Business process outsourcing (BPO) contains the transmission of processes along with the associated operational activities and responsibilities, to a third party with at least a guaranteed equal service level and where the client contains a firm grip over the (activities of the) vendor for mutual long term success. BPO is positively related to the search for more efficient organizational designs: cost reduction, productivity growth and innovative capabilities. Hence a source for strategic advantage.

            Traditionally, BPO is undertaken by manufacturing firms. However, BPO is nowadays rapidly conquering the service oriented firms as well. BPO is often divided into two categories: Back Office outsourcing, which includes internal business functions such as billing or purchasing, and Front Office outsourcing, which includes customer-related services such as marketing or tech support. The endless opportunities IT provides, stimulates (cross-border) BPO activities. BPO that is contracted outside a company's own country is alternatively called offshore outsourcing.

            Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to operate the service, while a typical ASP model includes only the provision of access to functionalities and features provided or 'served up' through the use of software, usually via web browser to the customer. BPO, itself is a part of the much bigger outsourcing industry. It is dependent on information technology; hence it is also referred to as information technology enabled services or ITES. Knowledge process outsourcing and legal process outsourcing are some of the other scopes of outsourcing that we offer.

            Information Technology Enabled Services, or ITES, is a form of outsourced service which has emerged due to involvement of IT in various fields such as banking and finance, telecommunications, etc. Some of the areas exemplary of ITES are medical transcription, back-office accounting, insurance claim, credit card processing, etc.

            Firms usually from developed countries outsource such services in order to gain from large talent pool and low labor cost of nations such as India and a few other in the region.

            India has revenues of 10.9 billion USD from offshore BPO and 30 billion USD from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. One of the most important advantages of BPO is the way in which it helps to increase a company’s flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways.

            Most services provided by BPO vendors are offered on a fee-for-service basis. This helps a company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not requisite a company in investing in assets and hereby making the company more flexible.

            Another way in which BPO contributes to a company’s flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic dictate. Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firm’s core businesses. The key in this, lies in knowing, which of the main value drivers to focus on – customer intimacy, product leadership, or operational excellence. Focusing on one of these drivers may help a company create a competitive edge.

            A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Using techniques such as linear programming is a way to reduce cycle time and inventory levels, which reduces a company’s slack.

            Finally, flexibility is seen as a stage in the organizational life cycle. A company can hereby help maintain ambitious growth goals, which do not fit with regular incumbent strategies. BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to become efficient as they greatly expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation.

Core Competencies:

            A core competency is something that a firm can do well and that meets the following three conditions:

               1. It provides consumer benefits
               2. It is not easy for competitors to imitate
               3. It can be widely leveraged to many products and markets.

            A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers. It may also include product development or culture such as employee dedication.

            Core Competency includes services that an organization must do to be in an industry, like Banks must clear checks. No real advantage to keeping this in-house - outsourced is a clear option. Competitive Advantage are services that are unique, like a special form of loan offered only by that bank . . . That kind of service would be kept in-house. Another example is in the Brokerage Industry: Settlement services are a commodity, but algorithmic trading is competitive advantage. There are instances where Core Competency can be Competitive Advantage - That being the case where a product is superior. A company let us say X may build lawn mowers like many other companies, but if they build a superior model, that in itself is competitive advantage as well.

            The concept of core competencies was developed in the management field. A core competency is "an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity." As an example we can take Honda's expertise in engines. Honda was able to exploit this core competency to develop a variety of quality products from lawn mowers and snow blowers to trucks and automobiles. To take an example from the automotive industry, it has been claimed that Volvo’s core competency is safety. This however, is perhaps the end result of their competency in terms of customer benefit. Their core competency might be more about their ability to source and design high protection components, or to research and respond to market demands concerning safety. "Capabilities are considered core if they differentiate a company strategically."

            One argument could be that "a core competency differentiates not only between firms but also inside a firm it differentiates amongst several competencies. In other words, a core competency guides a firm recombining its competencies in response to demands from the environment."

Recruitment Process Outsourcing (RPO)

            Recruitment Process Outsourcing (RPO) is a form of business process outsourcing (BPO) where an employer outsources or transfers all or part of its recruitment activities to an external service provider.

            RPO may involve the outsourcing of all or just part of recruitment functions and process. The external service provider may serve as a virtual recruiting department by providing a complete package of skills, tools, technologies and activities. The RPO service provider is "the" source for in-scope recruitment activity.

            On the other hand, occasional recruitment support, for example: temporary, contingency and executive search services is more analogous to out-tasking, co-sourcing or just sourcing. In this example the service provider is "a" source for certain types of recruitment activity differentiating between RPO and other types of staffing

            The biggest distinction between RPO and other types of staffing is Process. In RPO the service provider assumes ownership of the process, while in other types of staffing the service provider is part of a process controlled by the organization buying their services.

            While temporary, contingency and executive search firms have provided staffing services for many decades, the concept of an employer outsourcing the management and ownership of part or all of their recruiting process wasn't first realized on a consistent basis until the 1970s in Silicon Valley's highly competitive high tech labor market. Fast-growing high tech companies were hard-pressed to locate and hire the technical specialists they required, and so had little choice but to pay large fees to highly specialized external recruiters in order to staff their projects. Over time, companies began to examine how they might reduce the growing expenses of recruitment fees while still hiring hard-to-find technical specialists. Toward this end, companies began to examine the various steps in the recruiting process with an eye toward outsourcing only those portions that they had the greatest difficulty with and that added the greatest value to them. Initial RPO programs typically consisted of companies purchasing lists of potential candidates from RPO vendors. This "search/research" function, as it was called, generated names of competitors' employees for a company and served to augment the pool of potential candidates from which that company could hire.

            Over time, as business in general embraced the concept of outsourcing more and more, RPO gained favor among Human Resource management: not only did RPO reduce overhead costs from their budgets but it also helped improve the company's competitive advantage in the labor market. As labor markets became more and more competitive, RPO became more of a common solution. It is claimed that a greater impetus for RPO was provided by the shortage of skilled labor created by the dot-com boom and RPO was utilized more commonly to fill the gap.

            The greater use of RPO is also said be influenced by the ubiquitous use of technology to increase productivity. This reliance on technology places a premium on hiring people with specific technical skills. This specificity requires a targeted approach to recruiting, and RPO is a strategy that can satisfy this need.

            There have been fundamental changes in the US labor market that serve to reinforce the use of RPO as well. The labor market has become increasingly dynamic: workers today change employers more often than in previous generations. De-regulated labor markets have also created a shift towards contract and part-time labor and shorter work tenures. These trends increase recruitment activity and may encourage the use of RPO.

            RPO ensure that the solution offers improvement in quality, cost, service and speed.

            RPO provides for economies of scale enable them to offer recruitment processes at lower cost while economies of scope allow them to operate as high-quality, specialists. Economies of scale and scope are said to arise from a larger staff of recruiters, databases of candidate resumes, and investment in recruitment tools and networks.

            RPO solutions are also claimed to change fixed investment costs into variable costs that vary with fluctuation in recruitment activity. Companies may pay by transaction rather than by staff member, thus avoiding under-utilization or sacking recruitment staff when activity is low.

Website Management Outsourcing

            Website Management Outsourcing - WMO is the contracting of the management of a website and entire online environment to a third-party service provider. A variant of Business Process Outsourcing BPO, WMO is an outsourcing service typically offered to SMEs and in particular, Medium-Sized Enterprises, that don’t have a specific internal, web team or web-marketing team.

            The days where a single design agency or development company can create and manage a successful online offering for an organization are gone. In today’s business environment, the online presence of an organization is increasingly layered and complex.

            Online projects now require the skills of designers, developers, hosts, project managers, editors and marketing experts in addition to an internal project team in order to create an effective online environment. This has fueled the need for WMO services.

            A WMO company work on behalf of a client organization to manage the designers, the hosting company, the development partners, the content editors, the online marketing company, SEO specialists and the internal marketing team of the client, to ensure that their online environment meets their commercial objectives.

            Typically, a WMO company will manage the provider companies to Service Level Agreements SLA, follow best practices, and assume full responsibility for the success of the deployment and ongoing management of a website.

            Just as with BPO and other forms of Outsourcing, WMO companies work with SMEs and Medium-Sized Organizations on an ongoing basis rather than a simple per-project basis – implementing new techniques and technologies to make the website more effective throughout the lifecycle of the site.

            The most common examples of WMO are website marketing, website development, website design, support and maintenance, and website project management.

            WMO is a term that was first coined by industry thought-leaders in January 2006 during a speech at the Internet Business Networking Conference in London, to describe the fulfillment of the expanding needs of clients within the online sector. Today, this term and the WMO industry are growing in common usage.

            WMO is a nascent industry that has only recently been labeled, but is growing at a rate of 110% year on year. Although many companies do outsource part of their website development or design to 3rd parties, very rarely do they engage a WMO provider to manage the entire process.

            Current WMO providers estimate that WMO accounts for less than 2% of the total website development industry revenue (Q1 2007) – up from 0.5% in the first quarter of 2006. The WMO industry is expected to grow to a market share of 15% by Q4 2009.