.

 Recruitment Assistance

Recruitment assistance is a type of outsourcing where a business passes all or part of its
employment operations to a third-party outsourcing company.

 Marketing Analytics Support

Businesses outsource all or a portion of their marketing analytics activities to analyze data
and assess how well a marketing action is performed. Businesses may comprehend what
motivates customer behavior, improve their marketing efforts, and maximize their return
on investment by using technology and analytical procedures that the outsourcing
company uses to marketing-related data.
  IT Application Development

When an application management expert serves in an organization's information

technology division, they guide consumers with the use and performance of software
programs that were obtained from the organization. In various application, the experts
may interact with specific users or corporate accounts.

 IT Hardware Support

Businesses may outsource all or some fraction of their hardware maintenance and
support services, such as contract maintenance and per-incident repair, in order to fix or
optimize their hardware. Hardware support professionals also provide installation
assistance, tech support for difficulties over the phone and the internet, and all fee-based
upgrades to the hardware warranty.

 IT Software Support

Long-term and incident-based assistance agreements are included in software

maintenance and support services. Specialists in outsourced software support are in
charge of installation support, fundamental functionality help, online repair, and support
delivered over the phone and online.

3. Explain the key technologies that support outsourcing.

 Knowledge Process Outsourcing (KPO)

This happens when an organization hires an outsourcing company to accomplish a job

because of their knowledge and area of competence. This knowledge may go beyond
process knowledge and into business and domain knowledge.

 Legal Process Outsourcing (LPO)

This is a particular kind of knowledge process outsourcing for the legal industry. Legal
process outsourcing contains activities like carrying out legal research, preparing legal
paperwork, and even giving legal counsel.
  Research Process Outsourcing (RPO)

It is a particular KPO kind that comprises activities relating to analysis and research.
Research process outsourcing consists of marketing companies, investment houses, and
biotechnology industry.

 Cloud Communication

Communication that is housed on network infrastructure is referred to as cloud-based

communication. These communication tools are accessible to everyone with a computer
and internet connection because they are stored online. This enables businesses to
communicate with customers, clients, and even team members more effectively.

 Social Media Tools

Social media has evolved into a major component in the typical consumer ’s purchasing
selections. Social media is incredibly user-friendly. A normal individual can create a
social media account in a matter of seconds.

 Vocal Recognition

Businesses that provide business process outsourcing (BPO), such as call centers, gain
from voice recognition technology. An advanced form of AI technology called voice
recognition employs algorithms to convert a caller's speech into a command.

 Consumer Journey Mapping

A visualization of a customer's engagement with your organization is created through the

process of consumer journey mapping. This helps firms to put themselves in their clients'
and consumers' shoes and view the company from the outside.

 Unified Communication Services

All corporate platforms are combined into a single, central hub via unified communications
as a service (UCaaS). Organizations may seamlessly cooperate, interact, and get
knowledge from their data with the assistance of this technology.

Activity/Assessment #3
1. Explain how the IT-BPM Engagement through providing insights on client –
service provider relationships, contract, pricing models, financials, and other
regulatory requirements.

 IT-BPM Engagements on client – service provider relationships

Clients are the major operations; the business that chooses to transfer its business
operations. On the other hand, service providers are those who support the overall
operations; and the business that carries out the workflows on the client's behalf.

BPO has always been considered as essentially a cost-control technique with reasonable
short-term goals. Outsourcing has become a much more complex method, though.
Nowadays, clients expect their service providers to do more than just controlling costs.

 IT-BPM Engagements on contracts

A binding contract for the management of a "agreed portion" of a customer's business

functions known as IT-Business Process Management exists between a client and a
service provider. The scope of work for this "pre-agreed section" is outlined in the
contract.

The master services agreement includes the IT-BPM agreement with all of its clauses,
expectations, and written agreements. A covering contract known as a Master Services
Agreement lists the conditions that apply to each project with the service provider. It is a
legal document that specifies the demands and responsibilities of both parties, which is
the customer and the service provider.

 IT-BPM Engagements on pricing models

Since IT-BPM industry have become more widespread, they have enabled businesses
to cut costs and give their customers a quality service. Additionally, it builds a
relationship of trust between clients and service providers.
 a) Staffing Model

Staffing model describes a price strategy in which a client hires people from a
service provider for a specified period of time. Staffing in BPOs includes desks,
Internet mobiles, and other instruments that employees require for the business.

The idea that the client is in charge of the task is one of its advantages. They might
deploy a staff member from within the business to train, manage, and build their
employees in response to demand.

b) Fixed Price Model

Here, the third-party outsourcing company sets a service fee for their offerings.
Depends entirely on the client's request, this approach may be billed yearly or
monthly and already involves fees for the workspace and equipment.

Salary, incentives, and achievement goals are just a few of the variables that might
affect the fixed pricing model.

c) Cost Reimbursable Model

With a cost-plus or cost-reimbursable approach, the outsourcing company can

establish upper limitations for their consumable costs and then add on a portion
for profit.

This approach consents to a set charge regardless of the actual expenses

incurred. The outsourcing company may or may not do this by combining incentive
pricing and cost-plus pricing.

d) Time and Materials Model

Long-term IT operations often follow the time and materials approach. As a result,
service providers is required to submit a bid for a particular project and formulate
a proposal based on the client's specifications.
This can also be seen in a build-operate-transfer approach, where the provider
develops a project from scratch and supervises its growth.

e) Consumption-Based Pricing Model

Several cloud service providers charge for their services depending on

consumption. In this arrangement, clients are charged based on how much they
actually use over the period of a month or a year. The clients benefit from this
costing's flexibility because they are only charged for what they really utilize.

f) Profit-Sharing Pricing Model

The conditions of the customer and service provider's contract determine the profit-
sharing pricing model. It enables the client to choose a fraction of their profit for
the service provider.

This method is frequently used as an incentive for good labor that generates
successful performance for the client. Additionally, this enables companies to
collaborate effectively and resolve problems that occur inside the team and within
the organization as a whole for a more efficient process.

g) Incentive-Based Pricing Model

In this type of price strategy, customers could consent to pay a commission or

incentives to the service provider in order to boost output. Additionally, this
typically applies to seasonal transactions and additional services like after-hours
and 24/7-line support.

h) Shared Risk-Reward Pricing Model

In this pricing model, client and service provider shares the risks and
developments associated with their process. Assigning tasks to the partner in this
 approach helps to reduce the threats that come with new technologies,
procedures, or modeling.

Activity/Assessment #4

1. Explain the transition strategies and illustrate the knowledge transfer framework.

A group of actions taken in connection with the signing of a BPO agreement to enforce
or carry out the comprehensive transfer of operations from the client to the third-party
outsourcing company. Transferring duties from a client to a service provider effectively
assists in creating strong business connections.

There are two common transition strategy in business process outsourcing, and these
are the following:

 Lift and Shift

It is the act of moving an exact duplicate of an application or task, along with its data
storage and system software, from one IT domain to another, typically from on-premises
to public or private cloud.

The lift and shift strategy, in contrast to other techniques, provides a quicker, less workers,
and more affordable transfer because it doesn't need changing the application
architecture or much of the application code.

 Re-engineering and Migration

In order to achieve significant advancements in productivity, periods, quality, and both

customer and employee experience, business procedures have been reworked.
Businesses begin by determining what work has to be done to provide value to customers.
Process mining is one method that can be used to find, manage, and enhance processes.
Then they assess if the work should be completed or how it should be done. Businesses
are also reevaluating the functions of outside parties at this point.
Knowledge Transfer Framework

Knowledge transfer is an effective strategy for moving information from one area of a
company to another. It is both a concept and a technique that can be used to improve
business processes and company cultures. It entails the sharing of knowledge, concepts,
tasks, procedures, methods, instruments, papers, etc.

Knowledge transfer focuses more on finding and utilizing the adaptive skills and
knowledge application capabilities of team members inside an organization. Transferring
one individual's private and practical knowledge to another is extremely challenging. In
order to change team habits and enhance team members' expertise, knowledge transfer
thus tries to mix both the practical and the personal.

2. Explain the importance of readiness of both parties (client – service provider) in

transition period.

 Client

Transition is more than just the delivery of the service provider's workforce and
operational procedures. Clients are accountable for the tasks in each transition work
stream and must work together in the overall management of both the transition and the
arising service to deliver the business case, so it is crucial that they are prepared for the
transitional period as they will take control and drive the majority of transition
responsibilities.

 Service Provider

The service provider must be prepared for the transition phase, have project and business
managerial experience, and be a skilled professional. Because the implementation and
administration of a transition involve particular tools and approaches, it takes people with
the right expertise to deal with the installation of an outsourced service. To keep
the customer satisfaction high, service providers need to have the depth and breadth of
knowledge necessary to manage operations.

Activity/Assessment #5

1. Explain the 6 components of IT-BPM Operations Management.

 Perceived Quality

A client's perception of the excellence of a goods, service, or company is known as

perceived quality. The concept can be applied by outsourced experts to forecast
consumer perceptions of a product. Whenever a product's perceived value rises, a
company can charge more for it to sell in the market, and will eventually a way to enhance
profits.

 Intrinsic Attributes

The advantages offered to clients are considered as the intrinsic qualities of a service.
This creates a genuine idea that the company is profitable and be well received by the
industry, adding value for the business.

 Extrinsic Attributes

Extrinsic characteristics include those that are connected to the service but do not
represent as a part of the service package.
  Monetary Price

A goods or service's monetary price is its value expressed in terms of currency. In certain
situations, things with monetary price may take the role of currency and serve as a means
of trade.

 Non-Monetary Price

The time spent looking for a product and the risk involved that will provide the desired
results are included in the non-monetary cost of buying something.

 Time

In BPO, time is vital in guaranteeing efficient business operations. Additionally, it provides

a number of advantages like improved worker performance and effective labor
management.

2. Explain the business process mapping and notation.

Business processes are represented visually using a technique called business process
mapping and notation. The data is presented in a flowchart-like layout that is simpler to
read and use. It enables businesses and organizations to see, record, and
analyze business processes, and discuss them in a universal language. It also offers a
notation that is clearly understood by all individuals involved, including the technical
developers who construct the system that executes the operations, the employees who
utilize the technology, and industry experts who draft the initial versions of processes.
Activity/Assessment #6

1. Explain the critical situations in IT-BPM operations and creatively formulate

solutions in solving issues and problems especially in implementing changes due
to transitions.

 Critical Situations in IT-BPM Operations

Businesses across a variety of industries have realized the value of outsourcing as a

means of obtaining best employees, a cost-effective labor, and infrastructure.
Outsourcing is made even more interesting by features including cheaper costs, better
efficiency, better returns, and flexible staffing. However, since outsourcing was primarily
created to operate without consideration for national boundaries, there are various
factors that have an effect on this field and make it more difficult or challenging.

The first critical situation in IT-BPM is the environment regulation. Acquiring people from
other countries that can accomplish duties for your company is difficult because it is the
essence of outsourcing. The BPO industry has encountered this as its biggest hurdle
ever since outsourcing began. To establish a concise legal framework for outsourcing
partners and those operating in the outsourcing industry, its regulatory organizations
have issued numerous compliance-related papers.

The next critical situation is the cost of doing business. The BPO industry has been
represented as a massive business that cuts costs ever since it began expanding.
Everyone are able to see advertisements that are guaranteeing to provide access to
outstanding talents at a reasonable cost. The BPO sector has evolved over the years
into a large source of income, but for many outsourcers, cost-of-operation and budget
are still their highest issues. They are expected to offer the best possible service, but
this may be a major challenge for the BPO industry because customer has high
expectations with their service.

Also, employee attrition was one of the main issues BPO businesses. The attrition rates
also continue to rise over time because it appears that the BPO firms have not yet
discovered out how to provide employment for their staff.

The last critical situation in IT-BPM is the brand building and equity. The factors that
was first mentioned have an effect on the BPO businesses' brand image and their future
in the industry. Because of the large number of market-related factors, it is extremely
hard for BPO companies to formulate a long-term branding strategy, which greatly
reduces the speed at which brand equity is being built.

 Solutions in Solving Issues and Problems

BPOs must devise approaches to prevent the negative cycle of declining margins if they
are to successfully address the present BPO issues. To solve critical situations in the
business it is best that the BPO industry creates a new and more valuable service
channels, uses tech support, utilizes customer service technologies to improve present
service provision, reexamines customer experience costs, and presents new pricing
strategies based on customer success.