Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external provider that in turn owns, administers and manages the selected process based on defined and measurable performance criteria. Some of the motivation factors as to why BPO is gaining ground are:

• Factor Cost Advantage
• Superior Competency
• Utilization Improvement
• Economy of Scale Business Risk Mitigation

Customers across verticals like Insurance, Banking, Pharmaceuticals, Telecom, Automotive and Airlines seem to be the early adopters of Business Process Outsourcing. Of the vertical listed above insurance and banking are able to generate bulk of the savings purely because of the large proportion of processes they can outsource like claims processing, loans processing and client servicing through call centers.

Improvement in cost, quality and productivity has encouraged customers to rapidly scale up their offshore operations. It is no longer seen as a one-time cost reduction or process improvement but customers are demanding year-on-year improvements in process metrics.

Offshore

Unconverted Image It is not hard to find why moving non-critical functions offshore makes sound business sense. Among the reasons are:

• In an increasingly competitive environment, there is a greater need for the representatives of the company to be available all the time
• The advent of technology makes communication between local and offshore centers easy. Popular devices include videoconferences over the Internet, shared folders across locations, automatic replication of critical databases across multiple locations, etc.
• Organizations find themselves struggling to procure quality resources at reasonable costs. Organizations also face tremendous pressure to lower operational costs, and offshore centers cost as much as 40% less to run than local centers performing the same function.
• Having an offshore office also provides new business opportunities. For example an organization that has successfully moved its back office offshore can perhaps think of offering similar back office services to other companies.
• Those offices also provides organizations with accessibility to a global market, thereby widening its reach. Frequently organizations start doing business in the countries where they have a back office because the existing infrastructure makes it easier to take the step.
• Having an offshore office gives the company improved business focus, with the local offices concentrating on core competencies that increase revenue and market share, while the offshore offices focus on improving operational efficiency and therefore profitability.
• Because of the significant cost advantages that an organization gains by having an offshore back office, it can afford larger data analysis and data mining teams. This leads to improved business practices that ultimately lead to greater profitability
• It also allows an organization to get the best skills the world has to offer, taking wireless skills from Europe, programming skills from Asia and so on. Having the best of breed work for the organization increases its competitiveness and helps it grow.