With the advent of globalization, vastly increased availability of bandwidth at rock-bottom rates and wage differences at various locations across the globe, firms are increasingly resorting to Business Process Outsourcing, or BPO. This allows firms to focus on their core business activities and strategic functions that are the revenue drivers. Non-strategic functions and business processes are outsourced from an outside partner. These could include customer support, invoicing and claims processing.
Considered at the strategic level, outsourcing essentially involves the transfer of control of a product or a process to a supplier who may provide the service either at the same location or remotely, whichever is most cost effective. In strategic outsourcing an entire service, product or product line may be handed over to the supplier for strategic value. By its very nature, strategic outsourcing yields best results by outsourcing to a provider who adds value to the company’s core business processes.
o Benefits – It is now well established that strategic outsourcing yields many tangible and intangible benefits to a business. It yields many competitive strategic benefits, lowering manpower costs, freeing up internal processes and ease of management.
o Concerns – The strategic outsourcing decision makes sense only if it brings tangible business benefits to the firm. If not properly planned, outsourcing could well result in lowered customer satisfaction levels, decreased quality, delayed deliveries, theft of intellectual property or customer information and increased costs for the firm.
Outsourcing Finance and Accounting Services
Companies are increasingly resorting to outsourcing the finance and accounting function to BPO firms located overseas. Preferred destinations are India, Ireland and countries in Eastern Europe. The finance and accounting function is concerned with the acquisition and use of funds by the business. These needs cannot be postponed or put on hold. Any errors in this department can have disastrous consequences for the entire firm. It is, therefore, of prime importance that the outsourcing is carefully planned and executed and lower costs quoted by a provider are not the sole criteria for selection.
o Advantages – Outsourcing of this function can accrue substantial savings for businesses. A separate accounting division may not be necessary with consequent savings in recruiting, training and labor costs. The outsourcing firm with specialized expertise and technology can help you improve the processes.
o Services Available – Services that can typically be outsourced include bookkeeping, audits, preparation of financial statements, ledger maintenance, payroll processing, training of accounts staff and software assistance, to name a few. These are essentially low value adding activities and eminently suited for outsourcing.
BPO is being accepted increasingly as an effective management tool enabling businesses to take advantage of labor arbitrage. It enables firms to access specialized services and latest technologies at competitive costs. It cuts on transaction times by leveraging the different time zones across the globe. Firms must include this aspect in their strategic planning to maximize the gains.