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Issue Date: October 2002 (es)

BPO vs outsourcing: Look beyond the function to the process

October 2002
Paul Mullon, marketing director, Metrofile

Many managers and executives confuse traditional outsourcing with business process outsourcing (BPO). This leads to a missed opportunity. Outsourcing as it is traditionally sold is focused on the replacement of a standalone business function. A specialist may believe that due to critical mass of skills and experience it can perform this function better than a customer does. Areas where this applies can be facilities maintenance or document scanning, to mention just two, and there are many, very happy examples where this has been applied to good effect.

Where a trick is unquestionably missed, though, is that while traditional outsourcing yields dividends, it does not necessarily impact directly on processes, and as such its effects seldom cascade through the business. Business process outsourcing (BPO), on the other hand, is consciously and deliberately aimed at improving a process for downstream benefits, such as:
* Cost savings.

* Productivity enhancements.

* Improved customer service.
The value proposition of BPO consciously and deliberately states: "By streamlining and improving the way in which we currently perform this cross-functional process, we can obtain certain benefits, some predictable, others not, but all positively impacting the bottom line."
Two good examples I would like to focus on for the purposes of this article are credit card application processing and purchase invoice processing.
I will focus on credit card application processing here, but the examples, techniques and benefits would be generically applicable to many other types of application processing.
Paul Mullon, marketing director, Metrofile
Paul Mullon, marketing director, Metrofile
Credit card application processing
The business of credit card application processing is fairly standardised and predictable:
* Forms are sent out.

* Potential clients fill them in and the forms are returned.

* The data in various fields on the form is manually extracted, with all the costs and potential error that manual intervention implies.

* The application is processed, with validation and reference checking against internal and external databases, such as ITC.
Many companies do this themselves, much of it manually, with varying costs and variable outcomes. In fact, much of this can be automated and outsourced as part of a computerised BPO exercise. The data in the various fields can automatically be lifted, then verified against internal and external databases.
Downstream benefits start early
It is here that downstream benefits start to occur. For instance, the potential for fraud is immediately reduced, as known perpetrators and suspect names and addresses are trapped as early in the process as possible.
Other benefits soon become apparent:
* The costs of processing are reduced.

* Errors and inefficiencies are eliminated and the sheer number of people required to fulfil are reduced, with concomitant savings.

* The time taken for credit cards to be issued is reduced.

* With data being captured at source, there is potential for customer relationship management (CRM) exercises to be leveraged from inception.
The purchase invoice process
The purchase invoice process also involves predictable steps and data. Invoices contain certain common fields; the process of extracting the data from these fields can be automated, and this data brought into the digital loop as early as possible - ideally as the invoice arrives. Computer-based intelligence can be applied to these fields, eliminating as much of the manual work as possible.
By having order and delivery in a digital loop, you spend less time on the repetitive, mundane and unimportant issues, allowing you to focus on what is important and requiring business intelligence.
So, apart from the clear and obvious benefits to be had in automating the process and reducing inefficiencies between invoicing and actual delivery, the business gains significantly in freeing up its people to focus on higher value-add business functions: setting strategy, focusing on negotiating and procurement and better deals and margins, and leaving the mundane aspects of the process to computers.
That is the potential power of BPO: freeing up resources and impacting positively on the bottom line!
Paul Mullon, marketing director, Metrofile, (021) 380 6700,

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