Fbpo Final

FUNDAMENTALS OF BUSINESS
PROCESSING OUTSOURCING 1
Table of Contents
CHAPTER PAGE
OVERVIEW ...............................................................................................................1
1. INTRODUCTION .............................................................................................2
1.1 The IT-BPM Industry Overview ................................................................2

1.2 Introduction to the IT-BPM Industry ...................................................................... 5
1.3 Why Companies Outsource? ................................................................................... 5
1.4 The IT-BPM Industry Overview ................................................................6
1.5 Advantages and Disadvantages of Outsourcing .......................................8
2. FUNDAMENTALS OF OUTSOURCING .......................................................11
2.1 The Two (2) Types of Outsourcing .........................................................11

2.2 Strategies for Outsourcing ......................................................................................... 12
2.3 What to Outsource – 2 Types ............................................................................... 14
2.4 What NOT to Outsource ............................................................................14
2.5 What to Outsource ....................................................................................15
2.6 Typically Outsourced Activities-Tasks-Processes .................................................. 15
2.7 Key Technologies that Support Outsourcing ........................................................... 17
2.8 Fundamentals of Outsourcing .................................................................18
3. BPO ENGAGEMENT ..................................................................................................... 19
3.1 Client-Service Provider Relationship ......................................................19
3.2 The BPO Contract ....................................................................................................... 19
3.3 The BPO Contract: Master Services Agreement .................................................... 20
3.4 The BPO Contract: Scope of Work .............................................................20
3.5 The BPO Contract: Core Elements .............................................................21
3.6 BPO Contract Pricing Models .................................................................................... 22
3.7 BPO Contract Financials ........................................................................................ 23
3.8 Components of Process Cost .................................................................23
3.9 Regulatory Requirement .........................................................................24
3.10 External Regulatory Requirements - BOI .............................................................. 25
3.11 External Regulatory Requirements – PEZA ................................................... 26
3.12 Internal Regulatory Requirements – Industry ....................................................... 28
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4. MANAGING OUTSOURCING TRANSITIONS........................................................ 29
4.1 Managing Outsourcing Transition ...........................................................29
4.2 Transition Success & Effectiveness .................................................................... 32
4.3 Document Readiness .............................................................................................. 33
4.4 Work-Shadowing ....................................................................................35
4.5 Readiness Assessment ..........................................................................36
4.6 Hand-Offs .................................................................................................................... 44
4.7 Scale ............................................................................................................................ 45

5. BPO OPERATIONS MANAGEMENT ........................................................................ 50
5.1 BPO: Operations Management Overview ...............................................50
5. 2 BPO: Operations Management Six Components- Component 1 ............... 51
5.3 BPO: Operations Management Six Components – Component 2 .............. 51
5.5 BPO: Operations Management Six Components – Component 4 ............53

5.8 Business Process Mapping and Notation ...............................................58
6. CRITICAL SITUATION IN BPO ENGAGEMENTS ................................................ 63
6.1 Business Continuity Management ........................................................................ 63
6.2 Critical Situation in BPO Engagements - Critical Situation ........................... 67
6.3 Managing Issues and Changes ............................................................................ 83
REFERENCES ........................................................................................................85
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OVERVIEW
This module on Fundamentals of Business Process Outsourcing I provides

students with an overview of the outsourcing industry, including the rationale for
outsourcing, critical factors which affect different outsourcing industries, and the
processes involved in engaging in, operating and maintaining an outsourced service.
The course also introduces different tools and methodologies used in outsourcing
operations, and provide the students with opportunities to apply these tools in
simulations at a computer laboratory or “Game Lab.”
The course enables students to recognize areas of opportunities in outsourcing,

as well as to analyze and assess how changes in technology, regulation and business
environments may affect current industries. It also increases the students’ awareness
of the different processes critical to maintaining outsourcing engagements, such as
maintaining client relationships in the context of a service culture, and the effective
management of costs and resources.
INTENDED LEARNING OUTCOMES
1. Define and explain what is outsourcing.

2. Name and define two types of outsourcing.
3. Describe the attributes of a client and the service provider.
4. Define transition management and its sub-topics.
5. Define and explain operations management and its importance.
6. Explain what continuity management is and its procedure.
1
MODULE I
INTRODUCTION
1. Define and explain what is outsourcing

2. Identify the reasons why companies outsource
3. Identify functions/ services that are being outsourced
4. Enumerate the advantages and disadvantages of outsourcing
1.1. The IT-BPM Industry Overview
In 2010, The Philippine Information Technology and Business Process

Outsourcing (IT-BPM) industry garnered recognition from around the world. The UK’s
National Outsourcing Association determined the country #1 in business process
outsourcing service in its Global Business Trends report.
The word is definitely out – the Philippine is a major player in global IT-BPM.
The opportunity remains for the Philippine IT-BPM industry to capture a bigger
share, given the global offshoring services market is seen to more than double by
2016. The industry has the potential to bring in USD$25 billion in revenue, and employ
1.3 million individuals by 2016.
Offshoring and Outsourcing (O&O) is perhaps one of the most unique
developments in business and industry. Firms now adopt s truly global scope with the
opportunity to situate their Operations across the world.
Outsourcing is said to have first flourished in the run-up to the beginning of the
second millennium. IT processes and Operations were migrated to India as some
American and European companies focused on dealing with the Y2k problem.
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IT-BPM Industry Snapshot in the Philippines
2016: Base Case vs. Accelerated Case Increases Jobs from 3.1 Million to 4.
Otherwise 2016 talent requirements will reverse the current demand-supply

situation
by 2012-2013.
3
Growth of IT-BPM Industry = Economic Growth of the entire Philippines
75% of IT-BPM jobs are in NCR, with only 25% of PH graduates

IT-BPM is biggest private-sector job creator & employer in many tier 2‒3 cities
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1.2. Introduction to the IT-BPM Industry
Every time we buy something from somebody rather than producing it

ourselves, we have essentially 'outsourced' the production of that good or
service.
Contracting of a service provider for the delivery of a process or service

1.3. Why Companies Outsource?
1. Capacity Management
2. Lower Cost
3. Better Performance
4. Faster and Continuous Service Delivery
5. Part-based Activities
Capacity Management:
• Need to acquire/buy/hire (temporary) capacity
• Demand chasing (one day 50 employees needed, next day only 10 are
needed)
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Lower Cost:
• Replace expensive local or in-house resources with less expensive

resources from external service providers
• Tax differential or government incentive programs in other locations

leading to lower cost
Better Performance:
Use of specialized external providers which can deliver service with better
quality, innovation, in new platform:
• Sales force providing web-based sales management
• PeopleSoft providing employee-facing tools
Faster and Continuous Service:
• Greater output from work being done around the clock
• Offshoring market research support to locations in reverse time zones
• Offshoring processing of bills of lading to centers in other time-zones to

complete task faster
Part-based Activities:
• Automobile components
• Cruise-ship rooms
• Airplane avionics
• Desktop build and configuration
1.4 What is Being Outsourced?
1. Support or Auxiliary Services
2. Routine activities or activities that can be automated at larger centers
3. IT services
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Support or Auxiliary Services
o Cafeteria
o Janitorial Service
o Copy Center
o Building Maintenance
o Trucking/Shipping
o Security
o Payroll
o Legal
Routine activities or activities that can be automated at larger centers
o Small banks outsourcing check processing to larger banks, riding on ATM

base of multi-bank network
o Small vendors using Amazon.com as data center, marketing, and

payment processing platform
o Banks using common/multi-bank core banking services of large

technology providers
IT Services
o Application development
o Application maintenance and management
o Production/ Data-Center Operations
o Production technical/systems support
o Helpdesk
o Software as a Service (SaaS): shared application software
o Cloud services: shared data storage facilities, database management
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1.5 Advantages and Disadvantages of Outsourcing
Advantages:
o Employer as well as Employee
Disadvantages
o Employer as well as Employee
Advantages of Outsourcing – Employer Perspective
• The service provider (BPO company) determines most efficient number of

resources, process, and supervision to achieve output
• Service Provider may have more expertise/capability than the buyer
• Buyer can leverage economies of scale of the Service Provider
Service Provider may have more expertise/ capability than the buyer
Example:
Technical Support -
Accounting -
Animation -
Buyer can leverage economies of scale of the Service Provider.
Example:
Technical Infrastructure
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Human Resources
Technical Expertise
Advantages - Employee Perspective
• “Work Abroad, Live here”
• Be near your friends and family
• Work in the country and support Philippine growth
• Professional Growth
• Financial Independence
• Employee Assistance
• Enjoy your favorite food
• Cost can be higher
• Buyer does not have full control of resources doing work
Disadvantages of Outsourcing – Employer Perspective

• Cost can be higher
• Buyer does not have full control of resources doing work
Cost can be higher because provider may add premium for risk in case processes
are not well defined
o Example Problem: Vaguely defined task as “provide clinic service.”
o Example Solution: Redefine tasks 2 full-time nurses and 1 full-time doctor,

from 8:00AM to 5:00PM, providing emergency medicine (to what extent),
and, emergency care equipment (or not)
Buyer does not have full control of resources doing work

o Example: Can your agency provided office assistant also do this extra
errand – bring pet to the vet clinic, bring clothes to the dry-cleaner, pick-up
kids from school?
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o Solution: Do not use outsourced office assistant like your personal
assistant.
“Disadvantages” - Employee Perspective
• Shifting schedule (possibility to work at night)
o Gives you the opportunity to pursue your passion and interest during the
day
• Dealing with irate customer
• There is training support on how to deal with irate customer
• There is also floor support
• Companies provide facilities and activities to help you unwind
1. Identify what is outsourcing?

2. What are the five (5) types of outsourced
services as presented in the IT-BPM industry
snapshot of the Philippines?
3. Name three (3) reasons why companies
outsource?
4. Enumerate five (5) functions that can be
outsourced
5. Give two (2) Advantages and two (2)
Disadvantages of outsourcing from an employer
perspective
6. Give two (2) Advantages and two (2)
Disadvantages of outsourcing from an
employee perspective
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MODULE II
FUNDAMENTALS OF OUTSOURCING
1. Name and define the two (2) types of Outsourcing

2. Enumerate the different outsourcing strategies
3. State the common types of activities, tasks, and/ or processes that
get outsourced
4. Identify what are the key technologies and trends in outsourcing.
Putting Things into Context
• No man is an island
• Everything is connected
• The nature of business is …
2.1 The Two (2) Types of Outsourcing
Third-Party:
• Owned by a service provider, a local entity or part of a global grou
• Providing services to clients of the service provider
Shared Service Center (SSC):

• Wholly-owned by the mother company
• Providing services entirely to affiliates and subsidiaries, or more rarely to clients of

the mother company
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2.2 Strategies for Outsourcing
1. Multisourcing
2. Crowdsourcing
3. Onshoring
4. Nearshoring
5. Offshoring
Multisourcing: Multiple vendors for client's outsourced project.
Example:
• GM's Brazilian e-commerce site. Vendors: Oracle, AT &T, Microsoft, Cisco,

EDS (now HP Enterprise Services), IBM
• GM's 2007/$7.5B IT outsourcing contract with EDS (now HP Enterprise

Services), IBM, Capgemini, and Wipro Ltd.
Crowdsourcing: Company puts out a call for a project; best solution/submission is

accepted and contracted.
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• Crowdsourcing: "...outsourcing to an undefined, generally large group of
potential officer’s in the form of an open call." (Jeff Howe)
Onshoring: Vendor in the same home country as client
Advantages:
• Allows immediate response: product designers in same country respond to market

feedback quickly
• Local contractors have same market knowledge, culture, language,

communication style; minimizes culture issues
Disadvantages:
• Risk of inadequately selected, trained, supervised staff—i.e., less skilled because

contractor staff are lower paid
• Risk of higher attrition (lower business acumen/process knowledge) than internal

staff; less motivation to deliver quality
Example: New York bank contracting start-up security service firm in New York.
Nearshoring: Vendor in a country “close” (geographic and/or cultural proximity) to
client's home country
Advantages:
• Fee-for-service variability rather than fixed compensation costs
• Significant labor cost arbitrage
Disadvantages:
• Additional coordination costs, sourcing management, communications
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• Transfer pricing/tax margin requirements
Example:
Hong Kong retail firm offshoring garments manufacturing in Manila
Offshoring - Vendor and client in different countries
Advantages:
• Allows company to focus on core business
• Fast ramp-up/down at reasonable cost
• Opportunity to expand into new areas cost effectively
Disadvantages:
• Data privacy/confidentiality issues
• Lack of right business acumen/right market knowledge in offshore location
• Cultural differences leading to delays and miscues
• Risk of high attrition in service provider, weak staff selection/training.
2.3 What to Outsource – 2 Types
Core Activities-Tasks-Processes:
• Primary process or product of the business

• Tasks that deliver the primary product, the unique value proposition of the company
• “Essential, defining activities of an organization,” what it needs to keep enhancing
to improve competitive advantage
Non-Core Activities-Tasks-Processes:
• Support activities, processes, functions
2.4 What NOT to Outsource

Core Activities-Tasks-Processes:
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• Design
• Product Development
• Process
• “Recipe”
2.5 What to Outsource
Well-defined/documented tasks, standard outputs
Examples:
• IT Development: programming, documentation, unit and integration testing,

implementation of new systems, conversion to new platforms
• IT Maintenance: application maintenance, helpdesk, network support
2.6 Typically Outsourced Activities-Tasks-Processes
1. Business Process Outsourcing (BPO)

2. IT Outsourcing
3. Support Function/s
4. Routine activities or activities that can be automated at larger centers
5. Seasonal Requirement/s
6. Part-based Activities
• Business Process Outsourcing (BPO): outsourcing of entire business

process components; e.g., HR, payroll, accounting, Financial, etc.
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• IT Outsourcing:
o IT Technical Support
o IT Application Development
o IT Application Management
o Data Center operations
o Software as a Service (SaaS)
o Cloud (On-line Storage) Services
• Support function/ services:
o Cafeterias
o Copy centers
o Security
o Janitor Services
o Trunking/ Shipping
o Building Maintenance
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• Routine activities or activities that can be automated at larger centers:
o Small banks outsourcing check processing to larger banks, riding on

ATM base of multi-bank network
o Small vendors using Amazon.com as data center, marketing, and
payment processing platform
o Banks using common/multi-bank core banking services of large
technology providers
• Seasonal requirements/s:
o One day 50 employees needed; next day only 10 are needed

o Christmas hires to handle additional volume of transaction
o Temporary extension of operating hours to accommodate foot traffic
• All Part-based Activities:
o These are activities that are: routing, scheduled, with little uncertainty
o Automobile assembly
o Electronics assembly
o Packaging solution
o Handicraft or garments for mass production
2.7 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
o MS Windows Meeting Space
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o MS SharePoint
o Google Applications
2.8 Fundamentals of Outsourcing
1. What are the two (2) types of outsourcing?

2. Enumerate and briefly explain the five (5)
outsourcing strategies.
3. What are the typically outsourced activities/
processes/ tasks? Enumerate.
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MODULE III
BPO ENGAGEMENT
1. To describe the attributes of a Client and Service Provider

Relationship.
2. Define the following: BPO Contract, SOW, MSA, SLA, KPI
3. Enumerate the five (5) core elements of a BPO Contract
4. Define and differentiate CAPEX and OPEX
5. Enumerate and define what are the BPO Contract Financials
6. Enumerate the different regulatory requirements
3.1 Client-Service Provider Relationship
Attributes
Client company is concerned with:

• Quality transition of processes
• Efficient operation of business functions that were once handled in-house
Service provider company is concerned with:

• Scope of service
• Performance measures
• Benchmarks to ensure objective standards in assessing work quality
Therefore, as a result of these relationship attributes, the BPO contract is a unique,

“tailor-fit” agreement captured in a document that resembles a performance contract.
3.2 The BPO Contract
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• A business process outsourcing (BPO) 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.
• This “pre-agreed portion” is documented in the contract as the scope of work

(SOW).
• The BPO contract, with all its attachments, assumptions, and documented
agreements, is referred to as the master services agreement (MSA)
3.3 The BPO Contract: Master Services Agreement
Definition: 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 management
C. Country laws
Groups (A) and (B) are the “operational” elements, used day to day. Group (C)
generally “just-in-case” terms.
3.4 The BPO Contract: Scope of Work
Definition: Describes specific work to be delivered, by when, at what cost
Considerations:
• Can be similar to a “job order”
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• Is generally an attachment/addendum to a Master Agreement, points to covering
terms
• May state that in case of terms inconsistency, the SOW or Master Agreement
supersedes
3.5 The BPO Contract: Core Elements
1. Services to be rendered or provided as documented in the Scope of Work

(SOW)
2. Performance standards expected from the service provider; Service Level
Agreements (SLA), and, Key Performance Indicators (KPI)
3. Timeline of the contract; start date (“go live”), and, duration
4. Costs to the client
5. Other Specific Operational Requirements
• Performance standards expected from the service provider; Service Level

• Services to be rendered or provided as documented in the Scope of Work
(SOW)
o Out-bound sales calls
o In-bound inquiries or subscriptions
o Delivering food or flowers or mail
• Performance standards expected from the service provider; Service Level

o “Handle Time” and “Average Handle Time”
o Sales attainment
o Customer satisfaction rating
• Timeline of the contract; start date (“go live”), and, duration

• It is detailed schedule of when the transition period starts and when the service
provider assumes control of the contracted processes
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• In terms of type per duration; most contracts are typically multi-year contracts,
however and when deemed most effective, on-demand contracts may also be
put into effect
• Cost to the client

o Refers to the payment made by the client to the service provider for
honoring contractual agreements
• Other Specific Operation Requirements

o Who will provide the service
o Qualifications of personnel
o Location of operations
o Outline of reporting procedures, decision-making, and escalation of
problems
3.6 BPO Contract Pricing Models
There are two pricing models that are commonly used in outsourcing contracts; (1)
fixed price, and, time and material.
1. Fixed Price:
- This pricing model is easy to plan and more predictable than other pricing
models.
- A fixed, pre-agreed price per unit is negotiated, (e.g., a fixed price per call of
a fixed price per transaction)
- Advantages for clients: provides greater cost certainty
- Disadvantages: several risks with capital requirements and lower flexibility
2. Time and Material:
- The price for service is based on the time and material that was used.
- Used when a service is very flexible and it is not predictable in terms of how
much time and material is needed.
- In some cases, a maximum price for the service is negotiated by the client /
customer to build in some control or safety level. In practice, it is often a mix of
the above-mentioned pricing models that is used.
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3.7 BPO Contract Financials
Capex and Opex
CAPEX (or Capital Expenditure) – is a business expense incurred to create

future benefit. Expenditure on assets like a building or the physical space, machinery,
equipment or upgrading existing facilities so their value as an asset increase.
OPEX (ox Operational Expenditure) – is the money the business spends in
order to turn inventory into output (throughout). These are operating expenses which
also include depreciation of plants and machinery which are used in the production
process.
Those expenditures required for the day-to-day functioning of the business, like
wages, utilities, maintenance and repairs fall under the category of OPEX.
3.8 Components of Process Cost
Process costs associated with roles (activities-processes-tasks) that may be

outsourced via the offshoring outsourcing strategy
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1. Labor cost
o Compensation
o Benefits
o Bonuses
o Incentives
2. Direct costs
o Employee Development (Training), Employee Relations Programs
o Employee Tools/ Equipment; desktop computers, communications
o Coordination and Management: travel, representation, meetings, and,

workshops
3. Indirect costs
o Infrastructure: indirect costs for network, mail, and other shared

employee services, rental, depreciation/ amortization
o Other charges: head office or regional shared cost allocation, interest

cost, foreign exchange gains/ losses
Loaded Annual Cost:
1. Compensation: Salary and Bonuses
2. Benefits: Training, Health and Life Insurance, Profit Sharing, Pension Matching,
Worker’s Compensation, Employer share of payroll and Social Security taxes
3. Infrastructure: Facilities, Venue Rent, IT Support
3.9 Regulatory Requirement
Adherence to Government Regulations (External):
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• Board of Investments (BOI)
• Bureau of Internal Revenue (BIR)
• Bureau of Immigration
• Department of Labor and Employment (DOLE)
• Pag-Ibig Fund
• Philippine Economic Zone Authority (PEZA)
• Securities and Exchange Commission (SEC)
• Social Security System (SSS)
• Data privacy Law
Industry/ Company Regulations (Internal):
• Institutional and operational standards/ policies/ guidelines
• Service provider implements own regulations
3.10 External Regulatory Requirements - BOI
• Board of Investments
o A Republic of the Philippines agency created under the Department of

Trade and Industry.
o It strives to attract direct investments into the country to contribute to
economic growth and jobs creation in the Philippines
• BOI Qualification
o A Philippine enterprise can register their project with the BOI if the
proposed activity is listed as a preferred project in the current IPP. Said
enterprise may engage in domestic-oriented activities in the IPP whether
classified as pioneer or non-pioneer
• BOI Qualification (Continued)
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However, an activity which is not listed may still be entitled to incentives if the following
conditions are met:
o At least 50% of the production is marked for export (for 60% Filipino-
40% Foreign-owned enterprises); or
o At least 70% of production is marked for export (for more than 40%
Foreign-owned enterprises)
Any outsourcing company is
Qualified under 100% export
• For foreign-owned firms or those whose foreign investment exceeds 40% of the
outstanding capital stock who can engage in domestic-oriented activities, can
only be registered with the BOI if they propose to engage in an activity listed or
classified in the IPP as pioneer.
• However, if it fails to meet the pioneer classification, it can likewise opt to be an

export-oriented firm to qualify for BOI registration. However, this time, the export
requirement is at least 70% of actual production
BOI Requirements:
• DTI Registration: Sole Proprietorship

• SEC Registration: Corporation, Branch Office, Regional Headquarters
• Audited financial statement and Income Tax Return for the past three years (if
applicable)
• Board Resolution to authorized company representative
• Accomplished Application Form 501 and Project Report
3.11 External Regulatory Requirements – PEZA
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PEZA, The creation of
• The development of Special Economic Zones throughout the country, and the
very competitive incentives available to investments inside PEZA Special
Economic Zones are embodied in the Special Economic Zone Act of 1995
(Republic Act No. 7916), a law passed by the Philippine Congress.
• Promote Philippine investments, extend assistance, register, grant incentives to

and facilitate the business operations of investors in export-oriented
manufacturing and service facilities inside selected areas throughout the country
proclaimed by the President of the Philippines as PEZA Special Economic
Zones.
Qualification
• Export-oriented enterprises that locate in any of PEZA special economic zone.
Requirements
• Duly accomplished and notarized PEZA application form and anti-graft

certificate.
• Corporate Profile (including that of parent company, if applicable)
• Board Resolution authorizing the filing and designation of a representative
• Securities and Exchange Commission SEC Certificate of Registration, Articles of

Incorporation and by Laws (if not available, submit draft of Articles of
Incorporation)
• Project brief (i.e., Information on Market, Technical, Financial and Management

aspects of the project to be registered)
Data Privacy Law – Republic Act No. 10173
An act protecting individual personal information in information and

communications systems in the government and the private sector, creating for
this purpose a national privacy commission, and for other purposes
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3.12 Internal Regulatory Requirements – Industry
Industry Specific Regulations - Control of communication channels and

information systems:
ARTICLE 16- (1) The communication channels and information systems of the
bank shall be controlled to ensure that information obtained within the bank is reliable,
complete, traceable, consistent, in a suitable format and character to meet the
requirement, and accessible by relevant units and personnel in a timely manner
Industry Specific Regulations - Auditing of partnerships subject to

consolidation:
ARTICLE 34- (1) Banks shall take all necessary measures to ensure that their
internal audit units can inspect all activities and units of their consolidated partnership
without limitation
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MODULE IV
MANAGING OUTSOURCING TRANSITIONS
4.1 Managing Outsourcing Transition
The Transition Manager ~ Transition Strategies & Knowledge Transfer

Framework
• Transition Management is the set of activities that transpire after a BPO

contract is signed that implements or executes the detailed movement or
transfer of processes from the client to the service provider.
• Transition Management, The Manager
• A Transition Manager is responsible for migrating the function or the process
from the client location or organization to the service provider or outsourcing
organization.
• The Transition Manager needs to be an effective communicator, as the role
requires extensive interaction with the clients
• Because of the nature of the role, a Transition Manager needs to have a variety
skills and competencies.
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➢ Needs to have strong project management skills, as the migration process
are complex projects that require expert management skills.
➢ Need to be comfortable in working in a cross cultural environment, as most
often the client teams are based overseas;
➢ Needs to have a though rough understanding of the existing business and
legal process and the current as well as emerging technologies as these
play a critical role in the offshoring of a business function. Generally, there
are two common strategies followed in migrating a function, these are:
➢ Generally, there are two common strategies followed in migrating a function,
these are:
➢ Lift and Shift and Re-engineer and Migrate
• Generally, there are two common strategies followed in migrating a function,
these are: Lift and Shift and Re-engineer and Migrate
1. Lift and Shift

2. Re-engineer and Migrate
➢ Lift and Shift
Definition - This is the most common methodology used. When the process is
mature, the ’Lift and shift' approach is used for migrating.
Phases
1. Move the current process to the service provider without changes/

improvements
2. Stabilize
3. Re-engineer the process to achieve efficiency
gain – produce same output, less FTEs
➢ Modify the process

➢ Add end-user type or strategic automation
➢ Combine role with others
➢ Move process into a production line
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➢ Negotiate elimination of unnecessary outputs
Items to Consider
1. Process change that will not affect process control points or output can be done by
service provider independently
➢ Onshore approval of process changes is good practice

➢ Onshore review if the change impacts regulatory control points
➢ Lift and Shift
2. Major effort: post go-live reengineering
➢ Transition phase can be easy especially if “people and processes” are moved;
may take 3 to 4 months only
➢ Risk that Onshore loses political will to reengineer processes after a while
Advantages – Advantages of an “as is” basis process migration:
• Training the new team is easier, as the process is well understood and
documented
• Existing employees at the donor location are available to support the process
in case of disruptions or instability
• A fresh set of eyes (the new team) look at the process from a fresh perspective,
often resulting in process improvements and enhanced controls
➢ Re-engineer and Migrate
Definition – Fundamental rethinking and radically redesigning of the business

process so as achieve dramatic improvements in critical measures of performance
such as cost, service, and, speed.
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Items to Consider:
➢ Useful when the process is either broken and requires fixing, or is due to
undergo significant change in the near future (systems change or process
change)
➢ In such cases, it may be important to utilize the expertise of the existing team
(which is built over several years) to drive the change, before it is handed over
to the new team
➢ Company that outsource industry common processes to a market-leading
service provider will generally follow service provider processes
➢ Company transition changes its processes as part of to service provider
4.2 Transition Success & Effectiveness
Transition Pitfalls & Risks ~ Critical Success Factors ~ Transition

Effectiveness
1. Inadequate investment and Sponsorship
2. Unclear scope of work
3. Training shortcuts
4. Unclear roles and responsibilities
5. Not retaining the experts
Transition Critical Success Factors
The success or failure of a transition project is fundamentally measured in two

aspects:
1.Technology Readiness – the enabling hardware and on-going operations
state of readiness of software to support the
2. Manpower Readiness – state of the readiness of the operating staff; hired, trained,
and, skilled for the service processes
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Transition Effectiveness can measure through:
1. Financial Benefits
It is important to quantify the real cost of the function before off-shoring

(baseline costs), and also to measure the cost of the off-shore team on an
ongoing basis.
• Costs related to moving the function to the new team should be tracked
separately as project costs.
• Capturing these cost elements enables comparison of baseline costs with

current costs, and provides an accurate measurement of the saves.
2. Performance of the Team
• Primarily done by developing performance metrics
Usually subject to a testing phase to determine reasonability of the service measures

– also known as the “baselining” period
4.3 Document Readiness
• Inputs
• Processes are documented to standards
• Replication ready
• Output
• Communication
• Supervision
Document Readiness: Inputs
1. Inputs are documented
• Source systems and dependencies
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• Timing of delivery quality assumptions, and work-around in case of failure in
delivery of some inputs
•Historical timeliness and accuracy statistics. Helps size service provider

resources need, helps identify likelihood of work-compression (rushing 3 hours
work in 1 hour) or overtime (working late to keep to output delivery targets)
• Format of inputs (structured or not)
Document Readiness: Process
2. Process are documented in industry standard format and in complete detail
• Hand-offs to other parties, internal and external, documented, including

timing and format
• Interim/flash reports, if required, are documented as deliverables.

Delivery time, day-of-month, period targets are documented
3. Required tools, macros, workflow, application, shared directory access are

listed in sufficient detail to allow replication in the service provider
Document Readiness: Outputs
4.Interim/flash and final outputs are completely documented
• Formats are completely defined.
• Control steps and quality assurance checklists are defined.
• Delivery time/day-of-period are defined; these are reviewed to ensure

they are achievable/consistent with input timelines.
• Service provider and transition project manager should validate that

timelines are current and not “aspirational;” tendency to put in
desired/unrealistic deadlines when outsourcing.
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Document Readiness: Communication
5.Communication channels for output to be explicitly defined
• Clarity during here minimizes misunderstanding early production period
• Especially if the output is an input to another process
Document Readiness: Supervision
6. Onshore supervision points and what will be reviewed/checklist should be

defined
• Some country regulations (US) require clear trail of supervisory control

by an Onshore person
• Responsibility for output (e.g., financial statements) rests with an

accountable Onshore officer
• For shared service centers particularly, clear documentation on areas

of supervisory review paves the way for transition into “center of
excellence” mode where supervisory control rests offshore
4.4 Work-Shadowing
Definition – is the term used for “learn-by-doing” activity of service provider

personnel, generally done at the same location as current company performer
Phases:
1. Onshore personnel doing activity
• Onshore personnel performs activity, conducts training; service provider

personnel look over/ on - observers
• May be done at Onshore location with service provider staff travelling; may be
done at service provider location with Onshore staff travelling
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• Service provider staff reviews documentation provided against actual activity
done by Onshore personnel
• Changes in documentation are done
• Re-sizing of required staffing may be negotiated at this point
2. Guided service provider network
• Service provider performs the activity; Onshore personnel looks over and
gives close guidance
• May be done Onshore or at service provider site • Completes 1 or 2 full cycles:

if output is
monthly, guidance is given for 2 month-ends; if output is daily, guidance is given

for a few days
• Generally 1 to 2 months of guided work
3. Go-live
• Service provider performs the activity independently at service provider site
• Performance targets in place and required
• Changes in sizing or process (to correct erroneous training provided by

onshore) now falls under change-request process and governance
• Need to closely monitor for a period of 3 months to ensure stable performance
4.5 Readiness Assessment
Readiness Assessment verifies if process to be outsourced is:
1. Adequately documented. Poorly documented current process will result in:
a) Most current in-house processes operate on tribal knowledge,

undocumented steps.
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b) Service providers adding “uncertainty” of process premium in their
proposals—not very clear what will be delivered, how, and by when
c) High probability of he-said-he-said misunderstanding during initial phase of

production
d) Long work shadowing period and high cost as service provider tries to
document required process
2. Correctly-sized in generic resources
a) Most current process done in-house operate with long-experienced staff

(veterans in role). 1 FTE with 20 years on-the-same-job experience is not equal
to 1 FTE with general experience no matter how bright or expert or diligent
b) Without readiness assessment, the company will estimate the current cost
low, the receiving provider may incorrectly size the role, may have to initially
use 2 performers (with very structured steps) to do the same 1 FTE job until
knowledge is gained/documented
3. Resource sizing already includes the right level of quality assurance and
supervisory control
a) Most in-house processes rely on veteran performers with long-developed

“business acumen” that allows unstructured sense-check for quality assurance.
b) Most contracts (especially shared service center migrations) are under-

configured because QA/supervisors are not included
c) Why is incorrect (under) sizing a problem? Because service providers will

inevitably use the “change request” process to add to the cost
Adequate Documentation
Adequate Documentation for:
1. Input
2. Process
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3. Output
4. Communication
5. Supervision
Considerations for Input
1. Properly described input
2. Method of acquisition
3. Language of input
4. Timing of the input
5. Dependencies
Adequate Documentation: Input
a) What are the inputs
– Is there documentation listing/describing the inputs
➢ Many onshore processes performed by long-time staff would not

have existing documentation
➢ Key to know where there are gaps to understand areas and cost
of remediation.
- What are the inputs yow are the inputs received
➢ Are they in structured form (consistent) or are they in verbal, email

or even spreadsheet freeform
➢ Structured input makes straight-through processing easier,
requires less business acumen on part of performer
➢ Less training for processor to start, faster growth from new hire to
productive performer
➢ Unstructured input data points to early area for process
improvement; efficiency gains from straight-through processing
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– Are inputs in same language as that of provider
➢ Can communication onshore be done in same language as that

used by provider
➢ Different language adds cost in terms of language
translator/specialist and “funnel” effect
b) Is there an input data timing condition (can be received only on Business Day x)
– Are the inputs received all throughout the month or do they peak on a single
day/period
➢ Peaking inputs may require peak-basis staffing to keep delivery

target
➢ Extra cost of peak personnel
➢ Challenge of work-scheduling to use staff during low periods
− Are inputs received only on defined days
➢ Do those days coincide with month-ends

➢ Less opportunity to do work-scheduling of off-peak staff if work peaks are the
same
c) What are the dependencies (what systems, external parties)
– Are dependencies documented—i.e., OO output from another

system/process must be received first before PP input can be delivered
– Which inputs are delivered systems, which by internal by external systems
➢ How stable are the systems (do they go down regularly)?
− Are there work-arounds in case of input system failures
d) How accurate are the inputs (quality of input)
– Are there base/historical accuracy statistics. Can be used to justify cost of

measures to improve accuracy
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– Input errors cost money in terms of re-work – Poor quality of input means prior
step to validate input must be added
c) How consistently delivered on time (timeliness)
– Are there historical timeliness statistics. Can be used to justify investment in

faster platforms, in process improvements
– Late inputs cost money in terms of overtime
– “Compressed work-day” burden (doing 3 hours’ worth of process deliver on

time)
Adequate Documentation: Process Checklist
a) Are the processes properly documented
b) Are hand-offs to external) shown other parties (internal and in the

documentation
c) Are interim or “flash” reports documented
d) Are delivery time/day-of-month/period targets documented
General rule of thumb:
➢ If documentation length exceeds the output materially, that is too

low a level
➢ Lowest level documentation going beyond 2 to 3 pages is too
much
a) Are the processes properly documented
– What documentation standard
➢ Process maps (who performs, what are the hand-offs to other

performers) are intuitive
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➢ Using a specific standard is not important; it is important that a
standard is consistently used
– How many levels are documented
➢ Must go beyond high-level process

➢ Must document actual outputs sufficiently to
o Qualified performer (with xx years academic training) to replicate
output
➢ Must be simple and straight forward
– Are workflow and other technology tools properly referred to in the document
➢ Ideal if workflow platform is used Onshore, but this is infrequent

➢ If specific spreadsheets, access, or other end -user-developed programs are
used (“macros”), it is important that the source code and technical
documentation for the macro is shared
b) Are hand-offs to other parties (internal and external)
– Clear documentation of hand-offs show areas of
– Hand-offs are transfers of the task to other people
– Aggregate items to review in a single-sign-off step
– May be better to. require l enriched data prior to start
c) Are interim or “flash” reports documented
– Flash reports allow Onshore supervisors to do early process check.

Regulatory submission deadlines are hard, hence critical outputs may need
intermediate review
– Ideal that the process continues without waiting; only stop by exception
d) Are delivery time/day-of-month/period targets documented
– Indication important of required delivery time/date in the process

documentation
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– Quick look at input receive and output delivery allows check of process ease
and staffing requirements
– Tight processing times (late input, early month output) shout out opportunities
for required technology/process improvement
Adequate Documentation: Process
How up-to-date is the documentation
– How often is document re-certified. Are the “live”/modified immediately

whenever process is changed
▪ Documentation is valuable only if up-to-date; show binders are

not useful
▪ Easy to quickly assess live-status of documentation: Ask
performer about his process, ask him to then point it in the
documentation
▪ What steps/procedures will Contracting of a service provider for
the delivery of a process service.
▪ How: With description/documentation of how the service will be
performed (key operating procedures, control points) (in many
cases, requirements will include: performer qualifications and
count, required tools – for clarity of expectations)
▪ Supervision: Stating the supervision process, periodic reviews,
and how performance will be measured
▪ Cost: For a clearly defined cost (per input unit of outcome) and
clearly defined bonus/penalty award and basis
Adequate Documentation: Output
Considerations for Output
1. Properly described output
2. Method of transmission
3. Language of output
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4. Timing of the output
5. Dependencies
Are outputs completely documented
- Formats defined. In key management reports, down to the colors of certain

data
- If output is an input to another process, best that structured template is

followed
- Periodic changes in outputs (and in contents/format within output) are normal

– BUT the change requests should be documented, cost-justified, and properly
approved
Adequate Documentation: Communication
How are the outputs to be communicated?
- Transmission channel has to be clearly stated – e.g. email, file upload

into MS SharePoint
- As input to another process – in workflow or direct entry to another

system
Adequate Documentation: Supervision
Considerations for Supervision:
• Onshore
• Offshore
• Staffing, Equipment, Motivation
• Country Regulations
Where are the “Onshore” supervision points
• Some country regulations (US) require supervisory control by an Onshore

person – i.e. ownership of the output is with the Onshore person
• In Onshore exercises who has “supervisory control”
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• In shared services, next stage of evolution is true centers of excellence where
work and supervision is done in another location
Adequate Documentation: Summary
• Onshore processes with adequate documentation have greater

readiness for offshoring
• Documentation on Inputs, Processes, Outputs, Communication
channels, and Supervision allow a service provider (Third0Part of
Shared Service Center) to estimate cost of doing the service offshore
with more certainty.
4.6 Hand-Offs
Definition - are transfers of the output to a different performer, an approver, for further
action prior to continuation
Reasons for Hand-offs
1. Data enrichment. The other performer adds data to the transaction
2. Quality Assurance. The second performer is a checker
3. Control. Approval for materiality and substance is done by a separate person
How you get paid…
1. Paymaster creates initial employee pay record
2. Timekeeper reviews overtime records to adds overtime pay
3. Payroll clerk reviews loan records for loan deductions
4. Payroll clerk looks at reimbursement records to add payments for expenses

advanced by employee
5. Payroll clerk looks at enriched pay record and calculates right withholding
tax
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6. Payroll supervisor reviews the whole pay and approves
7. Paymaster submits net salary ta bank for payment
4.7 Scale
Sufficiency – Tips to Optimize
Scale Illustrated
Scale
- Number of employees (manning compliment, head count, full time

requirements FTE) Sufficiency of scale depends on the following:
• Service provider
• Requirement of the job
• Client
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Scale in Relation to Workforce
Sufficiency of scale depends on the service provider – for risk management
• A 15,000 FTE provider is a single location may prefer engagements of at least

500 FTEs (5% is normal buffer of resources, can be ramped up easily or
absorbed in other clients when contract ends) Right scale depends on client –
percentage of outsourced roles to total staff, for risk management and control
• A 500-person Finance organization may want to limit initial outsourcing to say

10% or 15%
• A large company with experience in outsourcing may opt to outsource the

entire technology group (from data centers to application development to helpdesk) to
a provider –especially if core business is non-IT
Tips to Optimize Scale
• If the process to be outsourced is done by only a few FTEs (Full time

equivalent), it is not worth outsourcing
• Near self-contained roles have good potential for outsourcing – because more
FTEs covered
For Scale to work it must be considered to both sides client and service provider. In
each instance, both parties have to consider the following:
• End-to-end roles are ideal (start from external contact, ends with external
contact, with only 1 or 2 intermediate hand-offs for review/approval)
• Product P&L (profit and loss) starts with transaction data download and ends
with submission to regional/senior management, intermediate activities (market
price verification, calculation of mark-to-market value) are fully done by service
provider
• Buyer needs sufficient FTEs in outsource project to justify risk and executive
attention (sourcing management, finance/payments, legal)
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• What is the amount saved. If it is too small, the cost of Onshore supervision
eats up the benefit
• Service provider needs sufficient FTEs (margin) to justify a risk, supervisor

(operations manager attention), and overhead (Finance, billing, legal)
• Large and small engagements have near same “overhead” in support –except
for very large contracts
• Training
• Improve Hardware and/or Enhance Software
Identifying Task Candidates for Outsourcing
• Break down current onshore roles into individual tasks that have scale (high
number of FTE hours)
• Tool for task analysis can be - Follow the performer: consultant follows a
performer and tracks time spent in each task; called “stop-watch” method
because consultants carry timing devices
Identifying Task Candidates for Outsourcing: Time Tracking
• Time-tracking into granular task buckets is good way to identify potential roles
for outsourcing
• Record how much time is spent each day in specific task groups
• Helps managers assess whether the work can be simplified
• Challenge of simplify now or later
• Some high-volume tasks may need further breaking up to identify specific

roles
• Highlights tasks that occupy a lot of people’s hours
• High FTE-hour numbers are directional pointers for outsourcing
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• Other “sub-filters”: (a) do not require complex market knowledge, (b) do not
have high financial or regulatory risk, (c) tasks which are self-contained (have
minimal hand-offs)
• Tempting to wait and do more granular time tracking and further analysis. Be
wary of analysis paralysis
Identifying Task Candidates for Outsourcing: Candidates
• Finite
• Documented
• Sufficient of Scale
Identifying Task Candidates for Outsourcing: Considerations
• Readiness assessment
• Level of documentation of onshore processes
• Scale: sizing savings based on current performer count
• Time-tracking or task-based FTE assessment
• Prioritize roles that are “more ready”
• Lift-and-Shift for less documented roles
• Cost of low outsourcing readiness
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Components of Readiness
49
MODULE V
BPO OPERATIONS MANAGEMENT
5.1 BPO: Operations Management Overview
➢ The main strategy that the BPO sector applies is what is called; “End-to-End
Service Level Management.”
➢ The theoretical and practical aspects of designing and implementing End-to-

End Service Level Management (SLM) in any BPO relationship is through a
formal agreement – a contract with the client
➢ The Service Level Agreement (SLA), is a formal agreement between the client
and service provider for a common understanding on aspects including service
quality, responsibilities, performance metrics, penalties and commitments.
SLM is a regular and systematic review of service provider performance against the
agreements
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5.2 BPO: Operations Management Six Components- Component 1
PERFORMANCE MANAGEMENT
- is the systematic process by which an organization involves its employees, as

individuals and members of a group, in improving organizational effectiveness
in the accomplishment of mission and goals.
Employee performance management includes:
➢ Planning work and setting expectations,

➢ Continually monitoring performance,
➢ Developing the capacity to perform,
➢ Periodically rating performance in a summary fashion, and
➢ Rewarding good performance.
5.3 BPO: Operations Management Six Components – Component 2
Metrics and Reporting
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PROFESSIONAL DEVELOPMENT
Professional Development - refers to skills and knowledge attained for both

personal development and career advancement.
52
Value - lifelong learning, a sense of moral obligation, to maintain and improve
professional competence, enhance career progression, keep abreast of new
technology and practice, or to comply with professional regulatory organizations
Approach to Personal Development:
➢ Case Study Method

➢ Consultation
➢ Coaching Communities of Practice
➢ Lesson Study
➢ Mentoring
➢ Reflective Supervision
➢ Technical Assistance
QUALITY MONITORING AND ANALYZING
Quality Specification:
➢ Total Quality Management (TQM)

➢ Total Quality Circles (TQC)
➢ ISO 9001
➢ Six Sigma
Total Quality Management (TQM) is a management system or approach to long–

term success through customer satisfaction. In a TQM effort, all members of an
organization participate in improving processes, products, services, and the culture in
which they work through the use of; strategy, data, and effective communications to
integrate the quality discipline into the culture and activities of the organization.
Primary Elements of TQM:
➢ Customer Focus
➢ Total employee involvement
53
➢ Process-centered
➢ Integrated system
➢ Strategic and systematic approach
➢ Continuous improvement
➢ Fact-based decision-making
➢ Communication
Total Quality Circles means having organized Kaizen activities, involving everyone
in a company - managers and workers - in a totally systemic and integrated effort
toward improving performance at every level.
It is to lead to increased customer satisfaction through satisfying such corporate cross-

functional goals as quality, cost, scheduling, manpower development, and new
product development.
ISO 9001 is a very flexible quality standard that is readily applicable to many industries,
as well as to all sectors of IT-BPM industry, hence its popularity in the Philippines even
with small-scale business.
ISO 9001 is part of a series of International Standards for Quality Systems, it is

primarily focused on quality systems as models for quality assurance in design/
development, production, installation and servicing
Six Sigma is a set of qualitative and quantitative (statistical) techniques to

systematically improve processes by eliminating defects and process variation.
It is byproduct of decades of quality improvement methodologies such as Statistical

Process Control (SPC), Total Quality Management (TQM), and, Zero Defects.
Six Sigma asserts that:
➢ Process variation is an obstacle to reliably delivering high quality products and

services, as defined by the customer,
➢ Continual focus on reducing process variation is the foundation for business
improvement and success,
➢ All business processes (manufacturing, service, administrative, etcetera) can
be measured, analyzed, controlled, and improved,
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➢ Effective problem solving can only be achieved by data driven decision making,
and,
o Achieving and maintaining quality improvement requires an
organizational commitment that comes from senior management
PRODUCTIVITY MONITORING AND CONTROL
Employee Productivity is amount of outputs (usually regulated by requirements and

quality) which can be produced by employee per period of time, utilizing the given
resources. The more stable and elaborated the process of production (the less X-
factors or varying inputs it involves), the smoother level of productivity is expected from
employees operating it.
Guidelines for monitoring Employee Productivity:
➢ Measuring
➢ Comparison
➢ Identification
➢ Feedback
CONTINUOUS IMPROVEMET INITIATIVES
5S Process – or more simply “5S”, is a structured program to systematically achieve

total organization, cleanliness, and standardization in the workplace.
5S was invented in Japan, and represents five (5) Japanese words: Seiri, Seiton,
Seiso, Seiketsu, and Shitsuke
Benefits:
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➢ Improve safety
➢ Decrease down time
➢ Raise employee morale
➢ Identify problems more quickly
➢ Develop control through visibility
Kaizen:
➢ It is a Japanese management concept for incremental (gradual, continuous)

change (improvement)
➢ It is a way of life - a philosophy, assuming that every aspect of our life deserves
to be constantly improved
➢ Kai means Change and Zen means good
Key Elements of Kaizen:
➢ Quality
➢ Effort
➢ Involvement of employees
➢ Willingness to change
➢ Communication
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Lean is a process management framework and methodology derived mostly from the
Toyota Production System (TPS). It aims to optimize the flow or speed of producing
goods and services by removing the traditional "8 deadly wastes. “
Lean implementation (or transformation, as it is commonly called) leverages tools for

assessing process flow and delay at every step in a process. The focus is on
separating value-added from non-value-added activities and eliminating the root
causes and cost of non-valued activities. Lean methods are used to quantify and
eliminate the cost of complexity
“8 Deadly Wastes:
➢ Overproduction
➢ Transportation
➢ Motion
➢ Correction
➢ Over-processing
➢ Inventory
➢ Unused Employee Ideas and Talent
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5.8 Business Process Mapping and Notation
➢ Business Process Mapping and Notation (BPMN): “standard notation readily

understandable by all business stakeholders”
➢ Crafted by business analysts
➢ Reviewed by business managers and performers who will manage and execute
the processes
➢ Implemented by technical developers
58
Process Mapping & Notation: Basic Shapes – Event
Event – represents start, intermediate, end events. “Something that happens”
Examples:
➢ Month-end date is an event that can start the month-end reporting process
➢ Email with an invoice attachment requesting payment can start the accounts
payable process
➢ Student grades arriving at the registrar office is an end event to the semester
teaching process
Process Mapping & Notation: Basic Shapes – Activity
Activity – represents; task, sub-process. “Something that is done.” Leads with an

action verb, describes the work done in the task as a clear/ action instruction
Examples:
➢ Extract account balances in SAP is an activity that will be performed at the start
of month-end
➢ Check for duplicate invoice is a task done at the first stage of the accounts
payable process
➢ Explain syllabus is a task performed by the teacher at the start of the semester
Process Mapping & Notation: Basic Shapes – Gateway
Gateway – represents; forking (decision) or merging of paths.
May be exclusive forking an “or”, depending on the answer to the question indicated
by the label. An “X” can be placed inside the shape (diamond) to denote a forking of
paths.
May be parallel flow an “and”, marked by a “+” sign inside the shape (diamond),
denoting concurrent activities.
Examples:
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➢ Exclusive: Is invoice a duplicate? If yes, reject. If no, create accounts-payable
entry
➢ Parallel: After billing template is received;
o Accounts receivable entry is created in service center, AND
o Accounts payable entry is created in the Onshore unit
Process Mapping & Notation: Basic Shapes – Flow
Flow – represents; sequence flow. Connects the tasks, shows/ indicates the flow
direction
Examples:
• Check for duplicate invoice is followed by generate accounts payable entry
Process Mapping & Notation: Basic Shapes – Data
Data – represents; input data, output data. As an input can be via a submitted template
or data in a storage repository. As an output can be a report to be sent to a recipient,
can be a filled-up template to be used by the next process
Examples:
• Flash or interim profit and loss (P&L) report

• Email notice to a recipient
• Generated physical invoice
Process Mapping & Notation: Basic Shapes – Group of Tasks
Group of Tasks – represents; a group of tasks. It is literally a visual indicator that the
included tasks are within a logical group
Examples – Pay supplier group can include:
• Generate balance sheet entries (credit cash, debit accounts payable)

• Issue check-payment request
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• Pay supplier
• Get official receipt
Annotation – represents; comments. A repository for explanatory comments for any

of the shapes (process, flow, tasks)
Examples:
• “Check payment requests are processed only every Thursday”

• “Same as Onshore process”
Process Mapping & Notation: Basic Shapes – Pool or Lane
Pool or Lane – represents; scope of the role of a performer; hands-offs to other

performers/ units are shown as arrows going out of the lanes. Activities performed by
the individual (or role/ team) will be noted inside the lane
Examples:
• Accountant checks for duplicate invoice and requests check payment. These
two activities are within the Accountant’s lane
• Approval by company head is done by a different person, hence in a different
swim lane (the company head’s lane)
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MODULE VI
CRITICAL SITUATION IN BPO ENGAGEMENTS
6.1 Business Continuity Management
Steps of Business Continuity Management-Critical Situations
The challenge to business continuity management is to plan for seemingly

"uncontrollable" circumstances so as to provide for consistent excellent service.
Therefore, the goal of continuity is maintaining the uninterrupted availability of

all key business resources required to support essential business activities.
Goal of Business Continuity Management is most evident in the following:
• Uninterrupted availability-continued business operations

• Key business resources- ensuring critical business capability
• Essential business activities- key business goals
Business Continuity Management Steps
1. Identify key business processes
2. Identify risks and business process impact
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4. Reduce probability of occurrence
5. Mitigate impact
6. Develop disaster recovery plan
7. Mitigate impact
Business Continuity Management Steps-Step 1
▪ Strategic, operating, and support processes

▪ Assessment of business impact in event of interruption
▪ Documentation of maximum allowable time for interruption
▪ Assessment of business impact in event of interruption
• Prioritization/ranking of business processes
Business Continuity Management Steps - Step 2
2. Identify risks and business process impact
• Identification of risks, link with key business process affected. prioritize by

business impact
• Periodic certification that the list is updated
• Constant monitoring to assess likelihood of occurrence of risk
• Documentation of maximum allowable time for interruptions
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Business Continuity Management Steps - Step 4
4. Reduce probability of occurrence
• Formulate measures to reduce the probability that controllable risks will

occur
• Effective primarily on internal risks
• Improve policies, process changes, people measure
• Revise guidelines, provide greater supervision
5. Mitigate impact
• Formulate measures to mitigate adverse effect, shorten interruption, if

risk occurs
• Planning for redundant resources, alternative process
6. Develop clear disaster recovery plan
• Response, Responsible personnel, decision structure, facilities

• Interim process. Alternate processing resources
• Restoration/Resumption, Transition from alternate process / work-
around and resources to normal mode after interruption is resolved
• Also called a "business continuity plan"
7. Mitigate impact
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• Periodically test recovery plan to
o Validate effectiveness of plan actions (response, interim process,
resumption)
o Ensure availability of required equipment, and
o Develop people skills
• Perform success/failure assessment to improve plan
• Perform root-cause analysis to improve risk prevention measures
Business Continuity Management Interruption Events
• Each process has a period within which interruptions will not affect achievement
of key business goal
• Beyond that period, business goal will be impacted and interruption becomes
extraordinary
• Business Interruption Event is triggered when the interruption on a key business
process exceeds the maximum allowable time
Business Continuity Management Triggering Event
1. Extraordinary event
- Beyond normal downtimes of equipment or input process errors
2. High impact
- Resulting in risk of significant loss ANAO uses the term "outage"
- In this course, we use Risk and Risk Event interchangeably with "business
interruption event"
Business Continuity Management Reduce Probability of Occurrence
• Develop measures to prevent risk from occurring
-If within the control of the organization
• If cost effective
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-Shifting of factory to an underground bunker to protect from tornado
damage may be cost prohibitive
• Reduce likelihood of the risk if prevention is impossible or not cost effective
- Extensive smoke alarms to catch possible fire start
-Good quality circuit breakers, periodic inspection and replacement, use

of standard wires/tapes reduce risk of electrical fir
- Multiple generator sets reduce risk of interruption from power failure
6.2 Critical Situation in BPO Engagements - Critical Situation
Management Method
Critical Situation in BPO Engagements
Definition
• Critical situation (CritSit) in BPO is when your ability to render consistent

excellent services has been compromised
• An organizational state where symptoms of service quality and operations

management degradation is becoming apparent in the delivery of services
Critical Situation in BPO Engagements: Symptoms
"Tell Tale" Signs of a Critsit:
1. Prolonged period of non-achievement of key SLA's or Contractual

Obligations.
2. Business Controls and/or Financial posture of a contract / account is

assessed as high risk.
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3. Lingering IT infrastructure issues causing problems in operations, e.g. delays
in processing of client's payroll
4. Data Privacy Incidents/Fraudulent activities involving clients' information are

recurring in the workplace.
5. Customer satisfaction rating is on a downward trend; Customer escalation is

spiraling upwards.
6. Increase in costs (e.g. additional resources)
Critical Situation in BPO Engagements: Entering into
Entering a Critsit:
• A state of being on the verge of a crisis or emergency that if not addresses

could lead to an elevated risk level
• A CritSit is no ordinary exercise and it should only be declared once a defined
set of criteria has been determined by the senior management.
Critical Situation in BPO Engagements: Declaration of
Declaring a CritSit
The Critsit should be jointly declared by the following:
• Delivery Center Leader or General Manager

• Competency Leader or Delivery Process Leader
• Delivery Center or Competency/Process Quality Leader
Critical Situation in BPO Engagements: Situation 1
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Situation: Heavy flooding caused by the Habagat phenomenon in August 2012
Situation in the BPO: Massive absenteeism as employees were not able to

leave their houses due to the heavy flooding
Impact to Business:
• Non-attainment of SLA (Service Level Agreement) due to lack of agents to take

the calls or do the work
• Long call queues as only a handful of agents taking the call
• Other centers/countries who are receiver of Manila work output cannot do the
next process as work is delayed from Manila end
Mitigating Actions done by the BPO:
• Declared an emergency situation for Manila and asked for assistance/support

from other centers located in India, China, Singapore and other centers in Asia
• Requested employees who are already in the center to render overtime work
to cover for agents who are absent
• Employees who can work from home (with technical connectivity) were asked
to work from home
• Team Leaders, all management and support teams who can do actual
operations work, were asked to do operations work
• Shuttle service provided to ferry employees from house to work and vice versa
(where passable)
• Reimbursement of transportation expense.
Over-all Support to Employees Heavily Affected by Habagat:
• Financial assistance for those whose houses, personal properties were

damaged
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• Paid absences
• Counseling for those who were emotionally affected
• Fund derives organized by the employees as well assistance from other
centers/affiliate companies to support affected employees
Support to the Community:
• Fund drives organized by the employees as well assistance from other

centers/affiliate companies to support communities in affected areas
• Amount from the fund drive doubled by the company or a certain amount
donated by the company
• Support in kind also provided especially in evacuation centers
Situation: Metro Manila Blackout and to compound the situation building

generator is broken/not functioning due to mechanical trouble
Situation in the BPO: No power means downtime as there is no technology

support (no computers), no light and no air-conditioning
Impact to Business:
• non-attainment of SLA (service level agreement) as employees cannot work

due to the lack of power
• long call queue
• their centers/countries who are receiver of Manila work output cannot do the
next process as work is delayed from Manila end.
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• Declared an emergency situation for Manila and asked for assistance/support

from other centers located in India, China, Singapore and other centers in Asia
• Required employees to go down the building using the fire exit stairs and wait
for instructions as to when work will resume
• Employees who can work from home (places where there is power and with
technical capability and connectivity) were requested to work from home
Disaster Recovery Plan/Business Continuity Plan to minimize risk in the future:
• Meeting with Building Admin to review situation (what went wrong) and identify
Action Plans to increase prepared in the future
• Schedule monthly meeting with Building Admin to ensure actions are being
done as per agreed timelines
• Monthly/Quarterly audit/testing to ensure generator and other power
systems/tools are in good condition
Situation in the BPO: High Absenteeism due to widespread influenza and colds
Impact to Business:
• Delay in response time as there are not enough agents to take calls
• Long call queues
• Turn Around Time of work/calls is no longer than required time as there is not
enough agents/employees to do the volume of work
• Other centers/countries who are receiver of Manila work output cannot do the
next process as work is delayed from Manila end
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• Required employees to work overtime (work extension and work on day-off)

to cover for colleagues who are absent
• Request for vacation leaves are revoked
• Employees who can work from home (places where there is power and with
technical connectivity) were asked to work from home
Disaster Recovery Plan/Business Continuity Plan to minimize risk in the future:
• Review workforce planning to ensure FTE allocation in case of high

absenteeism
• Multi-skilling of agents to allow for flexibility to transfer agents from I program

to another in case of high absenteeism in certain accounts/programs
• Develop health programs to educate employees on how to live healthy and

avoid illnesses
Critical Situation in BPO Engagements: Example
• First call Resolution (FCR) which is a Key Service Level Measure in a Call
Center operation with a target of 85% is consistently missed for three months.
Should management call for a CritSit?
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Medical Transcription - Specialist accuracy output consistency is below SLA
for 5 consecutive weeks.
Animation-Delayed attainment of pre-production targets
Technical Support-Resolution of escalations exceeding required turnaround

time.
Critical Situation in BPO Engagements: Entering into
Entering a Critsit:
• A state of being on the verge of a crisis or emergency that if not addressed

could lead to an elevated risk level.
• A CritSit is no ordinary exercise and it should only be declared once a defined

set of criteria has been determined by the senior management
• A CritSit should be declared for the following reasons:
-non-achievement of the Service Level Agreement (SLA):
-non-implied client dissatisfaction; and
- penalty paid for every month of SLA miss
Critical Situation Management Method
A simple and straight-forward manner to manage a critical situation is presented

below:
73
Prepare
• Identify the Project Manager or Team Leader of the CritSit team. A good option
to lead this team is either a certified Project Manager of 6S Black Belt.
• Identify the team members of the CritSit and assemble the team.
• Identify the stakeholders/governance board of the Crit Sit process
• Ensure all administrative requisites of the CritSit are ready, e.g. meeting
schedules
• Establish a dedicated "war room" that will be used by the Critsit team
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Assess
• Develop glide-paths for improvement on key metrics that will be monitored for
the duration of the CritSit
• Define and communicate to CritSit team members the entry and exit criteria of
the CritSit
• Conduct an in-depth analysis of the problems by scrutinizing thoroughly
historical data/ measures of the problem area (s)
• Use root cause analysis methods such as the Fishbone diagram, why-why
analysis or 8D problem solving techniques
Develop Recovery Plan
• Prioritize the problems and/or root causes as a result of the assessment

• Brainstorm with the team and develop detailed action plans to address the
problems and/or root causes
• Assign individuals/teams to implement solutions as defined in the over-all action
plan. Make sure that each action step has defined timelines in synch-with the
target exit from CritSit
• Ensure that there will be consistent executive status presentation and regular
core team project review schedule
Gain Commitment
• Get clients' buy-in and/or vote of confidence on the recovery plan if they are
aware of the CritSit in their contract/account
• Be sure that all stakeholders and team members involved in the process have
signed-off on the following:
-Over-all recovery plan
-Assignments and timelines
75
-Resource allocation/requirement
-Costs associated with the recovery plan
Execute the Plan
• Execute a pilot or go for a full-implementation of the recovery plan

• Conduct frequent checkpoints and tollgates per the established metrics glide
path
• Document the changes in the process as it gets implemented and standardize
accordingly
• Establish regular stakeholders and customer feedback sessions during the
implementation of the recovery plan
Close the Recovery
Present to the stakeholders and client the improvement of the metrics per the glide
path
• Get the sign-off of the stakeholders and client to approve the exit from CritSit
and return to business as usual mode
• After implementation of the action plans and full recovery from CritSit, conduct
an evaluation of lessons learned and collate this for future reference
• Ensure to develop next steps that will prevent the CritSit from happening again.
This could be done by conducting another round of brainstorming session
• Celebrate with the team
76
The 8D Approach
8D Approach Problem Solving/Issue Resolution
Definition:
The Eight Disciplines or 8Ds is a Ford Motor Company method to resolve a

problem when the cause of the problem is unknown.
The 8D is at one time three different things that work together, these are:
-A problem-solving process
-A standard
-A reporting format
The 8D Approach:
Discipline 0-Become aware of the problem
Discipline 1-Use Team Approach
Discipline 2-Describe the Problem
Discipline 3-Implement and Verify an Interim Containment Action
Discipline 4-Define and Verify Root Causes
Discipline 5-Choose and Verify Corrective Actions
Discipline 6-Implement Permanent Corrective Actions
Discipline 7-Prevent Recurrence
Discipline 8-Congratulate Team
Discipline 0-Become Aware of the Problem
• Understand the complaint of customer or the problem raised

• A problem is the gap between "what is" or current results and "what should be"
or desired/promised results
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• Clarify if the concern is not clear
Discipline 1-Use Team Approach
• Establish a small group of people, with the process/product knowledge,

allocated time, authority, and, skill in the required technical disciplines to solve
the problem and implement corrective actions.
•The group must have a designated champion-team leader, for command

responsibility purposes
Champion/Team Leader
Sets the stage and ensures that the team activities are in the right direction
• Assists the team and provides leadership when required

• Has ownership; supports the final decision] and has the authority to implement
the Corrective Action and system repair when necessary
• Responsible for facilitating and directing the 8D tea
• Ensures the group performs its duties and responsibilities
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Discipline 2-Describe the Problem
• Specify the internal/external customer problem by identifying in quantifiable

terms the: who-what-when-where- why-how-how many (5W2H) of the problem
• Use an "Operational Definition". The definition should have a common meaning
to everyone who reads it
• 5W2H:
- Who: Identify customer/s complaining
- What: Describe the problem adequately
- Where: Locate the problem
- When: Identify the start of the problem
- Why: Identify known explanations
- How: In what mode or situation did the problem occur
- How many: Quantify the problem
Discipline 3-Implement and Verify an Interim Containment Action
• Define and verify Interim Containment Action (ICA) to isolate the effects of the
problem from any internal/external customer until Permanent Corrective Action
is implemented
• Temporary short-term (Band-Aid) fix taken until a permanent corrective action

is defined, implemented, and verified
• Verify the effectiveness of the interim containment action (ICA)
• Verify the effectiveness of the ICA:
- Perform tests to evaluate
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-State the results
- State the procedures for on-going evaluation of effectiveness (control

charts, check sheets, etc.)
- Prioritize goods nearest customers' gate
- Define inspection/checking method that is certain to detect the defect
Discipline 4-Define and Verify Root Causes
• Identify all possible causes, which could explain why the problem occurred
-Ask "why" as many times as necessary to drive the process to root cause
-Review the FA report, dimensional measurement data, illustration, photo
- Use Cause and Effect Diagram, FMEA to list previously defined causes
• Isolate and verify the root cause/s by testing each possible cause against the
problem description and test data
• List all possible corrective actions to eliminate root cause/s
Discipline 5- Choose and Verify Corrective Actions
• Through pre-production test programs quantitatively confirm that the selected

corrective actions will resolve the problem for the customer and will not cause
undesirable side effects
• Define contingency actions, if necessary based on risk assessments
• Verify corrective actions before the actions are implemented
• Corrective action should be a poka-yoke solution and should address root

cause
•Notify all affected personnel and formalize change action
80
•Run Pilot Tests
• Artificially simulate the solution to allow the actual process or field evaluation
•Monitor Results
Discipline 6-Implement Permanent Corrective Actions
• Implement the best permanent corrective action. Choose on going controls to

ensure the root cause are eliminated
Once in production, monitor the long term effects and implement contingency actions,
if necessary.
• Establish an action plan on all permanent actions
• Establish on going controls on the process
Correct defective parts already produced
• Identify contingency actions
Discipline 7-Prevent Recurrence
• Modify the necessary systems, practices, and procedures to prevent

recurrence of this and all similar problems
• Identify opportunities for improvement and establish a process improvement
initiative
• Revise systems, procedures, and practices, if necessary
• Document new standard procedures, streamline to remove obsolete
procedures and revise previous standard
• Release specs to document plan
• Fan-out to other equipment or area
• Process Control Plan, if necessary
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Discipline 8-Congratulate Team
• Recognize the collective efforts of the team in solving the problem

• Write case study reports
• Acknowledge the significance and value of the problem/solution
6.3 Managing Issues and Changes
Interaction Levels - Issue Management Process Management Systems

Communication and Tracking - Issue
Managing Issues and Changes: Interaction Levels
Managing Issues & Changes: Issue Management Processes
Issue Management Processes:
1. Facilitated Communication and Tracking
2. Root-cause Analysis
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3. Escalation
4. Process Improvement or One-Off
Managing Issues & Changes: Communication and Tracking
Facilitated Communication and Tracking:
• Communication of issues, particularly tie sensitive matters, can be done

verbally or by email
•But proper documentation by way of an issue management system is key to:

structures resolution and recurrence prevention
•Clear documentation of issues is key to effective escalation
Managing Issues & Changes: Issue Management System
Issue Management System Facilities:
1. Clear documentation
• Clear statement of the following: issue (including cost of the issue if

unresolved). scope affected, root cause, proposed solution, financial
impact of the proposed solution, and, timetable
2. Accountability for issue resolution
• Clear assignment of responsible persons
3. Approvals
• Facilitates approval by right authority in service provider and

onshore/client organization
4. Process Improvement
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• Can identify changes in people skill/training, staffing level, technology,
or policy/processes
• Analysis of trends across multiple issues can highlight areas for

process changes that will prevent future issues
84
REFERENCES
➢ Book
• Wiley, John E., Essentials of Outsourcing, McGraw Hilll Publishing, Inc., 2006.
• Fundamentals of Business Process Outsourcing 101 (Teacher’s Guide)
85
Therefore, as a result of these relationship attributes, the BPO contract is a unique,
“tailor-fit” agreement captured in a document
that resembles a performance contract.
86

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FUNDAMENTALS OF BUSINESS

1.1 The IT-BPM Industry Overview ................................................................2

2.1 The Two (2) Types of Outsourcing .........................................................11

4.7 Scale ............................................................................................................................ 45

5.3 BPO: Operations Management Six Components – Component 2 .............. 51

5.4 BPO: Operations Management Six Components – Component 3 .............. 52

5.5 BPO: Operations Management Six Components – Component 4 ............53

6.2 Critical Situation in BPO Engagements - Critical Situation ........................... 67

6.3 Managing Issues and Changes ............................................................................ 83

This module on Fundamentals of Business Process Outsourcing I provides

The course enables students to recognize areas of opportunities in outsourcing,

INTENDED LEARNING OUTCOMES

1. Define and explain what is outsourcing.

1. Define and explain what is outsourcing

1.1. The IT-BPM Industry Overview

In 2010, The Philippine Information Technology and Business Process

Otherwise 2016 talent requirements will reverse the current demand-supply

75% of IT-BPM jobs are in NCR, with only 25% of PH graduates

Every time we buy something from somebody rather than producing it

Contracting of a service provider for the delivery of a process or service

4. Faster and Continuous Service Delivery

• Need to acquire/buy/hire (temporary) capacity

• Replace expensive local or in-house resources with less expensive

• Tax differential or government incentive programs in other locations

• Sales force providing web-based sales management

• PeopleSoft providing employee-facing tools

Faster and Continuous Service:

• Greater output from work being done around the clock

• Offshoring market research support to locations in reverse time zones

• Offshoring processing of bills of lading to centers in other time-zones to

• Desktop build and configuration

1.4 What is Being Outsourced?

1. Support or Auxiliary Services

2. Routine activities or activities that can be automated at larger centers

Routine activities or activities that can be automated at larger centers

o Small banks outsourcing check processing to larger banks, riding on ATM

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

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

o Application maintenance and management

o Production/ Data-Center Operations

o Production technical/systems support

o Software as a Service (SaaS): shared application software

o Cloud services: shared data storage facilities, database management

o Employer as well as Employee

o Employer as well as Employee

Advantages of Outsourcing – Employer Perspective

• The service provider (BPO company) determines most efficient number of

• Service Provider may have more expertise/capability than the buyer

• Buyer can leverage economies of scale of the Service Provider

Buyer can leverage economies of scale of the Service Provider.

Advantages - Employee Perspective

• “Work Abroad, Live here”

• Be near your friends and family

• Work in the country and support Philippine growth

Disadvantages of Outsourcing – Employer Perspective

• Buyer does not have full control of resources doing work

o Example Problem: Vaguely defined task as “provide clinic service.”

o Example Solution: Redefine tasks 2 full-time nurses and 1 full-time doctor,

Buyer does not have full control of resources doing work

“Disadvantages” - Employee Perspective