Types of Business Process Outsourcing

Human Resources (HR)
Most companies need HR or personnel services to recruit new staff, implement new procedures and processes, draft employment contracts etc. Because HR legislation is updated regularly, and general management might not always be aware of the latest changes, potential legal implications can be expensive.
Key HR areas that can benefit from being outsourced:
benefits administration,
salaries and holiday admin,
recruitment, training and personnel development,
organisational personnel requirements,
disciplinary issues.

If certain processes and procedures are not adhered to, for example with regard to disciplinary issues, this can result in costly litigation. Typical businesses that outsource HR tend to be in the region of 25-1,500 employees. Companies that are larger tend to keep HR in-house as at that point it can be more cost effective.

Finance is one of the most important functions within an organisation and processes must be followed meticulously. Finance can be a high overhead in terms of resource and procedures even to the extent of raising invoices, matching them against purchase orders and bank reconciliation which have to be accurate and in most instances can not be replaced by accounting software.

For example, payroll is a frequently outsourced process, simply because having the resources to carry out the task just once per month are worth having. However, when it comes to critical business processes like accounts receivable, do bear in mind that any issues can have a major impact to your business so you want to retain this in-house. Ultimately the Finance Director should still retain control and have overall responsibility.

This means that (as with all business process outsourcing processes) the finance team can focus on more strategic issues or areas that are more important to the day-to-day running of the business.

Document management
By outsourcing the document management process, companies can improve their use of data and find documents quicker. Information will be more easily retrievable and stored on a computer system to save physical office space. A document management system is held online with the data being held at a third party’s premises and accessed via the web.
Even small companies generate large amounts of data and recording and storing this can be time consuming and expensive.

Furthermore, being able to access records and data quickly can help a company maximise its intellectual property. For example, if an individual has already written a particular document that can be re-used many times, then this saves time and resource.

It is also very important to be able to record and access key records for compliance purposes. All companies have to adhere to some form of legislation that compels them to retain information for a set period of time. For instance, HM Customs and Revenue in the UK require individuals and companies to keep financial records for at least seven years.

Procurement or purchasing is a function of the Finance Department. Regardless of the size of a company, this can be an overhead especially if the finance department have to negotiate and look for appropriate suppliers.

By outsourcing procurement a company can benefit in a number of ways. The BPO service provider can:
monitor supplier performance.
implement appropriate processes and procedures,
manage requests for information or proposals and recommend the best potential suppliers,
select suppliers and issue and manage legal contracts.

The BPO service provider can help reduce costs through more thorough evaluation of supplier performance, an in depth knowledge of the markets within which they work and because they may purchase in volume for a number of customers, these savings may be passed onto the customer.

Software development
This is increasingly being outsourced or ‘off-shored’, with software development teams based in areas such as Central and Eastern Europe and Asia where there is access to highly educated, low cost personnel. This is because the social costs in these growing economies are currently far lower than in the western economies.

It is also far more productive and effective to have a team of people used as and when required rather than having full time developers on site unless the business can really warrant it. The majority of software vendors have teams based outside of their main domain for this reason.

Call centres
A call centre is a centralised office that facilitates large amounts of inbound and outbound telephone calls. Call centres have a number uses:

Telemarketing and telesales (out-bound calls)
BPO can encompass the outsourcing of sales and the sales process. Certain products and services are much easier to sell via the phone and don’t require a ‘face to face’ meeting. As a result, the costs for marketing and selling such a product will be drastically reduced. Furthermore, when this process is ‘off-shored’ because of labour costs, the cost of sale will be further reduced. BPO companies that are able to carry out this function have all the facilities including specialist phone systems and software to monitor and manage calls and the process thereafter.

Data cleansing
Data cleansing is a system where an individual or individuals phone the contacts within a database in order to ensure that all the details such as contacts, phone numbers etc. are correct. This allows sales people to phone and send emails safe in the knowledge that the information is up to date. Again, it is far more cost effective to offshore this process as the costs to do this activity in the UK can make it uneconomical.

Customer services (in-bound calls)
To outsource the inbound call process is also generally more economic. Many banks and financial services organisations have outsourced their customer services facilities. BPO companies that facilitate this, again have the up to date equipment and software that enables a seamless and fast way of dealing with queries and resolving issues. Such systems include the ability to ensure that customers never have to wait for too long for a call to be answered, if at all by using an automatic call distribution system that will route each call automatically to the next free call-centre employee. Some even have the capability to recognise when a customer is getting irritated or annoyed and automatically sends an alert to a manager who can intervene if necessary.

Legal issues
You have to keep a number of key business issues in mind when outsourcing, especially when it comes to personnel and their contracts of employment and their legal rights. This is encompassed by a piece of legislation entitled Transfer of Undertakings (Protection of Employment) Regulations 2006 or TUPE as it commonly known. In summary, TUPE ensures that:

  • Employees are not dismissed before or after any BPO agreement is in place. This means that BPO cannot be used as an excuse to make personnel redundant.
  • Employees are informed and represented throughout the process.
  • Employees’ rights are not affected by the BPO, i.e. their salaries and packages must not be worse. This includes pensions and pension rights, holidays etc. In essence, employees’ terms and conditions must remain the same.

If these regulations are not adhered to, and an employee is dismissed as a result of the BPO, then this will be regarded as unfair dismissal and the company may be held legally liable.