Course No.

: SMFBPO1 Fundamentals of BPO

NIPSC-SOM-BSBA
First Semester 2020-2021

Module 2: Fundamentals of Outsourcing

Lesson 2: What to Outsource, key Technologies that Support Outsourcing

Introduction
In this module, you will be introduced to services/processes that being outsourced and
the different technologies that support outsourcing.

Read the discussion and answer the questions that follow. Perform the activity and
submit via messenger or email @[email protected] for BSBA students. For BPA students,
submit your output to Professor Grace Barnuevo.

Learning Outcomes: Upon completion of this Module, you shall be able to:
1. state the common types of activities, tasks, and/ or processes that get outsourced;
2. identify what are the key technologies and trends in outsourcing.

Discussion:

Before discussing on what activities/task/processes to outsource and not, let us define first Core
Activities-Tasks-Processes and Non-core Activities-Tasks-Processes.

Let us use Reebok as an example. Reebok is an athletic company that creates and designs sports
apparels. Keeping that in focus, Reebok management chose to outsource its administrative Human
Resource (HR) functions. In doing so Reebok’s total back-office or support manning head-count is
significantly lean. Core activities-tasks-processes are essentially what the company is known for, is what
you are bringing home, is what you are paying for, or how the company makes its money. In our
example, the core activity of Reebok is to create and design sports apparels. For Non-core activities-
tasks-processes, let us look at Reebok again. Reebok needs a Human Resource Department to support
their internal operations but this indirectly affects the fulfilment of their value proposition to their
customers. 1

What to outsource?

The core activities-tasks-processes that can be outsourced includes primary process or products
of the business, tasks that deliver the primary product, the unique value proposition of the company,
and “essential, defining activities of an organization”, what it needs to keep enhancing to improve
competitive advantage. For non-core Activities-Tasks-Processes, support activities, processes and
functions can be outsourced. 1

What not to outsource?

Core activities-tasks-processes like design, product development, process and recipe should not
be outsourced. 1

Both KFC an American brand and Jollibee proudly Pinoy, closely protect their chicken recipes.
Another example is the multitude of brands that use Android as the preferred operating system on their
smart phones, but because of clear differences in product development and manufacturing processes
some brands are more durable and attractive than others. 1

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Typically Outsourced Activities-Tasks-Processes

 Business Process Outsourcing (BPO): outsourcing of entire business process

components; e.g. HR, payroll, accounting, Financial, etc.
Business Process Companies that outsource Companies that caters to
the function the function
Human Resources (HR) Reebook Shell SSC, Deutsche
Knowledge Services, Coca-
Cola Bottlers Business
Services
Financial Washington Mutual, Sallie Aegis, DSM “Manila”LLC,
Mae and Expedia Du-Baladad & Associates
Payroll and Accounting Del Monte Philippines Manulife Financial, DKS,
BPO International Inc.

In the table, Reebok is just one of the companies that chose to get services of other
companies to do its HR functions. Shell SSC, Deutsche, Knowledge Services, Coca-Cola
Bottlers Business services are companies that offer HR services for other companies.
Same goes for the next two examples. These will only be possible if there is a clear
definition of tasks or processes.

 IT Outsourcing:
- IT Technical Support
- IT Application Development
- IT Application Management
- Data Center Operations
- Software as a Service (SaaS)
- Cloud (On-line Storage) Services

Examples of companies that cater to IT outsourcing are Accenture, Chartis,

Chevron and hp.

 Support function/ services:

- Cafeteria
- Copy centers
- Security
- Janitorial Services
- Trucking/Shipping
- Building Maintenance

If you look closely at some schools you would find that most likely five (5) of the
six (6) items presented here are performed by agency provided personnel and not direct
employees of the school.

 Routine activities or activities that can be automated at larger centers:

- Small banks outsourcing check processing to larger banks, riding on ATM
base of multi-bank network.

- Small vendors using Amazon.com as data center, marketing, and payment

processing platform

- Banks using common/multi-bank core banking services of large technology

providers
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 Let’s take the second example. Amazon.com is close to some websites like
Slulit.com. It is like virtual marketplace where people can sell anything. All
information about the product and the vendor is there. Given that it is a
marketplace, there will also be buyers accessing it to find what they need.

 Seasonal Requirement/s:
- One day 50 employees needed; next day only 10 are needed
- Christmas hires to handle additional volume of transactions
- Temporary extension of operating hours to accommodate foot traffic

Example of seasonal requirements is a call center that takes call for flower
orders and delivery would have their peak and off-peak season. To accommodate
calls during events such as Christmas or Mother’s day, they would hire more people
only for that season. For employees being hired, they would sign a contract which is
short term. After the season, their contracts are up. But these people’s record
would be kept as reference and they would be priority hires the next time the
company needs more personnel.

 All Part-based Activities:

- These are activities that are: routine, scheduled, with little uncertainty
- Automobile assembly
- Electronics assembly
- Packaging solutions
- Handicrafts or garments for mass production

For all part-based activities, let’s look at the Automobile assembly as an

example. The main car company may have their names on the product but some of
the parts are actually done by other manufacturers especially if the car company
doesn’t have the capacity to produce certain car parts.

Key Technologies that Support Outsourcing

 Video conferencing:
- HP –Halo (8.5 min. video)
- Cisco –Telepresence
- Sun – MPK20: Project Wonderland

 Web-based conferencing and workflow tools:

- WebEx
- MS Windows Meeting Space
- MS Sharepoint
- Google Applications

Each item presented here are tools that empower workforces that increasingly need to
conduct parts of its business functions virtually. These tools help the organization knowing that
some companies may not be in the same country where the service provider is located. This
covers sharing files, conducting meetings, doing presentations and many more.

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IT-BPM Company Business Cycle

Business Process
Outsourcing
Engagements

Issue Management Managing

and Critical Outsourcing
Situation Control Transitions

BPO Operations
Management

The diagram shows the business cycle for an IT-BPM company. The cycle start by the
time parties come up with an agreement and signs a contract which will be discussed in the
next module. 1

Summary

Core activities are the “bread and butter” of the business – the money makers of the company.
Therefore a company should study well what activities/processes should they outsource and entrust to
service provider.

Assessment

Answer the question below: 25 points

1. In not less than 100 words, discuss why companies outsource?

Your answer shall be evaluated using these criteria:

 Content . . . . . . . . . . . . . . . . 10 pts.
 Organization of ideas . . . . . 10 pts.
 Language facility . . . . . . . . . 5 pts.
Total . . . . . . . . . . . . . . . . . . 25 points

TO DO: Activity 1: Putting it all Together

Your output on this activity will be graded using this rubric.

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Instructions:
1. Choose from one of the following businesses:
o Restaurant
o Salon
o Clothing
o Printing Shop
o Flower Shop

Note that all business types are subject to your interpretation. The restaurant business type
does not exclusively refer to a fast-food or fine dining establishment. Similarly, the salon business is
not an exclusive to women only salon concept. The clothing tailoring shop business does not
necessarily have to focus on just formal custom built outfits. The printing shop business does not
mean that you cannot include internet services as part of the product mix. And, for flower shop
concept this business concept can freely include event coverage – flowers for weddings, flowers for
store openings or product launches, or even flowers for a funeral.

2. Create your business concept and supply the following information:

a. Name of your business

b. Products and services

Product and services is what customers will be buying. Be mindful of trying to create too narrow
or too broad a mix of products and services. For a restaurant, what is the house specialty? For
the printing shop, what is different about your shop’s printing services?

c. Price of products and/ or services

When dealing with this item – price of products and/ or services, try to be as realistic as
possible. If competitor’s salon in the same mall as your own salon charges Php1,200.00 for re-
bonding for normal hair length, then it does not make sense if your salon business charges
Php8,500.00 for the same service of re-bonding.

d. Image and Brand identity that you want to create

Image and brand identity is critical for any business. For purposes of this exercise, we can
capture this concept in well-written and thoroughly thought through paragraph or sentence.
For our purposes it can sound as simple as; “… a computer in every home” which is a
paraphrasing of the famous tagline of Microsoft. Currently Microsoft is changing its tagline as a
result of the evolving identity of the company. You can opt to present your business identity this
way; “to be the number one flower shop in the Philippines terms of: customer service, price,
and delivery efficiency.”

e. Location
Location does not refer to a specific physical address, but rather as a description of a target
location where you intend to set-up your business establishment. Location selection is also an
important concern for many businesses. Ask why do you think this is so? For example, your
restaurant operations will be situated or located; in a mall that has assorted boutique shops,
movie theaters, other restaurants different in concept from yours, sufficient parking, that is
accessible to public transportation.

f. Marketing strategy
Marketing strategy is another critical business decision for management teams around the
world. For your activity you can simplify this critical business concept by listing activities. For
example, to attract customers to our restaurant we will be placing tarpaulins at the exit points
of airports, ferry as well as bus terminals. We will also be distributing flyers with information
about our restaurant at all major shopping malls in the city. We will be airing commercials over
the radio and have television commercials. The point is to be as creative as possible in writing
your marketing strategy.

g. Operating Processes
Operating processes for the most part, answer the question of “how will my business make
money?” To fulfill on this part of your activity, I recommend that you begin by identifying the

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 functional departments or units of your business. For example, with our restaurant, we have the
chefs, cooks dishwashers, serving staff, hosting staff bartenders, security, etc.

You have to submit a detailed description of an average or normal customer transaction. This
detailed description should clearly demonstrate and illustrate how and when the customer
receives the products and/ or services and more importantly pays for it. Beginning with initial
contact with the customer and ending when the customer finished his or her transaction up
until leaving your establishment.

To make this activity more realistic let us assume the following business expenses:

Water - 5,000 per month

Electricity - 5,000 – 10,000
Internet connection 1,000
Minimum wage - Php446.00, 15 workers or less
Base Rent - 5,000 – 10,000

Provide for total expenses for two (2) years.

h. Next, you must decide what parts or functions, service delivery or fulfillment, product creation or
production – of your business is to be outsourced. State the reason why. For this particular output
you must include in your explanation the perceived or desired benefits to outsourcing.

References:

1. Fundamentals of Business Process Outsourcing 101 Teacher’s Guide. IT & Business Process
Association of the Philippines
2. Rouse, M. (2020, May). Outsourcing. Retrieved from
https://searchcio.techtarget.com/definition/outsourcing
3. Murphy, C. (2020, Aug. 24). Knowledge Process Outsourcing. Retrieved from
https://www.investopedia.com/terms/k/knowledge-process-outsourcing.asp

-END OF MODULE 2, LESSON 2-

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