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BPO or Business Process Outsourcing is not a new term though a one attracting a great amount of attention in recent times. Simply put, BPO is outsourcing of critical but non-core processes by one company to the other for substantial cost savings and operation streamlining benefits.

The traditional outsourcing contracts in IT and allied areas form a part of a BPO activity as a whole. Only by definition, BPO goes a significant step beyond traditional outsourcing contracts, in which a company delegates only components of a business process to an outside vendor.

It should be understood that while BPO entails the delegation of any non-core business process to a third party, sub contracting IT-enabled business processes to external provider(s) who execute and manage on behalf of the company has acquired great promise and expectations due to the phenomenon. The current article deals with IT-enabled services that part a significant part of the BPO scope of activities. The most common processes that are outsourced currently include Customer interaction and care services, transcription services and market research & data mining services.

In spite of being prevalent for quite some time now, the main reasons BPO is gaining prominence as a buzzword today can be accredited to the technological and web-infrastructure developments that have taken place. The plummeting cost of communications, the widespread use of standardized interfaces such as web browsers, and the quickening pace at which companies are automating data have cut interaction costs sharply.

All this has been extremely favorable for BPO partners and their customers. Early obstacles to BPO were security risks, bandwidth shortcomings and general technological immaturity however lately companies are embracing BPO as an important and often inherent activity to their business. Of course the most obvious reason is the benefits that companies accrue when they outsource their non-core processes to vendors. According to a NASSCOM-McKinsey Study, companies can obtain as much as 50 -60 % net savings on outsourced processes (including the interaction and project management costs).

This has also led to and will continue to further lead to more service providers offering specialized services to companies, more customers going for the choice and BPO standards and innovations that lead to better services and better BPO relationships.

Benefits
While cost savings remain to be the most obvious and primary reason to BPO, companies that outsource also begin to realize other softer benefits as time goes on. They begin to understand that besides cost savings, outsourcing to a vendor who has expertise and specialization in the field also enables lesser time to market and more quality. This is so because the vendor is able to create innovations in the processes and add value and speed to them, something that the client would not have been able to do even though it is his own business. Understanding this point by companies shall be very important for BPO growth.

What can be outsourced?
While the general rule of the thumb is that any process that is critical though non-core to a company can be outsourced for significant cost benefits, another criteria for identification could be that these corporate support functions are generally transaction-intensive. Though these activities still require a specialized knowledge, what they don't require is the administration of any core business strategy. This distinction between transaction and strategy defines BPO's current niche. A rough draft of IT-enabled services that can be outsourced is as follows. The list is not limited to but mainly includes the following:
Customer interaction services (call center, help desks, online support systems)
Finance & Accounting services
Transcription services
Translation services
HR related services
Data mining and integration services
Website management and hosting services

Predictions
The global market for IT-enabled services as estimated by the NASSCOM-McKinsey study to be as high as $142 billion by the year 2008. Currently customer interaction services and finance and accounting related services are primarily seen outsourced; however services in the field of Human Resources, and data mining and integration services are expected to grow in importance. Moreover after the concept of BPO has taken full shape, many other processes are likely to open up to be outsourced under the BPO framework.

Vendor analysis
Companies should outsource business processes to vendors who they feel can understand their process very well and can add value to it in terms of speed of delivery and innovation. Vendors on the other hand should fix a scope of their services and try and build value in those processes something that their clients cannot. While building economies of scale to the process is important it is also necessary to invest in innovative process execution for the clients.

It is almost certain that in due course, the popularity of BPO and outsourcing of IT-enabled services will give rise to a number of firms vying to be vendors to companies. This will give rise to a vendor's need to differentiate from other companies each trying to be more scale efficient than the other by either providing a broader scope of processes to be serviced or achieving greater heights of specialization and innovation for outsourced processes.

BPO promises to be a wonderful opportunity for companies to achieve streamlined and cost effective operations on one hand and for vendors to serve an (part of an) entire supply chain with their services. Proper management and exploitation of this opportunity can effect a revolution for the industry in years to come.

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