Business Process Outsourcing

Topics: Business process outsourcing, Outsourcing, Business process Pages: 5 (1407 words) Published: March 19, 2008
The trend in the world of business grows rapidly. Historically, it is difficult to find the best solutions for the common issues in business such as quality, cost and innovation. Nevertheless, business experts have reacted by implementing strategies. One of these strategies is "the farming out of services to a third party" (Overby 2007), which is called outsourcing .According to The Daily Telegraph (2007), worldwide outsourcing is now valued at approximately $US4 trillion. Originally, it was thought that only IT management could be outsourced. However, this has changed as the Business Process Outsourcing (BPO) issue became a major point of discussion in the second half of 2003 (Click and Duning 2004, 209). This paper will define The BPO as well as its styles. Moreover, it will explain the categories of BPO with focus on some examples in Australia. Finally, it will outline the future effects of BPO on Australian politics and Australian workforce.

Since the second half of 2003, many definitions of BPO have been presented. Furthermore, to define BPO, lots of challenges have appeared. One of them is that the BPO refers to the outsourcing of any business process, which means a wide scope of possibilities such as financing, human resources, marketing and asset management (Halvey and Melby 2007, 3-4). In any case, as Halvey and Melby said (2007, 4) an official definition of BPO is found in The End-User Executive's Guide to PBO, which defines BPO as "the delegation of one or more intensive business processes to an external provider who, in turn, administrates and manages the selected processes based upon and measurable performance metrics."

In addition, there are three different styles of BPO. Firstly, offshore BPO, which is the most challenging and argumentative type (Click and Duening 2004, 20). It is the movement of jobs to other countries in order to take the advantages of lower wages overseas. According to Click and Duening (2004), in fact, by using this style companies can save 20-40 per cent from their overall costs. Therefore, managers use this way to perform some operations such as manufacturing, programming, financial analysis and call centre.

The second style of BPO is onshore BPO. This is defined as outsourcing some business functions to local sources, which specialized in the required employment area (Click and Duening 2004, 22). Overby (2007) states that the cause of this outsourcing is "increased flexibility to meet changing business and commercial conditions". In addition, Click and Duening (2004) notes that companies use this style to transfer service functions to best-in-class performance to gain competitive advantage.

Thirdly, nearshore BPO, which is the movement of jobs overseas but not faraway from the original country. According to Click and Duening (2004), this style is less complicated than offshoring because it allows companies to test the BPO without a high level of risks. Moreover, companies use this strategy because it is still reducing costs and it allows them to keep their tasks tightly under control. This style was opened when some American companies outsourced to Mexico, Canada and Central of America.

To facilitate any discussion about BPO, Halvey and Melby (2007) divided it into several categories. The first category is finance and accounting, which includes many processes such as cash management, tax compliance, budgeting and contracts maintenance. In fact, tax compliance is a subject of outsourcing for longer than most of financial tasks. Because taxes, in numerous ways are similar to the practice of law, they need more special outside firms to be managed (Halvey and Melby 2007, 5).

The second category is human resources. Halvey and Melby (2007) have said human resources management has become the most attention feature of BPO in the last few years. Also it has the greatest number of transactions. Chafkin (2007) said "world wide, the industry now accounts for US$88 billion in...
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