MODULE 1 AND 2
inventory for back-to-school sales, or scaling up customer support during peak travel
Outsourcing -refers to the practice of contracting out certain business functions or processes
to external service providers.
It-BPM industry - (Information Technology-Business Process Management) industry
integrates IT services with business process management solutions, providing businesses
with comprehensive technological and operational support. It plays a pivotal role in optimizing
business processes, leveraging technology to enhance efficiency, productivity, and
competitiveness.
Why do companies outsource?
1. Capacity Management -Outsourcing allows companies to manage fluctuations in
workload by accessing additional resources when needed.
2. Lower cost- Outsourcing can be more cost-effective than hiring and maintaining in-
house staff, especially for tasks that can be performed more efficiently by specialized
external providers.
3. Better Performance- External service providers may have specialized skills and
resources that lead to improved performance and quality in certain areas.
4. Faster and continuous Service- Outsourcing enables companies to provide
services around the clock or achieve faster turnaround times by leveraging service
providers in different time zones.
5. Part-based Activities- Companies can outsource specific parts of their operations or
processes, rather than outsourcing entire functions.
What is being outsourced or what to outsource?
1. Support or auxiliary services- refer to additional services that support the primary
functions or operations of a business.
Examples of support or auxiliary services:
customer support, technical assistance, administrative tasks, facilities management,
and other ancillary functions that contribute to overall business operations.
2. Routine Activities or activities that can be automated at large contract - refers to
tasks or activities within a business that are repetitive or mundane in nature and can
be automated using technology.
3. It Services- refer to a broad range of activities and support provided by information
technology professionals or service providers to help organizations manage,
maintain, and optimize their technology infrastructure and systems. These services
encompass various aspects of technology, including hardware, software, networks,
security, and data management. Examples of IT services include:
software development, network administration, cybersecurity, cloud computing, IT
consulting, technical support, and system integration..
4. Seasonal Requirements- refer to temporary or fluctuating needs that occur during
specific times of the year. In business, this term often describes situations where
companies experience peaks or surges in demand for products or services during
seasons or periods. To meet these temporary demands, companies may need to
adjust their workforce, production capacity, or service levels accordingly. Seasonal
requirements could include hiring temporary staff for the holiday season, increasing
times.
5. All Part-based Activities- refer to any aspect of a business operation that can be
segmented or broken down into smaller parts or components. These activities can be
outsourced individually or collectively to specialized service providers. By outsourcing
all part-based activities, companies can delegate specific tasks or functions to
external vendors while focusing on their core competencies and strategic objectives.
What not to outsource? (mga core process)
Design
Product Development
Process
Recipe
NON-CORE ACTIVITIES/TASKS/PROCESSES: These refer to tasks or processes within a
business that are not directly related to its primary function or core competencies.
Examples may include:
administrative tasks, maintenance, cleaning, IT support, or other ancillary functions that can
be outsourced or streamlined to focus resources on core activities.
CORE ACTIVITIES/TASKS/PROCESSES: These are the fundamental functions or
operations within a business that are central to its mission, value proposition, and competitive
advantage. Core activities are directly related to the company's primary products or services
and are essential for its success and differentiation in the market. Examples may include
product development, sales, marketing, customer service, research and development, and
strategic planning. Focusing on core activities allows businesses to allocate resources
effectively, capitalize on strengths, and maintain a competitive edge in their industry.
TWO TYPES OF OUTSOURCING
1. Third-Party Outsourcing: Third-party outsourcing, also known as traditional outsourcing,
involves contracting with external service providers or vendors to perform specific tasks,
functions, or processes on behalf of the outsourcing company. Third-party outsourcing allows
companies to leverage the expertise, resources, and scalability of external providers, often
resulting in cost savings, increased efficiency, and access to specialized skills.
2. Shared Service Center (SSC): A Shared Service Center (SSC) is an internal business
unit or department within a company that consolidates and centralizes certain support
functions or services that are commonly needed across different parts of the organization.
STRATEGIES FOR OUTSOURCING
1. Multisourcing: involves engaging multiple service providers to handle different aspects of
a company's operations or projects. Instead of relying on a single outsourcing partner,
companies spread their outsourcing needs across multiple vendors to mitigate risks, increase
flexibility, and leverage specialized expertise. Multisourcing allows businesses to avoid
vendor lock-in, improve service quality through competition, and tailor outsourcing solutions
to specific requirements.
2. Crowdsourcing: involves outsourcing tasks, projects, or problem-solving activities to a
large group of people, typically through an open call or online platform. Companies tap into
the collective intelligence, skills, and creativity of a diverse crowd of individuals or
communities to generate ideas, gather data, complete microtasks, or solve complex
problems. Crowdsourcing enables companies to access a broad range of talents and
perspectives, accelerate innovation, and reduce costs compared to traditional methods of
sourcing talent or solutions.
3. Onshoring: also known as insourcing or domestic outsourcing, involves outsourcing
business processes or services to service providers within the same country as the
outsourcing company. Unlike offshoring, which involves contracting with overseas vendors,
onshoring leverages local resources, labor, and expertise. Onshoring can offer benefits such
as proximity to the company's headquarters, cultural alignment, language compatibility, and
reduced logistical challenges, while still potentially providing cost savings compared to in-
house operations.
4. Nearshoring: is like offshoring but involves outsourcing business processes or services to
service providers in neighboring or nearby countries, often within the same region or
geographic area. Nearshoring offers advantages such as geographical proximity, similar time
zones, cultural affinity, and lower travel costs compared to offshoring to distant locations.
Nearshoring can help companies maintain operational efficiency, streamline communication,
and minimize risks associated with offshore outsourcing, such as language barriers and
regulatory differences.
5. Offshoring: involves outsourcing business processes or services to service providers
located in a different country, typically in a region with lower labor costs or specialized
expertise. Offshoring allows companies to access a global talent pool, reduce labor
expenses, and leverage economies of scale. Common offshoring destinations include
countries in Asia, Eastern Europe, and Latin America. However, offshoring may also present
challenges such as cultural differences, language barriers, time zone discrepancies, and
regulatory compliance issues.
KEY TECHNOLOGIES- refer to the foundational tools, platforms, systems, or methodologies
that play a critical role in driving innovation, efficiency, and competitive advantage within an
industry or organization. These technologies represent fundamental components of modern
business operations and enable businesses to streamline processes, enhance productivity,
and deliver value to customers. Examples of key technologies may include cloud computing,
artificial intelligence (AI), machine learning, data analytics, Internet of Things (IoT),
blockchain, cybersecurity solutions, and automation technologies. Understanding and
leveraging key technologies are essential for businesses to stay relevant, agile, and
successful in today's rapidly evolving digital landscape.
FUNDAMENTALS OF OUTSOURCING - refer to the basic principles, strategies, and
practices that underpin the process of delegating specific business functions, processes, or
tasks to external service providers.
MODULE 3
CLIENT COMPANY: also known as the client or the outsourcing company, refers to the
organization that engages the services of another entity, typically a service provider, to
perform specific tasks, functions, or processes on its behalf. The client company is the entity
that outsources certain business activities or operations to external partners in order to
leverage their expertise, resources, and capabilities.
SERVICE PROVIDER: also known as the vendor or the outsourcing partner, refers to the
entity that offers and delivers outsourced services to client companies. Service providers can
be external organizations or internal departments within a larger organization, such as a
shared service center. Service providers specialize in providing specific services, such as IT
support, customer service, accounting, or manufacturing, and may offer a range of expertise,
resources, and capabilities tailored to meet the needs of their clients.
IT-BPM contract- a formal agreement between client and service provider.
The SCOPE OF WORK (SOW) refers to a document that outlines the specific tasks,
activities, deliverables, timelines, and requirements associated with a project or contract. It
serves as a detailed roadmap or blueprint that defines the boundaries and expectations of the
work to be performed by a service provider for a client company. The SOW typically includes
key project objectives, project scope, project milestones, resource requirements, payment
terms, acceptance criteria, and other relevant details. It is used to ensure alignment between
the client and the service provider regarding project goals and deliverables and serves as a
basis for assessing performance and managing expectations throughout the project lifecycle.
A MASTER SERVICES AGREEMENT (MSA) is a legal contract that establishes the terms
and conditions governing the relationship between a client company and a service provider
over an extended period or multiple projects. The MSA serves as a framework agreement
that outlines the general terms, rights, and obligations of both parties, including issues such
as scope of services, pricing, payment terms, confidentiality, intellectual property rights,
dispute resolution, and termination clauses.
IT-BPM CONTRACT: CORE ELEMENTS
1. Service to be rendered or provided - documented in the SOW. The "service to be
rendered or provided" refers to the specific tasks, deliverables, and responsibilities
outlined in the Scope of Work (SOW) document between the client and the service
provider. This serves as a contractual agreement detailing the nature, scope, and
expectations of the services to be performed, providing clarity and guidance for the
project's execution.
2. Performance Standards- expected from the service provider, service level
agreement (SLA), and Key Performance Indicator (KPI). Performance standards
are defined criteria used to measure the quality, efficiency, and effectiveness of
tasks, processes, or services. They provide clear benchmarks for evaluation,
ensuring consistency, accountability, and alignment with organizational goals.
● A Service Level Agreement (SLA) is a contractual agreement between a
client company and a service provider that defines the expected level of
service to be provided. The SLA outlines specific metrics, performance
targets, responsibilities, and penalties or remedies in case of non-
compliance. It serves as a formal document that establishes mutual
understanding and expectations regarding the quality, availability,
responsiveness, and reliability of the services being delivered.
● A Key Performance Indicator (KPI) is a measurable value or metric used to
evaluate the performance, effectiveness, and success of an organization,
department, process, or individual. KPIs are specific, quantifiable, and
relevant to the goals and objectives of the entity being measured. KPIs are
commonly included in Service Level Agreements (SLAs) to measure and
monitor the performance of service providers and ensure adherence to
agreed-upon standards.
3. Timeline - Start Date: The timeline, particularly the start date, refers to the
scheduled or agreed-upon commencement date for a project, task, or activity. It
marks the point at which work officially begins and sets the pace for subsequent
activities and milestones. The start date is crucial for planning and coordinating
resources, allocating budgets, and ensuring timely completion of the project. It is
typically specified in project plans, contracts, or agreements to provide clarity and
alignment between parties involved.
4. Costs refer to the financial expenditures associated with a project, task, or activity.
These may include direct expenses such as labor, materials, equipment, and
services, as well as indirect costs such as overhead, administrative expenses, and
contingencies. Costs are a fundamental aspect of project management and play a
significant role in budgeting, resource allocation, and financial planning.
Understanding and managing costs effectively are essential for ensuring project
viability, profitability, and success.
5. Other specific operational requirements refer to any additional or unique needs,
specifications, or conditions that must be met in order to successfully execute a
project or task. These requirements may include technical specifications, regulatory
compliance, quality standards, safety protocols, environmental considerations, or
other operational parameters specific to the nature of the work being performed.
Identifying and addressing these requirements upfront is essential for ensuring that
the project is carried out efficiently, effectively, and in accordance with the
expectations of stakeholders. They may be outlined in project plans, contracts, or
agreements to ensure clarity and alignment among all parties involved in the project.
IT-BPM CONTRACT (PRICING MODELS)
1. FIXED PRICE, also known as a lump-sum or fixed-cost contract, is a pricing model
where the total cost of a project or service is predetermined and agreed upon
between the client and the service provider. In a fixed-price arrangement, the service
provider commits to delivering the agreed-upon scope of work for a set price,
regardless of the actual time or resources required to complete the project. This
pricing model provides cost certainty and predictability for the client, as they know the
total cost upfront and are protected from cost overruns. However, the service
provider assumes the risk of underestimating the effort or encountering unforeseen
challenges during project execution.
2. TIME AND MATERIAL, also known as cost-plus or rate-based pricing, is a pricing
model where the client pays for the actual time spent and materials used by the
service provider to complete a project or deliver a service. Under this arrangement,
the client is billed based on the hourly rates of the service provider's personnel and
the cost of materials or resources consumed during project execution. Time and
material contracts offer flexibility for both parties, as the client pays only for the actual
work performed and can adjust project requirements or scope as needed. However,
this pricing model may lack cost predictability for the client, as the final cost depends
on the actual time and resources expended by the service provider.
IT-BPM CONTRACT (FINANCIAL)
● Capex(Capital Expenditure) refers to the funds allocated by a company for the
acquisition, enhancement, or maintenance of long-term assets or investments that
are expected to provide future benefits or value. In the context of IT-BPM contracts,
Capex may include expenses related to purchasing hardware, software licenses,
infrastructure upgrades, or other capital investments necessary to support the
operations or growth of the business. Capex is typically incurred upfront and is
amortized or depreciated over time, reflecting the gradual consumption of the asset's
value.
● Opex (Operational Expenditure) refers to the day-to-day operating expenses
incurred by a company in the course of its ongoing business activities. Opex may
include costs such as salaries and benefits for personnel, utilities, rent, maintenance
contracts, software subscriptions, and other operational expenses required to deliver
services or support business operations. Unlike Capex, which involves upfront
investment in long-term assets, Opex is expensed immediately and reflects the
ongoing operational costs of running the business.
COMPONENTS OF PROCESS COST
1. Labor cost refers to the total expenses incurred by a company in employing its
workforce, including wages, salaries, benefits, and other related expenses. It
encompasses the direct compensation paid to employees for their time and efforts
expended in performing tasks or delivering services. Labor cost is a significant
component of operational expenses for many businesses and is typically tracked and
managed closely as part of overall cost management and budgeting efforts.
 2. Direct costs are expenses that can be directly attributed to a specific product,
service, project, or department within a company. These costs are incurred as a
result of producing or delivering a particular output and can be easily traced to the
activity or cost object in question. Examples of direct costs include raw materials,
labor costs directly associated with production or service delivery, equipment rental,
and other expenses directly tied to the production or provision of goods or services.
Direct costs are essential for calculating the cost of goods sold (COGS) and
determining the profitability of specific activities or projects.
3. Indirect costs, also known as overhead costs or operating expenses, are expenses
that cannot be directly attributed to a specific product, service, or project but are
incurred as part of the general operation of a business. These costs are necessary to
support the overall functioning of the company but are not directly tied to producing or
delivering a specific output. Examples of indirect costs include rent, utilities,
administrative salaries, marketing expenses, insurance, and depreciation of
equipment. Indirect costs are allocated or apportioned across various cost centers or
activities based on a predetermined allocation method and are essential for
determining the total cost of operations and profitability of the business as a whole.
COMPONENTS OF LOADED ANNUAL COST
✓ LOADED ANNUAL COST -refers to the total expenses associated with
employing a staff member for a year, taking into account not only their direct
compensation but also additional costs such as benefits and infrastructure support.
Here are the components of the loaded annual cost:
1. Compensation - This includes the base salary or wages paid to the employee for
their work. It represents the primary form of direct financial compensation for their
services.
2. Benefits - encompass additional forms of compensation provided to employees
beyond their base salary. This may include health insurance, retirement
contributions, paid time off (such as vacation and sick leave), bonuses, stock options,
and other perks or incentives offered by the employer.
3. Infrastructure costs include the expenses associated with providing the necessary
tools, equipment, facilities, and support services for the employee to perform their job
effectively. This may include the cost of office space, utilities, equipment (such as
computers and software), office supplies, communication tools, and other resources
required for the employee's work.
✓ REGULATORY REQUIREMENTS - refer to rules, standards, laws, and guidelines
established by government agencies or regulatory bodies that organizations must comply
with to operate legally and ethically. These requirements are designed to ensure the safety,
security, fairness, and integrity of various industries and protect the interests of consumers,
employees, and the public. Examples of regulatory requirements may include environmental
regulations, labor laws, data protection laws, industry-specific regulations, licensing
requirements, and financial reporting standards. Organizations are obligated to understand,
implement, and maintain compliance with applicable regulatory requirements to avoid legal
liabilities, fines, penalties, and reputational damage.
_ BSOI QUALIFICATION AND REQUIREMENTS -BSOI stands for "Business Standards
Outsourcing Initiative." BSOI qualification and requirements likely pertain to specific
standards, certifications, or qualifications that outsourcing service providers must meet or
adhere to in order to participate in outsourcing initiatives or projects. These requirements may
encompass criteria related to quality management, security protocols, data protection
measures, industry best practices, and ethical standards. Meeting BSOI qualification and
requirements demonstrates a service provider's commitment to delivering high-quality,
reliable, and compliant outsourcing services to their clients.
ADHERENCE TO GOVERNMENT REGULATIONS
( external)-refers to the obligation of organizations to comply with laws, regulations, and
policies established by governmental authorities at the local, national, or international level.
This includes laws and regulations related to taxation, labor practices, environmental
protection, consumer rights, trade, and industry-specific regulations. Adherence to
government regulations is essential for maintaining legal compliance, ensuring ethical
business practices, and mitigating risks associated with non-compliance, such as legal
penalties, fines, sanctions, and reputational damage.
INDUSTRY COMPANY REGULATION(internal)-refers to internal policies, procedures,
guidelines, and standards established by an organization to govern its operations, practices,
and behavior within the industry. These regulations are developed by the company itself and
may be based on industry best practices, ethical principles, corporate values, and strategic
objectives. Internal regulations may cover various aspects of the organization's activities,
including quality control, safety protocols, data security measures, employee conduct,
customer service standards, and corporate governance practices. Adhering to internal
regulations helps organizations maintain consistency, accountability, and alignment with their
mission and objectives while ensuring operational efficiency and ethical conduct.
BOARD OF INVESTMENT(BOI)-is a government agency or authority typically established by
a country's government to promote and regulate investments in specific industries or sectors.
The BOI's primary role is to attract both local and foreign investments by offering incentives,
tax breaks, and other benefits to investors. It also provides assistance and support to
investors throughout the investment process, including facilitating permits, licenses, and
approvals.
DATA PRIVACY LAW (R.A No. 10173), is a legislation enacted in the Philippines known as
the "Data Privacy Act of 2012." This law aims to protect the privacy of individuals and ensure
the security and confidentiality of personal data collected, processed, and stored by
organizations. It establishes guidelines and standards for the processing of personal
information, including requirements for data collection, use, disclosure, storage, and disposal.
The Data Privacy Law also grants rights to data subjects, imposes obligations on data
controllers and processors, and sets penalties for violations of data privacy principles.