SOURCINGINTERESTSGROUPRESEARCHREPORTAugust2002THEFAST-DEVELOPINGWORLDOFBUSINESSPROCESSOUTSOURCINGThisreporthasbeenmadepossiblebythesponsorshipofthefollowingSourcingInterestsGroupmembercompanies.Copyright©2002,SourcingInterestsGroup.Allrightsreserved.www.SourcingInterests.Org.(818)884-6080©SOURCINGINTERESTSGROUPTABLEOFCONTENTSEXECUTIVESUMMARYiINTRODUCTIONvAboutSourcingInterestsGroupReportContributorsReportSponsors1.ABRIEFHISTORYOFITOUTSOURCING1-12.WHYBPOHASBECOMESOIMPORTANT2-13.BPOTRENDSANDDIRECTIONS3-14.BPOBUSINESSMODELS4-1TypesofBPOBusinessModelsChoosingaBPOBusinessModel5.FOURBPOCLIENTEXAMPLES5-1OutsourcingIndirectProcurementataTelecomCompanyOutsourcingOrder-to-CashatMicrosoftOutsourcingCustomerServiceataFinancialServicesFirmOutsourcingProcurementatANZBankingCorporation6.BPOMETRICSANDSERVICELEVELAGREEMENTS6-1KindsofMetricsCreatingGoodMetricsCreatingGoodServiceLevelAgreementsMonitoringMetricsandSLAs7.POINTSTOCONSIDER7-1AssessingYourSituationManagingtheRelationship8.ABOUTTHESPONSORS8-1©SOURCINGINTERESTSGROUPEXECUTIVESUMMARYBusinessProcessOutsourcing(BPO),whichmeansdelegatingtheown-ership,administration,andoperationofaprocesstoathirdparty,isde-velopingrapidlythesedays.ManypeopleseeitasanevolutionfromInformationTechnologyOutsouring(ITO).SomebelieveBPOwillen-velopITO,eventhoughthetwoareverydifferent.ITOisaboutcostandservicelevels;BPOisaboutsolvingabusinessproblem.BPOaimstoraiseaclientcompany’sshareholdervaluebecauseitisaboutdeliveringoutcomes—thatis,higher-performingbusinessproc-esses.Companiesessentiallyhavethreekindsofprocesses:coreproc-esses(whichgivestrategicadvantage),critical,non-coreprocesses(whichareimportantbutarenotcompetitivedifferentiators),andnon-core,non-criticalprocesses(whichareneededtomaketheenvironmentwork).Noonesuggestsoutsourcingcoreprocesses;theyrecommendinvestinginthem.Butmanydorecommendoutsourcingcritical,non-coreproc-essestoproviderswhospecializeinthoseprocessesbecausetheywillinvestinthemandaimtomakethemworld-class.Andmostadvisorsrecommendoutsourcingallnon-core,non-criticalprocesses.Butoutsourcingdoesnotmeanhandingoveranentireprocess.Gener-ally,itmeansturningovertoaBPOproviderthe“how”aspectsofaprocess—thesystems,infrastructure,administration,execution,andsomeofthedesignofnon-coreprocesses.Butretainthe“what”aspectsoftheprocess—thegovernance,policy-setting,decisionmaking,andstrategyoftheseprocesses.Theintentistooutsourcethework(thebor-ingpart)whileretainingthedirection-settingpart.Companiesgenerallyoutsourcefourtypesofprocesses:(1)processesthatlinktosuppliers(supplychainmanagement),(2)processesthatlinkwithcustomers(sales,marketing,andcustomercare),(3)productionprocesses(R&D,contractmanufacturing),and(4)supportprocesses(finance,HR).Examplesofprocessesnowoutsourcedincludehumanresources,em-ployment,accounting,finance,procurement,travel,theorder-to-cashprocess,cafeterias,payroll,landscaping,realestate,manufacturing,ad-vertising,andonandon—anyprocessthatisnotcoreandshouldim-proveifmanagedbyaspecialist.i©SOURCINGINTERESTSGROUPThereareseveraltypesofBPOproviders.Onewaytocategorizethemisastransaction,niche,andcomprehensiveproviders.Transactionprovidershandleasingleprocess(suchaspayroll),attheirsitesandwiththeirpeople.Theyareaccountableforthetransactionsonly,andtheyarepaidpertransaction.Thisformofoutsourcingiseasi-esttoselltomanagement,butitcanalsof...
