Outsourcing And BPO FAQ

December 1, 2008

Outsource FAQ

1. What is a business process?
A collection of interrelated tasks that takes input and produces an output that is of value to a customer or to other process. Typical business processes include receiving an order, entering a transaction in QuickBooks, sending a purchase order, receiving an invoice.

2. What is BPM?
Business Process Management (BPM) is the management of business processes. BPM seeks to make the businesses processes more effective, efficient, and adoptable to changing business conditions. For a detailed answer visit BPM wiki.

3. What is BPO?
Business Process Outsourcing (BPO) is a method of using outside vendors to perform your business processes like call centers, Employee Payroll, Accounting, etc.

4. What is Financial and Accounting BPO?
It is a method by which you outsource your Financial and Accounts related work like Accounts Payable, Accounts Receivable, Tax, Mortgage Processing, etc, to outside vendor

5. What is Offshore BPO?
Offshore BPO is a method of moving any of your business processes from one country to another.

6. What is Offshore F&A BPO?
Offshore F&A BPO is method of moving your Financial and Accounts related work from one country to another.

7. Why small businesses should consider Financial and Accounting BPO?
The main reasons small businesses are performing F&A BPO, to cut cost, increase operational efficiency, and to free internal resources from manual and labor incentive work to other core F&A work.

8. How small business can start their offshore Financial and Accounting BPO?
Small businesses need to go through following steps to successfully offshore there Financial and Accounting work:

Find what F&A work to offshore.
Select one or two F&A offshore vendor(s).
Perform a pilot project with the F&A offshore vendor(s).
Negotiate price and contract with the F&A offshore vendor.

9. Why India is dominating in offshore BPO?
India offers several advantages that can be effectively leveraged by businesses in the US and in other developed countries. Following are some of the fundamental reasons for India’s dominant position in offshore BPO market.

India has the largest English-speaking population in the world after USA. Abundant skilled manpower has made India a target destination for the BPO market.
India offers world-class telecommunications and IT infrastructure, which are backbone for the BPO industry
India is the world’s largest democracy and its economy is growing more than 10% year after year for the past 10 years and India has a positive economy and political outlook.
Leading Fortune 500 businesses have already set up their own shared-services centers in India to offer financial, accounting, payroll processing, taxation services.
Several professionals who emigrated from India for higher studies to countries like USA, UK, etc are setting up BPO firms in India and successfully delivering BPO projects to business clients all over the world.

10. What are some of the problems of offshoring Finance and Accounting work to India?
Though India is a dominating force in the BPO market, recent survey (http://money.cnn.com/2005/08/23/news/international/india_outsourcing/index.htm) shows rising labor cost and poor physical infrastructure are some of the problems faced by the BPO firms in India. However still 70-80% BPO work goes to India and the rest of it goes to countries like Philippians, Russia, China, etc.

11. What types of Finance and Accounting work are offshored?
All types of Financial and Accounting related work like Account Payable (AP), Account Receivable (AR), Bookkeeping, Payroll, Account Reconciliation, Corporate Tax, Individual Tax, Mortgage application processing, Credit Check & verification, various auditing like Sarbanes Oxley, SAS 70, etc, are offshored.

12. Is offshore BPO bad to the country that offshores the work?
No, different studies and research reports have proven that offshoring is not bad for any country. In short-term some people may loose their jobs, but in long run it will help the country that is offshoring the work. In fact many reports in USA have been published that shows offshoring creates jobs and improves overall economy. Following are some of the reports you can read about offshore and how it affects the economy.

Ten Myths about Jobs and Outsourcing
Offshore IT outsourcing helps economy
Finally in USA current unemployment for skilled workforce is less than 1.9 % and several companies across the board mention that the chronic shortage of professional works will hurt their business. Skilled worker shortage hurts U.S.

13. Are there any risks associated with small business offshore F&A BPO?
Like any new venture there are risks associated with offshore F&A BPO, but by careful planning the risks can be completely avoided.

14. What is KPO?
Knowledge process outsourcing (KPO) is the next step in BPO in which highly skilled jobs like financial analysis, medical research, equity research, and stock analysis outsourced to countries like India, China, and Philippians. Generally people with advanced degree like PhD, MS, and MBA will work on KPO projects.

15. What is the difference between outsourcing and offshore outsourcing?
Outsourcing deals with transferring a company�s business process to an external organization. The external organization may be located in the same country or in different country; if it is located in a different country it is called offshore outsourcing.
A parent company can have its own branch in a different country; if a work is transferred to its branch in a different country then it is simply called offshoring.

16. What are some of the security risks small businesses need to know before offshoring?
Data security while transferring the information over the internet
Data security in offshore provider�s locations
Security access restrictions and procedures for employees in offshore locations
Legal system in offshore locations

17. What is the difference between process outsourcing and product outsourcing?
Process outsourcing deals with BPO. Product outsourcing deals complete end to end product development by an outside vendor. If the vendor is physically located in a different country then it is an offshore product outsourcing.

18. What is nearshore outsourcing?
If a service or business process outsourced to a vendor geographically located closer to the country from where the work is going it is called nearshore outsourcing. For example several companies in US outsource work to Mexico and Canada. Nearshore outsourcing gives several benefits like less travel expenses, common culture and language.

19. What is BTO?
BTO stands for Business Transformation outsourcing. In BTO a company�s entire business process is outsourced to the BTO vendor. The BTO vendors not just manage the business processes, instead they work closely with the company to transform and improve the business process to add strategic value to the shareholders of the company. For a longer answer read the BTO article

20. What is nearshore outsourcing?
If a company sends it works to its subsidiary company located in the nearby country it is called nearshore insourcing. For example IBM, USA sending work to IBM Canada Limited.

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