Offshore Outsourcing Business Models

On December 28, 2011, in Outsourcing, by Business Development Group
The concept of outsourcing has its genesis in a number of industries. Be it information technology, healthcare – organizations have taken the step in this direction by outsourcing various components of their IT – hardware, software, application development, etc. BPO, in many respects is an extension of this same philosophy, but operates at a higher level and is more strategic in nature.

The concept of outsourcing has its genesis in a number of industries. Be it information technology, healthcare – organizations have taken the step in this direction by outsourcing various components of their IT – hardware, software, application development, etc. BPO, in many respects is an extension of this same philosophy, but operates at a higher level and is more strategic in nature.

While the philosophy of offshore business process outsourcing (BPO) is still evolving, there have been some distinct trends and business models that have emerged. The concept of outsourcing has its genesis in a number of industries. Be it information technology, healthcare – organizations have taken the step in this direction by outsourcing various components of their IT – hardware, software, application development, etc. BPO, in many respects is an extension of this same philosophy, but operates at a higher level and is more strategic in nature. Almost all BPO strategies in this industry will have two major components to it – one is the supporting information technology and the other is the business function to be outsourced.

Hereunder are the emerging business models in most industries offshore BPO include:

Managed Services Outsourcing

Is primarily outsourcing that refers to activities which are transactional in nature. Business functions outsourced include low value and non-strategic activities which have very little business impact. These include mailroom services, data entry, data digitization, etc. Broadband technologies are the main drivers as to why transaction based outsourcing is being rapidly adopted. For many organizations it is easier to outsource these basic services and see rapid returns. Once an organization outsources these business functions, it is then ready to move on to more complex ones. These also do not entail high capital expenditures and are easy to operationalize.

Read related article:Outsourcing Organizational Capability Assessment

Business Function Outsourcing

This business model encompasses outsourcing complete business functions and processes. It hence operates at a strata above managed services outsourcing. A classic example of this is outsourcing business process claims adjucation wherein both, the IT as well as the business processes is outsourced. It is necessary though that both (the IT and the business process) need to reside offshore. In fact, in most cases, the IT is outsourced and remains onshore while the manual processing is sent offshore. The outsourcing vendor takes over the function at all 3 levels – people, process and technology. Organizations should identify specific business functions which represents specific points of pain and explore the option of outsourcing these.

Such function presents a true transfer of responsibility and ownership of an entire business function. These business functions are generally high volume and the level of client involvement post-outsourcing is high. The key differentiating factor between this and managed services outsourcing is the strategic and financial impact on the business. This model tends to generate greater returns of investments for the client organization. Service levels in such as arrangement tend to be important components of the expected benefits.

Read related article: BPO Real Time Outsourcing Customer Engagement – Giving your Customers More!

Enterprise Operations Outsourcing

This is essentially an extension of business function outsourcing with two major differences. While business function outsourcing is limited to one business process, enterprise operations outsourcing spans multiple processes. For an organization adopting this business model, the majority of its back office functions are outsourced through one vendor and one combined package. The other key difference is one of specialization. Most offshore vendors who offers enterprise-wide outsourcing services specialize only in this industry. Hence the service offering is specifically tailored to meet the needs of the client organization.

Read related article: Philippine Outsourcing: What is a BPO Virtual Captive?

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2 Responses to “Offshore Outsourcing Business Models”

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