Business Process Outsourcing  offshoring processing of bills of

lading to centres in other time-zones

MODULE 1 to complete task faster
Outsourcing Part-based Activities
 buy something from somebody rather  automobile components
than producing it ourselves  cruise-ship rooms
 contracting of a service provider for  airplane avionics
the delivery of a process or service  desktop build and configuration
“Why company outsource?” “What is being outsourced?”
Capacity Management Support or Auxiliary Services
 need to acquire/buy/hire (temporary)  cafeteria
capacity  janitorial services
 demand chasing (one day 50  copy centre
employees needed, next day only 10  security
are needed)  payroll
Lower Cost Routine activities or activities that can be
 replace expensive local or in-house automated at larger centers
resources with less expensive  small banks
resources from external service  small vendors
providers  banks using common/multi-bank core
 tax differential or government banking services
incentive programs in other locations
leading to lower cost IT Services

Better Performance  application development

 application maintenance and
 use of specialized external providers management
which can deliver service quality,  production/data-center operations
innovation  production technical/systems support
 Sales Force – providing web-based  helpdesk
sales management  SaaS
 PeopleSoft – providing employee-  cloud services
facing tools
Advantages of Outsourcing – Employer
Faster and Continuous Service
 the service provider determines most
 greater output from work being done efficient number of resources,
around the clock process, and supervision to achieve
 offshoring market research support to output
locations in reverse time zones  service provider – may have more
expertise/capability than the buyer
  technical support Shared Service Center (SSC)
 accounting
 wholly-owned by the mother
 animation
company
 buyer – can leverage economies of
 providing services entirely to
scale of the Service Provider
affiliates and subsidiaries, or more
 technical infrastructure
rarely to clients of the mother
 human resources
company
 technical expertise
 “work abroad, live here” Multisourcing – multiple vendors for
 professional growth client’s outsourced project
 financial independence
 employee assistance Crowdsourcing – puts out a call for a
 enjoy your favourite food project; best solution/submission is
accepted and contracted
Disadvantages of Outsourcing – Employer
Onshoring – vendor in the same home
 cost can be higher country as client
 provider may add premium
for risk in case processes are  allows immediate response
not well defined  local contractors have same
 buyer does not have full control of market knowledge, culture,
resources doing work language, communication style
 shifting schedule – gives the  risk of inadequately selected,
opportunity to pursue passion and trained, supervised staff
interest during the day  risk of higher attrition
 dealing with irate customer Nearshoring – the transfer of business to
 there is training support on a nearby country, often sharing the same
how to deal with irate border
customer
 there is also floor support  fee-for-service variability rather
 companies provide facilities than fixed compensation
and activities to help you  significant labor cost arbitrage
unwind  additional coordination costs,
sourcing management,
MODULE 2 communications
 transfer pricing/tax margin
Third Party
requirements
 owned by a service provider a local
Offshoring – vendor and client in
entity or part of o global group
different countries
 providing services to clients of the
service provider  allows company to focus on core
business
 fast ramp-up/down at reasonable
cost
  data privacy/confidentiality  MS windows meeting space
issues  MS sharepoint
 lack of right business  google application
acumen/right market knowledge
in offshore location MODULE 3
 cultural differences leading to Client Company – transferring business
delays and miscues process to other company
 risk of high attrition in service
provider, weak staff  quality transition
selection/training  efficient operation

Core Activities-Tasks-Processes Service Provider Company – the one who

do the work and accepts, render and provide
 primary process or product of the service
business
 tasks that deliver the primary product,  scope of service
the unique value proposition of the  performance measures
company  benchmarks (standard)
 “essential, defining activities of an IT-BPM Contract – formal agreement
organization” between the client and a service provider, is
 design also well-documented and unique
 product development
 process Master Services Agreement – covering
 “recipe” agreement that summarizes terms applicable
to every job-order with the service provider
Non-Core Activities-Tasks-Processes
a. services to be provided (operational)
 Support activities, processes, b. performance management, issues,
functions change management (operational)
IT Development – programming, c. country laws (subjective)
documentation, unit and integration testing, Scope of Work – describes specific work to
implementation of new systems, conversion be delivered, by when and at what cost
to new platforms
 can be similar to “job order”
IT Maintenance – application maintenance,  is generally an attachment/addendum
helpdesk, network support to a Master Agreement, points to
Video Conferencing covering terms
 may state that in case of terms
 HP inconsistency, the SOW or Master
 cisco Agreements supersedes
 sun
Web-based conferencing and workflow
tools
 WebEx
Core Elements  wage or salary, benefit, utilities,
maintenance & repair
 Services to be rendered or provided
as documented in the Scope of Work Components of Process Cost
(SOW)
a. Direct Costs – binabayad sa
 Performance standards expected
empleyado
from the service provider; Service
 compensation
Level Agreements (SLA), Key
 benefits
Performance Indicators (KPI)
 bonuses
 Timeline – start date and duration
 incentives
 Costs – client
b. Labor Costs
Fixed Price  Employee development
(training)
 hindi nababago
 Employee Tools/Equipment
 kung anong napag-usapan na price,
(desktop, computers)
yun na yon
 Coordination and
 easy to plan and more predictable
management (travel,
than other pricing models
representations, meetings and
 known in advance (service
workshops)
providers)
c. Indirect Costs
 provides greater cost certainty
 Infrastructure
(clients)
 Other charges
 several risks with capital
d. Loaded Annual Cost – nagagastos
requirements and lower
ng company annually or yearly
flexibility
 compensation
Time and Material  benefits
 Infrastructure
 nababago
 base sa time and performance IT-BPM Contract Financials
 used when a service is very flexible
Adherence to Government Regulations
and it is not predictable in terms of
(External)
how much time and material is
needed  Board of Investments (BOI)
 created under the Department
IT-BPM Contract Financials
of Trade and Industry
CAPEX – Capital Expenditures  strives to attract direct
investment into the country to
 initial cost (start ng operation) contribute to economic
 machineries, equipments and growth and jobs creation in
furniture the Philippines
OPEX – Operational Expenditure  At least 50% of the production
is marked for export (for 60%
 day-to-day cost (basis or operation) Filipino - 40% Foreign-owned
 enterprises); or at least 70% of VISION
production is marked for
 A premier national university that
export (for more than 40%
develops leaders in the global
Foreign-owned enterprises)
knowledge economy.
 can only be registered with the
BOI if they propose to engage MISSION
in an activity listed or
classified in the IPP as  A university committed to producing
pioneer. leaders by providing a 21st century
 export requirement is at least learning environment through
70% of actual production innovations in education,
 Bureau of Internal Revenue multidisciplinary research, and
 Bureau of Immigration community and industry partnerships
in order to nurture the spirit of
Industry/Company Regulations (Internal) nationhood, propel the national
economy and engage the world for
 institutional and operational
sustainable development.
standards/policies/guidelines
 service provider implements own CORE VALUES
regulations
 Patriotism
PEZA, The creation of  Integrity
 Excellence
 The development of Special
 Service
Economic zones throughout the
 Resilience
country, and the very competitive
 Faith
incentives available to investments
inside PEZA Special Economic
Zones are embodied in the Special
Economic Zone Act of 1995
(Republic Act No. 7916), a law
passed by the Philippine Congress.
Data Privacy Law – Republic Act No.
10173
 An act protecting individual personal
information in information and
communications systems in the
government and the private sector,
creating for this purpose a national
privacy commission, and for other
purposes