The Comprehensive Guide To BPO
A Comprehensive Guide to Business Process Outsourcing (BPO).
By some estimates, digital transformation - defined by Salesforce as ”the process of using digital technologies to create new or modify existing business processes, culture, and customer experiences to meet changing business and market requirements - represents a $315 billion opportunity for Australia.
Indeed, a report by KPMG suggests that digital transformation represents the most pressing issue for Australian business leaders in the years ahead. Yet, further research from Gartner has found that, as of August 2018, “Only 8% of Australian enterprises are harvesting results from digital business transformation.”
One missing piece of the puzzle may be business process outsourcing. Though the outsourcing of business processes is often associated with lower perceived value tasks - such as call center staffing or mailroom processing - it can have a significant impact on a strategic level as well.
For instance, if your business has a directional target of achieving 30% growth through acquisitions or improving margins by 20% through cost and overhead reductions, BPO principles such as digitisation, standardisation, and automation can help. But because the BPO provider is incentivised to leverage their expertise in order to gain even further efficiencies for their customers, organisations essentially enjoy a double benefit when executing their strategies with an established BPO partner.
An effective BPO strategy allows companies to increase efficiency and lower costs, creating the freedom required to focus on core competencies that drive growth. By minimising distractions and reducing the pressure on team members to work outside their areas of strength, BPO empowers companies to move forward and meet - even exceed - their goals.
It should come as no surprise, then, that - by the end of 2019 - over half (52%) of businesses plan on outsourcing at least one business process.
Whether your enterprise falls into this category - or whether you anticipate joining those pursuing BPO in order to create or sustain a competitive advantage - it is critical to know what you can outsource, why doing so may be beneficial and what challenges you may encounter along the way.
Use this Converga guide to help your organisation make an educated decision on how to implement BPO in a thoughtful and strategic way.
“Business process outsourcing (BPO) is the contracting of non-primary business activities and functions to a third-party provider.”According to Techopedia
Business process outsourcing, as a concept, is rooted in manufacturing, where businesses frequently use other companies as contractors to handle certain tasks and activities as parts of their supply chain. Today, BPO is used more broadly to encompass many different processes. Ultimately, however, its core function is outsourcing business tasks to an external provider.
Businesses at all levels can utilise BPO, though it is not appropriate to automate all processes. Never automate a bad process. A good BPO provider will use their expertise and knowledge of best practices to improve processes as part of a BPO transition or a commitment to continual improvement. Processes that remain can be outsourced - especially tasks that are repetitive or that can be mapped and optimised in terms of flow, information or people.
Take invoice management as an example. A mid-sized company may receive 5-10K invoices a month. Yet because the task of processing them follows the same replicable workflow, the process can be optimised with business process outsourcing.
A transition workflow could involve:
Not only would such a process minimise the required human input into the process, it could potentially improve accuracy by removing the potential for human error.
Commonly Outsourced Business Processes
According to Techopedia, common BPO services include “payroll, human resources (HR), accounting and customer/call center relations.”
However, it can encompass myriad other tasks, including:
Mailroom and Corporate Services
Records and Information Management
Finance and Accounting
Administrative and Virtual Assistance
Human Resources and Payroll Services
IT Managed Services (Applications and Infrastructure)
What should be notable about this list of potential outsourcing opportunities is that it encompasses both front office and back office roles; both of which can benefit from BPO.
Front office roles include those that come into direct contact with customers or consumers or that generate revenue for a company; sales and customer support are front office roles, for example.
Back office roles, on the other hand, include any functions that do not directly produce revenue, but that are still required to facilitate smooth operations. IT, human resources, accounting and compliance are all examples of back office roles.
Business Process Outsourcing Execution
Another way to think about BPO is in the way that different solutions can be executed and implemented. Three common models that may be encountered include:
Each arrangement offers different advantages and challenges, discussed in greater detail in later sections of this guide. Having on-site BPO support may be necessary when sensitive data is being handled or where work must be conducted in-person, for example.
Off-site or overseas BPO solutions may be appropriate in other cases where cost savings are the highest priority or where there is a lower need for data sovereignty or language skills to match the required customer or staff experience.. Users of off-site BPO enjoy real estate savings by removing the space needed for facilities such as mail rooms or print rooms. This is especially impactful for businesses located in CBDs, where real estate is at a premium.
Business process outsourcing offers several benefits to forward-thinking businesses.
Eliminating Growth Bottlenecks
Today’s competitive business environment rewards rapid growth and innovation, whether in the case of startups trying to disrupt seasoned incumbents or established enterprises seeking to sustain performance in quickly evolving markets.
These growth pressures commonly result in bottlenecks, where the capacity of an existing team is stretched or even exceeded, contributing to employee burnout and dissatisfaction. Adding headcount may be necessary to resolve growth challenges, but enterprises may also benefit from transitioning specific tasks and activities to a BPO partner.
Leveraging External Expertise
Business process outsourcing is highly valuable when a team lacks the required knowledge to complete tasks effectively; perhaps because they have recently expanded into a new area. Business process outsourcing makes it possible to supplement internal wisdom with external expertise, fueling innovation and growth via accessing specialist skill sets such as IT technicians quickly on an as-needed basis.
Further, BPO dramatically increases the size of the talent pools available to companies, preventing them from being limited by the confines of their local workforce. This can be a major boon for companies that feel they have fully tapped the talent available in their geographic area.
Improving Process Efficiency
Improving efficiency and productivity is another big opportunity of BPO.
Understandably, allowing specialists to handle tasks frees up your time and allows you to accomplish much more than you would if you were responsible for every single task businesses require. If a workflow is automated, it is not sitting on someone’s desk waiting to be actioned. In this way, BPO also improves visibility in order to facilitate better resource management at the task level.
However, BPO also supports process efficiency on a macro level. A BPO partner can help your company map its existing process, if they are not already documented. Process improvement can then occur as part of your organisation’s BPO transition planning process, or as part of the continual improvement (CI) initiatives your BPO partner should offer.
There is also the matter of compliance. If industry standards require particular document management processes, as an example, a BPO provider can ensure a higher level of compliance, based on their past experience handling such requirements.
A good BPO provider will have:
Cost Savings and Flexibility
BPO solutions may represent a cost-effective alternative, compared to engaging to full-time employees (FTEs). Not only does transitioning tasks to a BPO partner prevent you from paying a full-time salary or other ancillary benefits, it offers you flexibility, should your business needs change in the future.
“Outsourcing cuts down on costs for in-house labor, particularly for staffing and training, and for the work space to accommodate local employees,” says Smartsheet. “An outsourcing company physically located in a developing country leverages lower-cost labour markets.” According to one study, Australian companies can save anywhere from 30 to 50% without compromising skill sets and performance levels.
Process improvement and the implementation of cutting-edge technology like robotic process automation can also help minimise manual input for additional savings.
In some cases, a business might need a specific skill set for a short period of time or for a specific project. For instance, imagine that a company’s accounts payables processes have become overburdened, and that they would like to introduce an element of automation to streamline payment processing.
Not only could a BPO provider offer specific expertise in both implementing new technology and developing the organisational processes required to support it, they could be onboarded faster than trying to bring on a new employee or to up-skill someone else in the business for a short period of time. This is a scenario where outsourcing represents a more cost-effective, flexible solution.
Empowering Executive Focus
Perhaps the most impactful opportunity that arises from investing in BPO is the ability to free up resources so that executives and other team members can focus on the business processes and operations at which they excel.
Most businesses have a lot of moving parts. Spending time on supplementary tasks can be a burden and potentially hinder long-term progress. With BPO, companies can concentrate their focus on the essentials, leaving the rest to third-party providers. This, in turn, improves productivity and alleviates stress, both of which contribute to a company’s top-line margin by improving its competitive advantage.
While there are many benefits associated with business process outsourcing, it is important to remain fully cognizant of the challenges associated with the process before pursuing a BPO implementation.
Estimating Outsourcing Costs
Manpower is certainly a considerable expense associated with particular aspects of BPO, such as managed services, and it is where companies will spend the bulk of their money. However, digital services such as electronic invoicing, remove the factor of human costs which would previously have been required for those processes to occur. Having robust documentation in place that maps out existing processes, recruitment, training and onboarding can minimise wasted spend associated with labor.
Transition and project management costs are another major factor. For the business benefits of BPO to be fully realised, the transition to an outsourced model must be as efficient as possible. The BPO partner chosen has a substantial impact on how efficiently the transition can be carried out.
With these elements taken into consideration, there are several factors that will ultimately influence total costs, including:
Will BPO Negatively Affect My Business or My Employees?
Without proper planning and management, business process outsourcing could be more of a detriment than an advantage; for example, if you experience major communication challenges when offshoring to another country with a different culture, in a different time zone.
If customer call reps lack language fluency, their inexperience could hurt the customer service experience. If a vendor’s employees are constantly coming and going with new ones needing to be trained, your business may suffer. Or if your level of control drastically declines with business process outsourcing, you may not be able to ensure the same level of quality moving forward, which can damage your brand reputation in the long run.
It is vital that there is due diligence and research done before choosing a vendor to ensure quality delivery and avoid these challenges. It is paramount to success that correct scoping is done to ensure the proper systems for management are in place to make BPO a success.
“Business process outsourcing” is a broad term; several smaller, more defined services and use cases exist under its umbrella. As you start to explore the benefits of BPO for your business, you may want to familiarise yourself with the following use cases.
One area of outsourcing companies may come across is managed services, which can facilitate smooth day-to-day operations for your company, in addition to allowing you to leverage the skill sets of highly experienced professionals.
Tasks that fall into the category of managed services are subset of BPO and include four main areas of responsibility:
As an example of the kind of operation that could benefit from managed services BPO, take Australia’s Department of Health. In total, the agency:
Given the high volume of transactions sustained by the agency, business process outsourcing can be utilised to:
Further, as the impact of each of these and other activities can be monitored and benchmarked, enabling the Department of Health and its BPO partner to provide maximum efficiency gains over time.
Offshore Managed Services (OMS)
As the name implies, offshore managed services involves outsourcing business tasks to an offshore provider in another country with favorable exchange rate. As an example, Australian businesses commonly partner with OMS partners that tap into talent in the Philippines, which boasts a workforce for Converga that is 98% tertiary qualified (dramatically better than the market average of 30%).
Businesses processes that may be handled through offshore managed services include:
Potential benefits of engaging offshore managed services through a trusted provider - beyond the cost-savings that come from outsourcing to countries where labour costs are cheaper - include:
It is also important to note the difference between offshoring and offshore managed services. Whereas offshoring requires setting up a new operation overseas, offshore managed services tap into the services of an established and reputable OMS provider.
Certainly, there are pros and cons to each approach. But while setting up your own offshore operation offers greater levels of control, the costs and risk associated with this process should not be minimised. Finding an appropriate location, developing the necessary infrastructure, and providing local management require significant investment that may far outweigh the efficiencies that can be leveraged with an existing OMS provider.
A good example of an enterprise that has succeeded with offshore managed services is Canon Australia.
In order to improve business efficiency and lower their overall costs, this leading imaging organisation worked with an OMS partner to update their process documentation using a team based in Manila.
Ultimately, as a result of these efforts, Canon Australia was able to transition its finance and accounting, accounts payable, analytics and contracts administration functionalities to the Philippines, resulting in further increased efficiency and lower costs.
Modern business practices make it possible for businesses of all sizes to reduce their paper and document management requirements through BPO engagements.
Business process outsourcing can assist in the management of form automation, claims processing, high-volume scanning, print management, and application processing. Document processes form the foundation of a businesses digital transformation, allowing the capture, storage, retrieval and analysis of data previously locked in disparate locations in many different physical formats. For example Back Scanning is a service customers can use to rapidly transform many types of physical documents into usable digital files leveraging scanning technology of BPO and existing systems, processes and people.
Consider the example of Kiwibank, a provider of low fee, low interest rate credit cards in New Zealand. In order to free up internal capacity to focus on aggressively scaling the business, Kiwibank worked with a BPO partner to implement an online application processing solution.
This solution involved routing all branch or direct mail generated applications to a single address, opening each application, completing the “for office use” section, and preparing and out-sorting the application. In addition, OCR technology was implemented to determine the type of form being submitted, the data elements available for capture, the business rules to apply to the data, and the format of data to be loaded into core banking systems.
Not only did doing so reduce the traditional cycle times associated with Kiwibank’s former application processing process, it further improved employee satisfaction by freeing up time to be invested into other responsibilities.
Handling a large volume of mail represents a key business process outsourcing opportunity. Companies need secure online storage of digital mail and efficient ways of managing paper mail; digital mailroom can be an ideal solution.
With digital mailroom, a BPO provider can receive and scan paper mail, and then convert it into digital formats, greatly lowering the costs associated with handling large volumes of paper. All mail - both digital and scanned - can be entered into a workflow system and re-routed to the appropriate individuals within a company for easy access.
Take, as an example, Australia’s Department of Health. With over 5,500 staff working all over the country, managing their volume of mail was a herculean task. Using a BPO provider and shifting to a cost-effective Electronic Document and Records Management (EDM) solution made it possible for the department to improve document processing and manage work governance to better support digital records and information management.
As a result, the team was able to manage the deletion of former staff accounts, data cleansing, and bulk updates to file, dramatically reducing their physical storage costs and overall management costs, while also increasing the speed of record retrieval.
Document and data management have become increasingly important in society with growing concerns around digital security. Quality information management consists of secure scanning, indexing, and a comprehensive system for archiving and retrieving documents. This practice allows for these normally internal processes to be outsourced, providing an opportunity to save money and time.
Not only can a BPO partner work with you to develop a secure storage system that allows you to store documents in multiple, searchable formats, their solutions also minimise time spent accessing documents in order to resolve customer issues while also reducing possible postage and printing costs.
Workflow and Exception Management
A document workflow is a system that allows businesses or individuals to create, monitor, alter and organise documents that are necessary for business operations. Many businesses often have a variety of different documents for various time periods, making it easy to lose track of important and detailed documents. Workflow management is designed to automate, store, search and route documents which streamlines business processes.
For example, InFLOW is Converga’s queue based document workflow engine that is used to track, monitor, route and report the progress of documents as they move through predefined business processes. InFLOW manages documents while they are essentially “active” and are requiring processing by either human intervention or automation depending on the status of the documents.
Thanks to their access to best-in-class technology, BPO partners can take on the management of your organisation’s first-level exceptions. Classifying and managing your exceptions using BPO workflows and technology also reduces the time required to correct errors and minimises the in-house investment needed to route issues for resolution.
An example of a business that would use a workflow process such as this would be a large-scale retail company such as JB HiFi – with many different store locations requesting stock allocations, a workflow management system can ensure that when an order is submitted, the automated system tracks the order through the submission, approval, action, and distributed process. The exception management then becomes valuable by setting parameters that allow you to ‘manage by exception’, which in the case of JB HiFi might mean that if an order does not meet the minimum requirement set for delivery, or the requested items do not align with the anticipated stock levels required for that location, it is then flagged with a designated person to review the issue. This process thus alleviates JB HiFi from having to manually review every order that is submitted, and still remain confident that the set parameters for orders will be met.
Transitioning the management of financial services to a BPO partner represents a massive efficiency driver for many organisations.
For instance, business process outsourcing can be used to support:
For example, by creating an automated accounts payable solution, businesses can combine digitizing, processing and routing the necessary documents through a predefined business workflow. Business Process Outsourcing technology can provide streamlined options to increase the efficiency of business operations while also yielding financial benefits. For example, a digital portal can present invoice information and data, allowing staff members to access a digital system that is designed to conduct invoice functions such as running reports, adjusting workflow rules and coding of invoices. BPOs utilise a combination of technology which allows them to deliver 98.5% data accuracy within 24 hours of receipt.
Take the example of The Compass Group, the world’s largest food service and hospitality organisation. In order to reduce the costs associated with the Accounts Payable function, support faster payment cycles, and support the suppliers’ own transition to electronic invoicing, The Compass Group implemented a ‘Procure 2 Pay’ solution which reduced AP costs by 30% and improved overall supplier relations.
Robotics Process Automation (RPA)
Robotics and AI are playing a bigger and bigger role in modern business operations. According to a recent report from Adobe and Econsultancy, 15% of companies were using AI in 2018, but an additional 31% were planning on using it within the next year.
According to UiPath, “Robotics process automation is the technology that allows anyone today to configure computer software, or ‘a robot’ to mimic the actions of a human interacting within digital systems to execute a business process.”
Robotics process automation is an effective way to integrate with existing systems to automate any manual workflow and can be used in:
Day to Day
Hi-tech & Telecom:
Energy & Utilities:
Besides these examples, robotics process automation can also be used to create effective workflows, such as in and out trays. This goes beyond simply plugging into existing processes, allowing users to actually create new workflows that improve operations.
There are three main ways robotics process automation can improve your operations.
An example of RPA in action can be seen in customer order processing. Imagine an ecommerce seller managing hundreds of orders each day. With RPA:
Note that, in these cases, the robot essentially acts like another member of your team and functions as another user; a robot could even report to an employee in your enterprise’s org chart. Robotics process automation works with a company’s people and processes just as any human would - the only difference is that a robot can complete tasks several times faster.
And while it is true that not all businesses are ready for robotics process outsourcing, a consultation with an expert in the industry can highlight key changes your company can begin making now to facilitate a smooth transition.
If the benefits of business process outsourcing are desirable and the challenges associated with the practice seem surmountable, the next question to answer is whether or not your business is ready to implement BPO. There are several considerations to evaluate:
All of the above items can be managed and addressed when you choose a strong and reputable BPO partner such as Converga.
It is also worth keeping in mind that BPO solutions tend to be highly flexible. Implementations scale. Organisations can start small, outsourcing a single process or department - such as mailroom or record management - before progressing to other areas and applying more advanced applications, such as robotic process automation.
For this reason, a lack of preparation alone should not necessarily delay implementation of a BPO program. Rather, organisations should look for opportunities to embrace modest business process outsourcing engagements and to scale up their investments as they begin to realise the benefits of BPO.
Choosing the right combination of outsourced services is essential to getting the most out of business process outsourcing and accomplishing your core objectives. Thoroughly assess your current operations and identify any key areas that need improving. You may, for example, look for ways to reduce operational costs and avoid wasting manpower on repetitive tasks. In this case, a mix of offshored managed services and robotics process automation may be appropriate.
As you progress in your search for the right BPO provider, vet several candidates and seek out consultations that can be tailored to your specific needs in order to discover the full scope of a provider’s services and to discover what an engagement with them might look like in practice.
A good BPO partner will:
To ensure a successful transition, you will need a detailed overview of your existing processes. Work alongside your chosen BPO provider to develop a logical transition plan that highlights three main elements: financial, technical and organisational change. Developing a formal plan for these various phases of transition will help you move effectively from one stage to the next.
The needs of every company are different. You have likely seen your business in some of the scenarios described above; others may not resonate in the same way as they do for those at other companies. Whatever your specific needs are, partnering with a professional BPO solution can help you find viable solutions and turn your vision into a reality.
Contact the team at Canon to speak with one of our experts and get started on your BPO journey. With clients spanning government, finance, healthcare and insurance they have extensive experience delivering BPO solutions across managed services, financial services, document services, and RPA. With 25 years experience Canon and Converga have the experience to drive efficiency and business growth at scale for your operations.
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