REVIEW OF BPO 101
DEFINITION OF OUTSOURCING
Contracting of a service provider for the delivery of a process or service.
REASONS WHY COMPANY OUTSOURCE
1.
2.
3.
4.
5.
Capacity Management
Lower Cost
Better Performance
Faster and Continuous Service Delivery
Part-based Activities
WHAT IS BEING OUTSOURCED?
1. Support or Auxiliary Services
Ex: Cafeteria, Janitorial Services, Security Services, Building Maintenance, Legal, Payroll
2. Routine activities or activities that can be automated at larger centers
Ex: Small banks outsourcing check processing to larger banks, riding ATM base of mutibank network
3. IT Services
Ex: Data Banks, Programming, etc.
ADVANTAGES OF OUTSOURCING
EMPLOYERS PERSPECTIVE
1. The service provider determines most efficient number of resources, process and
supervision to achieve output
2. Service provider may have more expertise/capability than the buyer
3. Buyers can leverage economies of scale of the service provider
EMPLOYEES PERSPECTIVE
1.
2.
3.
4.
“Work Abroad, Live here”
Professional Growth
Employee Assistance
Enjoy perks such as great cafeteria, gym, sleeping rooms, etc.
DISADVANTAGES OF OUTSOURCING
EMPLOYERS PERSPECTIVE
1.
2.
3.
4.
Cost can be higher
Buyers does not have full control of resources doing work
Shifting schedule affects the health condition
Emotional, Mental stress
TYPES OF OUTSOURCING
1. THIRD PARTY – OWNED BY A SERVICE PROVIDER, A LOCAL ENTITY OR A PART OF A
GLOBAL GROUP. PROVIDE SERVICES TO THE CLIENTS OF THE SERVICE PROVIDER.
EX. ACCENTURE
Accenture PLC is a global management consulting and professional services company that
provides strategy, consulting, digital, technology and operations services. Wikipedia
Stock price: ACN (NYSE) US$127.44 -0.17 (-0.13%)
18 Aug, 4:00 PM GMT-4 - Disclaimer
Customer service: 00 1 312-842-5012
Headquarters: Dublin, Republic of Ireland
CEO: Pierre Nanterme (1 Jan 2011–)
Revenue: 32.9 billion USD (2016)
Subsidiaries: Avanade, Kurt Salmon, IMJ Corporation, MORE
Founders: Arthur E. Andersen, Clarence DeLany
Formation and early years
Accenture began as the business and technology consulting division of accounting firm Arthur
Andersen in the early 1950s when it conducted a feasibility study for General Electric to install a
computer at Appliance Park in Louisville, Kentucky, which led to GE's installation of a UNIVAC
I computer and printer, believed to be the first commercial use of a computer in the U.S. Joseph
Glickauf, an early pioneer of computer consulting, held a position as head of Arthur Andersen's
administrative services division.
Splitting from Arthur Andersen
In 1989, Arthur Andersen and Andersen Consulting became separate units of Andersen
Worldwide Société Coopérative (AWSC).
Throughout the 1990s, there was increasing tension between Andersen Consulting and Arthur
Andersen. Andersen Consulting was paying Arthur Andersen up to 15% of its profits each year (a
provision of the 1989 split was that the more profitable unit – whether AA or AC – pay the other
the 15 percent ), while at the same time Arthur Andersen was competing with Andersen
Consulting through its own newly established business consulting service line called Arthur
Andersen Business Consulting (AABC). This dispute came to a head in 1998 when Andersen
Consulting claimed breach of contract against AWSC and Arthur Andersen. Andersen Consulting
put the 15% transfer payment for that year and future years into escrow and issued a claim for
breach of contract. In August 2000, as a result of the conclusion of arbitration with
the International Chamber of Commerce, Andersen Consulting broke all contractual ties with
AWSC and Arthur Andersen. As part of the arbitration settlement, Andersen Consulting paid the
sum held in escrow (then $1.2 billion) to Arthur Andersen, and was required to change its name,
resulting in the entity being renamed Accenture.
Emergence of Accenture
On 1 January 2001, Andersen Consulting adopted its current name, "Accenture". The word
"Accenture" is supposedly derived from "Accent on the future". The name "Accenture" was
submitted by Kim Petersen, a Danish employee from the company's Oslo, Norway office, as a
result of an internal competition. Accenture felt that the name should represent its will to be a
global consulting leader and high performer, and also intended that the name should not be
offensive in any country in which Accenture operates.
Accenture's banner hanging on the New York Stock Exchange (NYSE) building for its initial public
offering on July 19, 2001.
On 19 July 2001, Accenture’s initial public offering (IPO) was priced at $14.50 per share, and the
shares began trading on the New York Stock Exchange (NYSE); Goldman Sachs and Morgan
Stanley served as its lead underwriters. Accenture stock closed the day at $15.17, with the day's
high at $15.25. On the first day of the IPO, Accenture raised nearly $1.7 billion.
Bermuda headquarters
In October 2002, the Congressional General Accounting Office (GAO) identified Accenture as one
of four publicly traded federal contractors that were incorporated in a tax haven country. The
other three, unlike Accenture, were incorporated in the United States before they reincorporated in a tax haven country, thereby lowering their US taxes. Critics, most notably
former CNN journalist Lou Dobbs, have reported Accenture's decision to incorporate in Bermuda
as a US tax avoidance ploy, because they viewed Accenture as having been a US-based
company. The GAO itself did not characterize Accenture as having been a US-based company; it
stated that "prior to incorporating in Bermuda, Accenture was operating as a series of related
partnerships and corporations under the control of its partners through the mechanism of
contracts with a Swiss coordinating entity."
Accenture engaged in a very large and ambitious IT overhaul project for the National Health
Service (NHS) in 2003, making headlines when it withdrew from the contract in 2006 over
disputes related to delays and cost overruns. The government of the United Kingdom ultimately
abandoned the project 5 years later for the same reasons.
Ireland headquarters
Accenture announced on 26 May 2009 that its Board of Directors unanimously approved
changing the company’s place of incorporation to Ireland from Bermuda and would
become Accenture plc.
Accenture was chosen to replace CGI Group as the lead contractor for HealthCare.gov in January
2014. In December 2014, Accenture won a $563 million contract to provide ongoing
maintenance, software development and technology support for HealthCare.gov through 2019.
In July 2015 the United States Department of Defense awarded a major Electronic Health
Records contract to Cerner, Leidos and Accenture. The contract valued $4.33 billion will serve 55
hospitals and 600 clinics. Accenture federal services and Leidos will play the role of configuration
specialist while Cerner is the prime contractor.
Services and operations
A worldmap showing the countries where Accenture has operations as of 2016
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•
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•
•
Accenture Strategy provides business strategy, technology strategy and operations strategy
services.
Accenture Consulting provides technology, business and management consulting.
Accenture Digital provides digital marketing, analytics and mobility services.
Accenture Technology focuses on technology solutions, implementation, delivery, and
research & development, including its Technology Labs for emerging technologies.
Accenture Operations focuses on an "as-a-service" model of service delivery. This
includes business process outsourcing, IT services, cloud services, managed
operations, security and infrastructure services.
The company also operates a "National Security Services" business.
Marketing, branding and identity
In 2011, Accenture launched a new campaign of results-based ads featuring clients such
as Marriott, Unilever and the Royal Shakespeare Company alongside its slogan “High
performance. Delivered”. As of 2016, Interbrand ranked Accenture No. 37 of its list of best global
brands. The brand consultancy noted Accenture's focus on branding and marketing of its
Accenture Strategy, Accenture Consulting, Accenture Digital, Accenture Technology and
Accenture Operations divisions.
From at least 2005 until December 2009, Accenture used Tiger Woods as a celebrity
spokesperson and advertised using the service mark "Go on, be a Tiger" and the ancillary
statement "We know what it takes to be a Tiger" in association with his image. On 13 December
2009 after details of Woods' extra-marital affairs were exposed, the company terminated
Woods' six-year sponsorship deal.
The company uses a standardised system of branding, with extensive use of the font Graphik.
From 1999, the firm's culture was parodied by the webcomic Bigtime Consulting, operated
pseudonymously by its San Francisco-based employee James Sanchez. The comic operated a
store offering merchandise branded with the names 'Bigtime Consulting' and 'Indenture'.
Sanchez left the company in 2000 but continued to operate the comic for some years.
2. SHARED SERVICE CENTERED (SSC) – WHOLLY OWNED BY THE MOTHER COMPANY,
PROVIDING SERVICES ENTIRELY TO AFFILIATES OR SUBSIDIARIES, OR MORE RARELY TO
CLIENTS OF THE MOTHER COMPANY.
EX. J.P MORGAN CHASE
JPMorgan Chase & Co. is a U.S. multinational banking and financial services holding
company headquartered in New York City. Wikipedia
Stock price: JPM (NYSE) US$90.74 +0.09 (+0.10%)
18 Aug, 4:00 PM GMT-4 - Disclaimer
Divisions: J.P. Morgan Asset Management
CEO: James Dimon
Capital ratio: 11.6% (2015)
Headquarters: New York City, New York, United States
Subsidiaries: Chase Bank, J.P. Morgan & Co., MORE
Did you know: JPMorgan Chase & Co. is the sixth-largest bank in the world by total assets
($2,490.97 B). wikipedia.org
Operate in six lines of businesses and a leader in all of them.
Retail Financial Services:
• Retail Financial Services includes Consumer Banking, Small Business Banking, Auto and
Education Finance, Insurance, and Home Finance. Our extensive branch network of 2,400
retail banking centers in 17 states makes us the fourth-largest retail bank in the United States.
•
We are one of the industry’s leading providers of mortgages and home equity loans and with
more than 3 million accounts, we are the largest U.S. bank originator of auto loans and leases.
Asset Management:
• JPMorgan is a global leader in asset management services. We serve four distinct client groups
through three businesses: institutions and retail clients through Investment Management,
ultra high net worth clients through Private Banking, and high net worth clients
through Private Client Service. With assets under supervision of $1.6 trillion and assets under
management of $1.2 trillion, we are one of the largest asset and wealth managers in the
world.
Treasury & Securities Services:
• Treasury & Securities Services currently generates more than $6 billion in annual revenue for
the firm providing services for corporate CFOs, treasurers, financial institutions, issuers and
institutional investors. Our products and services are sold directly by Treasury & Securities
Services’ sales teams, as well as bundled with additional products and sold by other teams
across JPMorgan Chase. In fact, we help generate more than $2 billion in annual revenues for
other areas of the firm. Our product managers continuously monitor emerging market trends
to assure we are developing products to meet the future needs of our clients. Within Treasury
& Securities Services our employees act as advisors, often partnering with bankers to develop
solutions and recommendations to meet specific client needs. We offer opportunities in
product management, sales, operations, client service, mergers & acquisitions, legal, strategy,
finance, marketing, human resources, and risk.
Card Services:
• Chase Card Services creates lifelong, engaged relationships with our customers by being a
trusted provider of financial services. With 155 million cards in circulation and $157 billion in
managed loans, we are the second largest issuer of credit cards in the United States and the
largest merchant acquirer. Our customers use our cards for more than $281 billion worth of
purchases a year –that translates to about 97 Chase Card transactions per second. We offer a
variety of cards to satisfy the individual needs of our cardmembers, including outstanding
proprietary cards like Chase Freedomsm, cards reflecting our partnerships with major airlines,
hotels, universities, top retailers, other financial institutions and a host of well known brands.
•
Investment Banking:
JPMorgan is one of the world’s leading investment banks with one of the most extensive client
lists in the world. Our full platform enables us to develop some of the most complete and
innovative financial solutions in the industry. We offer clients a full range of services, including
strategic advice, capital raising, restructuring, risk management, market-making and research.
We operate in more than 100 countries and have global leadership positions in our key
products. JPMorgan also commits its own capital to proprietary investing and trading
activities. We continue to strengthen our platform and develop new products to meet clients’
needs.
•
•
Commercial Banking:
Commercial Banking includes three client segments: Middle Market, which serves companies
with revenues between $10 million and $500 million; Mid-Corporate, which focuses on clients
with more significant Investment Banking needs; and Real Estate. We also have two product
segments: Asset Based Lending and Leasing. Our critical core competency is outstanding credit
management, and we rely heavily on our local presence to cross sell investment banking,
treasury and investment management products and services.
Corporate & Strategic Activities:
We also have two centralized principal activities, Global Treasury and Private Equity. Global
Treasury primarily manages the firm’s liquidity and investment portfolio, and invests in
leverage buyouts, growth equity and venture capital for the firm and third parties around the
world. Our staff functions include: - Audit - Corporate Strategy & Development - Finance Global Real Estate & Business Services - Human Resources - Legal, Compliance & Government
Relations - Marketing & Communications - Risk Management - Technology & Operations
STRATEGIES IN OUTSOURCING
1. MULTISOURCING – contracting or using multiple vendors for fulfillment of a
client’s outsourced project. Ex. Microsoft, Oracle, IBM
2. CROWDSOURCING – the practice of obtaining needed services, ideas, or content
by soliciting contribution from a large group of people, and especially from an
online community, rather than from traditional employees or suppliers.
3. ONSHORING – when the vendor or service provider is based in the same country
as the client company. Ex. San Miguel Beer
4. NEARSHORING - the transfer of business to a nearby country, often sharing the
same boarder. Ex. US to Mexico, Vietnam to Cambodia
5. OFFSHORING – the most popular form of outsourcing when the vendor and client
is from different countries. Ex. When Apple contracted Samsung to produce
processor chips for their highly successful product offering, the iPhone.
WHAT NOT TO OUTSOURCE
1.
2.
3.
4.
DESIGN
PRODUCT DEVELOPMENT
PROCESS
RECEIPE
WHAT TO OURSOURCE
1. WELL DEFINED/DOCUMETED TASKS, STANDARD OUTPUT
EX.
A. IT DEVELOPMETS: PROGRAMMING, DOCUMENTATIONS, UNIT AND INTEGRATION
TESTING, IMPLEMENTATION OF NEW SYSTEMS, AND CONVERSION TO NEW FLATFORMS.
B. IT MAINTENACE: APPLICATION MAINTENANCE, HELPDESK AND NETWORK SUPPORT
CLIENT-SERVICE PROVIDER RELATIONSHIP: ATTRIBUTES
1. CLIENT COMPANY IS CONCERNED WITH:
Quality transition of processes, Efficient operation of business functions that were once
handled in-house
2. SERVICE PROVIDER IS CONCERNED WITH:
Scope of service, performance measures, benchmarks to ensure the standards in
assessing work quality
THE IT-BPM CONTRACT
A BUSINESS PROCESS MGT CONTRACT IS A FORMAL AGREEMENT BETWEEN A CLIENT AND A
SERVICE PROVIDER TO TAKE OVER A ‘PRE-AGREED PORTION” OF THE CLIENT’S BUSINESS
OPERATIONS.
THE PRE-AGREED PORTION IS DOCUMENTED IN THE CONTRACT AS THE SCOPRE OF WORK
(SOW)
THE IT-BPM CONTRACT, WITH ALL ITS ATTACHMENTS, ASSUMPTIONS, AND DOCUMENTED
AGREEMENTS, IS REFERRED TO AS THE MASTER SERVICE AGREEMENT (MSA)
IT IS THE COVERING AGREEMENT THAT SUMMARIZES TERMS APPLICABLE TO EVERY JOB
ORDER WITH THE SERVICE PROVIDER.
MAIN ELEMENTS:
A. Service to be provided
B. Performance management, issues, change mgt, etc.
C. Country laws
THE IT-BPM CONTRACTS – PRICING MODELS
1. Fixed Price – there is a negotiated pre-agreed price per unit.
2. Time and material – the price is based on the time and material that was used. Ex. Made
to order products or services.
THE IT-BPM CONTRACT FINANCIALS
1. CAPEX (Capital Expenditures) is a business expense incurred to create future benefits. Ex.
Building or the physical space, machinery, equipment, etc.
2. OPEX (Operational Expenditures) the money the business spends in order to turn
inventory into output. Ex. Depreciation pf plants and machinery which is used in the
production process.
COMPONENTS OF PROCESS COST
1. Labor cost, ex. Compensation, benefits, bonuses, incentives
2. Direct cost, ex. Employee developments like training
3. Indirect cost, ex. Infrastructure’s network, rentals, amortization, etc.
REGULATORY REQUIREMENTS
1. Adherence to Government Regulations
Board of Investments
Bureau of internal revenue
Bureau of immigration
Department of labor and Employment
Philippine Economic Zone Authority
Securities and Exchange Commission
Social Security Services
2. Industry/Company Regulations
Institutional and operational standards/policies/guidelines
Service provider implements own regulations