Free Custom «Business Process Outsourcing» Essay Paper

Business process outsourcing is a component of outsourcing, which involves contracting operations of a given business functions or processes to a third party service provider (Tas & Sunder, 2004). It describes the outsourcing of a business processing service to an outside firm with the aim of replacing in-house services and labor from an outside firm or firms. Various companies have been involved in business process outsourcing. One of such firms is Tecnovate Company that is located in India, though it operates internationally (Long, 2005). A successful closure of outsourcing deals is the first step in effective management in the transitioning of services from an in-house team to a selected outsourcing service provider. Most managers tune-off when an outsourcing deal is struck, especially, to the detriment of that process. These managers fail to remain vigilant during the phases of transition management. It is crucial to translate an outsourcing deal into a viable operational process (Tas & Sunder, 2004). Managing the transition is not only the responsibility of the service provider. Managers need to understand that the transition is a joint effort which requires a lot of commitment and involvement of both the service provider and the client’s organization. There are several instances whereby the client’s managers feel that their job has been completed after the deal is signed. The reason they give is that the onus shifts entirely to the service provider once the deal is struck. However, the key impetus in effecting smooth transitions hinges to a certain extent on the competence and experience of the service provider. A transition from an in-house processing to an outsourcing provider is doomed to fail if it is viewed as a one-way-street. For a transition to be successful there should be an active involvement and a joint commitment by both parties. Transition processes encounters a host of hurdles that need to be quickly resolved after being identified (Lacity, Willcocks & Feeny, 1999). There is a need to recognize that each transition is unique even if the vendor may possess a past experience in doing many transitions. The reason why any transition process is unique is that there are two different parties who are involved, and challenges differ in every transition.

 

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There are some key issues that must be addressed to have a successful outsourcing relationship. One of the issues is having the right team in place. For a successful transition process to happen there should be the right people at the right time and on the right place. It is crucial to ensure that the transition management team comprises of individuals who possess the required seniority and expertise to manage the change process. Also, when the right team is in place, besides having the technical expertise, it helps if the team members possess a prior international experience together with direct customers’ interactive experience. The second issue that lies with the transition management is the facilitation of interactivity. The transition management team should not make the transition process to be a one-way-street, whereby the incumbent team is left alone to share knowledge (Tas & Sunder, 2004). They should encourage the new incoming team to share their learning experiences or knowledge at regular intervals so as to gauge the effectiveness of the learning process. Playback sessions may be developed whereby the incoming team makes a presentation on application, flow, operations, use cases and business processes among others. In such way, the management can establish a clear relationship in the transition process.

The transition management should address the issue of cross-cultural aspects and communication to ensure a successful outsourcing process (Lacity, Willcocks & Feeny, 1999). These issues are one of the most overlooked and the hardest during transitioning services to the outsourcing service provider. These issues give rise to communication challenges and breed mistrust in the entire engagement. The management should arrange a cross-cultural training for customer teams and vendor. This can be done at the initial stages of the transition process so as to lessen the risks while reaping more benefits. The transition management should perform reviews diligently. Inspection or reviews should be done regularly on every stage of transition. This will ensure that there is clear and prompt communication during the process. Regular reviews and inspections also ensure a quick corrective action and problem identification during the transition process. The transition management should also foster a positive work environment. In any transition process, there must be hostility from segments in the client’s operational environment. Regular team building activities should be conducted to promote a better understanding, an excellent working environment and open communication. Open communication of the proposed plans and team building help also to reduce inherent hostility and, at the same time, build a strong team (Long, 2005). 

Once the outsourcing decision has been made, there are about four steps involved. The first step involves scoping. Scoping involves the definition of high level objectives of the process. Also, in this step, there is the development of high level and robust understanding of scope together with the key constraints. The outsourcing management should understand the implication of human resource after outsourcing. The second step involves feasibility study. This step focuses on building on the initial scope and constraints. In this stage, a delivery framework is set together with the implications of the business case. Supporting risk management activities and commercial agenda are set through drawing out key parameters of services delivery. The third step involves preparation of the transition process. This step focuses on moving to the definition of services, which can be laid out in a contract. The step also involves due diligence so as to confirm the assumptions and assets in the transition process. Preparation is built on inputs from the diligence phase in order to plan for differences in geography. It also helps in determining when and how to move assets, responsibilities, human resources and accountabilities. The last step is known as transition, or as process migration (Reuvid et al. 2005). It involves handing over the process to the supplier, who is the third party or the captive unit from the client. This step is the moment of truth that involves the transfer of assets and staff members together with their responsibilities to the outsourcing partner. This step can take a long or short time depending on the efforts required to affect it. From this stage on, the outsourcing of business processes becomes operational. From these four steps, the last step, which is the transition, is the most challenging and difficult. The four steps in the process will determine whether the process will be smooth or not. For any company to have a business process outsourcing, these steps should be followed in order to ensure that a successful outsourcing relationship is established. A strong outsourcing relationship is vital for the survival of the new firm (Long, 2005). 

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Tecnovate Growth Strategy

Tecnovate is one of the companies in the world that has been involved in the outsourcing of business processes (Mishra, 2003). The company has established several growth strategies . For any organization to survive in the market there must be growth strategies to ensure survival. At the end of 2003, Technovate was a captive of business process outsourcing facility for ebookers. This means that ebookers was its one and only client. Since 2002, the company took on responsibility for a myriad of support functions and back office for each Ebookers’ European offices together with the group management company. Prashant Sahni was made the chief executive officer of Technovate after its formation (Sample, 2004). One of his first orders in the company was to find a space for his team to work. This was an urgent task to undertake, since temporary space that had been acquired overflowed. This situation forced part of his team to work under rented structures that were placed on the roof of the existing offices. Prashant dismissed cheap and remote offices and chose to build the offices at an industrial estate that was closer to Delhi in India. The choice was made so as to attract more people and retain the customers. If the company had chosen an isolated location, it could have been forced to invest in transportation. Being close to Dehli ensured that the extra costs were avoided. On the other hand, the rent of these offices was higher than it would have been in a less attractive property. Prashant was able to negotiate the rates to around 60 % of the market rates for a period of nine years. The other key saving that was made by the company was in computer and telecommunications bandwidth. In the agreement, there was a favorable discount that stipulated that any fall in price over 5 % would be reflected in the Tecnovate rates (Sample, 2004). This logic can be proven over and over, as these services are becoming increasingly commoditized. Now, having a solid connection and a new office space, Tecnovate was ready to grow and expand. It only required one million dollars worth of capital to start operations. Knowing that any failures would lead to a disaster, Prashant together with his team opted to start with a simple and non-core processes. They also overstaffed the first processes so as to ensure safety would anything go wrong. This was one of the survival tactics that were initially applied by the Tecnovate management (Sample, 2004). Before being involved in any new processes, Tecnovate was much careful to agree on detail service level deals with ebookers. This included MIS specifications and workflows agreements. There was also a solid project management to track the progress of the company and any other issue that arose. Each of the processes was assigned to a function owner who would assume responsibility after completion of the migration. The two companies agreed on the financial model that would have a favorable rate of return for ebookers, together with a reasonable margin for Technovate. Prashant knew that the move to proceed with business process outsourcing was a risky decision, following the air crisis and the doomed-laden morale in 2002. Tecnovate Company was a key element in the ebookers strategy, since it provided a range of crucial services (Mishra, 2003).

Tecnovate was the captive BPO facility of Ebookers Company in 2003 having been valued at $160 million at India’s business process outsourcing space (Ebookers Tecnovate announcement 2004). The company was now providing a whole range of BPO services, contact centre services and IT services to ebookers, being its only client. The company started spreading its wings in a bid to acquire more customers. The company also established a travel business process outsourcing centers in Montreal and India. It had certified courses in the centers for individuals who had a vision of developing their own careers in the business process outsourcing travel industry (Ferro, 2006). At the end of the year 2005, Technovate was performing well. It started taking on additional services and functions. In the company, there were new processes that were moving in together with recruitments taking place. It was during this stage of growth that Myron Ferro became the director of operations in June 2005. He took over from Goa which was a famous travel destination in India. Ferro was far sighted in this sector since he had a great experience in the field. Ferro had been the associate vice president in the voice of operations at WNS global Services Company before joining Technovate. As seen earlier in the discussion, an experienced staff is essential in business process outsourcing. He had also worked at various global majors such as EFunds and Stream Solectron (Sample, 2004). Ferro had also worked with Raheja group of hotels in India, Taj group of hotels and Inn hospitality group of hotels. The experience possessed by Ferro helped much in the growth of Technovate. He was far-sighted and, at the same time, aware of the challenges that were present in the dynamic business process outsourcing industry. It is evident that in every stage of the business process outsourcing cycle, there are some challenges. But once a deal is complete, the transition process turns to be a testing ground. Ferro had a difficult task ahead of him, especially the Cendant’s processes at the pipeline, which were to be migrated into the facility that he was handling. There were also the growth of low costs outsourcing destinations in some countries, which included Philippines and Manila among others. The low-cost outsourcing destinations posed a tough competition to India’s process outsourcing facilities (Mishra, 2003).               

Tecnovate Fusion Philosophy

Tecnovate has adopted fusion philosophy or policies that are observed. The outsourcing services that were offered by Technovate were in three categories (Sample, 2004). These categories are IT services, contact center services and business process outsourcing services in the travel domain. The IT services were website design, maintenance and development. Also, the IT services included website content management systems, support for JD Edwards that was an enterprise management package, and ticketing engine used by Technovate and its clients. Contact center services included post-sales and pre-sales services. Customer support services were given to clients through emails and telephone calls that were in the caller’s native language. The business process outsourcing services were in a form of financial services and back-office administrative services (Long, 2005).

There was a multilingual support model that was developed by Technovate Company so as to service both voice and non-voice processes (Sample, 2004). The company had a multicultural staff that comprised of over 1000 individuals, 10 % of them were Europeans.  The staff came from more than 11 countries in the European countries. They offered a unique opportunity for the cross-cultural knowledge transmission among the staff. Technovate clients recruited and trained the expatriate staff. This was done through advertisements posted in the Internet and employees referral in their native countries. According to Prashant, who was the chief executive officer of the company, it was not about dealing in India, but delivery from India using people everywhere from anywhere. From this description, it is evident that Tecnovate has evolved the philosophy of fusion BPO, which offered a seamless integration of IT services, contact center and BPO services in the travel domain. The fusion philosophy is facilitated by the company’s multicultural staff. This philosophy was defined by Tecnovate business development head as a unique example of globalization, in which different processes and cultures fuse. The cultures and processes are merged together so as to release energy in the form of high revenues and worker’s enthusiasm. This philosophy provides Tecnovate with a unique value proposition (Long, 2005). Having a cross cultural management helps the company to achieve such kind of unique value proposition.

Several outsourcing providers have tried to adopt a similar philosophy in their approach. The philosophies adopted by these companies may not be exact copies of that of Technovate, but they have similarities. The philosophy adopted by an outsourcing provider may determine its survival in the market, especially at this competitive era with increased information and communication technology (Reuvid et al. 2005). IBM is an outsourcing provider that has a philosophy that is almost similar to Technovate Company. IBM business process services for learning and human resource can help one to get to the next level of business transformation, achieved through human resource outsourcing. IBM has a cost effective human resource approach that is designed to consolidate human resource and learning services together with providers into a single outsourced environment (Pertz, 2007). IBM philosophy goes a step further. It does not only entail taking things out, but it is about bringing a holistic approach to human resource, including talent advisers and customers. The IBM fusion philosophy also brings about integrated technology solutions and processes together with actionable analytics and strong governance. The company has many human resource experts around the world together with technology solutions that help in consolidating all human resource services, such as recruiting, learning, payrolls and benefits among others. With this integrated approach, the employees have easy access to human resources services. The approach also helps to improve the customers’ experience, hence, leading to high productivity and low employee turnover. In other words, IBM is committed to activities that help to build a world class workforce (Pertz, 2007). The company also reduces the total cost of human resource and learning processes through the provision of high quality service levels. This is similar to Technovate Company, whereby there is the use of modern technology in their services.

Wipro-Sectramind is also an outsourcing company just like Tecnovate. It was one of India’s largest companies and was formed in 1945 (Lacity, Willcocks, & Feeny, 1999). The first foray for Wipro ltd into the IT industry was in 1980. By the year 2003, the IT service division in Wipro ltd had a total number of 26, 000 individuals in more than 54 dedicated development centers, including 30 sales offices. Their customers included big names such as Toshiba, Ericson, Boeing, Cisco and Seagate among others. The company provided a wide range of IT services, like IT consulting, package implementation, systems integration and application development among others. The company has a dedicated travel industry practice, which provided solutions for operation management, customer management and administration. The ravel industry practice in the company also deals with issues such as flight information, fare searching, travel internet portals, reservation and booking among others. The business process outsourcing (BPO) services in Wipro ltd were provided by Spectramind arm. The services included email management, outbound and inbound voice processing, claims and orders processing, accounting and Human Resource processing. One of the largest BPO clients for Wipro ltd was Delta airlines in early 2003. The Wipro Sectramind was handling general sales enquiries, rejects and queue handling, frequent flyer program reporting and support and baggage service centers in-bound calls for the Delta.         

Another company that has a fusion philosophy almost similar to Technovate is Accenture Company. Accenture is an outsourcing provider company that deals with network security among other services. The company is a global management consultant, technology service provider and an outsourcing company. It is committed to the delivery of innovation through collaborating with clients, who make them achieve high performances in business. Having deep business processes and industry expertise, a proven track record and broad global resources makes  Accenture able to mobilize skills and technology, rights of people and helps clients to improve their performance. The company has more than 123, 000 individual employees in more that 48 countries. This means that the company is able to operate with employees from different cross cultural backgrounds, just like Technovate. Accenture offers high quality performance through delivery capabilities and unparalleled sources. Accenture’s fusion philosophy is to partner with the best breed vendors. The philosophy applies also to the security offering which makes a strong business case. The speed of operation in the company is maximized by the use of mature and repeatable architecture and methodologies (NASSCOM, 2004). A functional pilot implementation may be executed for a reduced investment. This is also similar to Technovate Company. The initial investment and ongoing investment in the network security in the company is justified, measurable and demonstrable value. Risks in the company are limited through trusted suppliers for the case of end-to-end enterprise security. Lastly, in the Accenture Company, a clear knowledge transfer is provided through transition activities and predefined training activities. The fusion philosophy held by Accenture Company is comparable to Technovate, as seen from the description of Accenture (Long, 2005).                 

Challenges Faced by Technovate in BPO Transition and how They are Overcome

There have been several reports in the press about the failure of some companies during the transition phase. Many companies fail to understand that, in the transition process, the same process is never transferred. The process may be perceived to be straight forward, because all what is needed is to perform the same task in the outsourced location. However, the process is never so straight forward as it may look. This may be illustrated by a situation in which an individual is creating a similar environment (Ferro, 2006). Here, one needs to find out the type of soil that is needed. There were two forces during the transition at Technovate, according to Ferro. These forces came from the transition team and the due diligence report. For a company to attain a successful transition, the due diligence of client’s processes is of much importance. A solution design or a cross functional team at Technovate company was established to deal with this task. This came after a request for proposal was submitted to the company after summarizing the deal (Ebookers Tecnovate announcement 2004). Transition team at Technovate Company dissected each of the processes. The dissecting of each and every process by the transition team at Technovate was done in depth, as every process was broken down into sub-processes that were studied comprehensively. Process flow was created afterwards. While revealing this, Ferro indicated that “in any business, one would wish to move not only numbers in the business but also the ‘how’ in the business.” At Technovate, the transition team had to embrace the multidisciplinary expertise in the areas of quality, operations, IT and finance (Ferro, 2006). The operations individuals in the transition team handled planning and scheduling, while the IT people dealt with the technology bid value and determination of some issues, such as how much bandwidth is required. Individuals at the finance department dealt with the costing bid and other issues, like how margins can be looked at in terms of costing and pricing. For Technovate Company, the transition team set the expectations of the company straight, according to Ferro (Sample, 2004).

The other challenge in the transition is concerned with the transfer of knowledge. This challenge was even more relevant in the outsourcing process. When the outsourcing process is moved to low-cost destination countries, individuals performing the task do not move along with the process. This means that a new team must take over the outsourced process. Documentation in any company can be easily transferred, but the expertise and knowledge of individuals involved in the transition process cannot be easily transferred. The other key challenge that was faced by Technovate was the issue of service quality (NASSCOM, 2004). From the fact that an outsourcing process takes time to stabilize, the quality of services is affected. To deal with this challenge, Technovate joined with Cendant Company in the establishment of service-level agreement (SLAs) together with formal task-level details for the purpose of defining and managing the transitioned process. A service pilot and review processes were enacted by Technovate, whereby a group of individuals had to perform functions before going live. This was then followed by a delivery that was based on SLA agreements.

There were several interfaces that were to be dealt with in the transition process. Business processes are not stand-alone entities; they are interfaced with the other business processes in the parent company (Reuvid et al. 2005). It is because of this, for example, when the process was being transitioned from Cendant Company to Technovate, that the interfaces and dependencies were clearly specified. The several failures in the transition process in Technovate were mainly caused by the inaccuracies in the process flows created by the transition team. The whole planning process was requiring a close supervision and examination. When the transition is over, the managers should be able to tell if the process looks like a six year, one year or even five years down the line. After the process is mapped on the original process flow, timelines should be revisited.  

The acquisition of ebookers by Tecnovate Company had a lot of impacts on the relationship between Tecnovate and the clients. The services provided by the Tecnovate Company after the acquisition of ebookers were beneficial to the clients of the company. The first benefit was obtained from the contact center services, established after the acquisition. Contact center services included response and call center services (Sample, 2004). There were also outbound and inbound services, enjoyed by clients of Tecnovate Company after acquiring ebookers. They include telesales, customer services and support, telemarketing, database updating, loyalty program administration, product support, activations and collections. Also, under contact center services, there are email sales, email support and email management. Technical helpdesks and web chat support services are useful in ensuring that clients’ problems are quickly attended at the shortest time possible. In such way, the relationship between Tecnovate Company and the clients is strengthened. Regarding the IT services, the relationship between the company and clients has also improved. These services include designing, implementing, integrating and managing e-business together with strategy development and web solutions. The company is also able to perform internet marketing, hence, ensuring search engine optimization. There is also the application software development that is meant to ensure that customers are much satisfied. Other services, such as enablement of legacy application, application maintenance and support, software services in the enterprise’s application integration help to improve the services offered to customers, thus, ensuring a strong relationship between the clients and Tecnovate. Business solutions in hospitality and travel domain are essential services provided to clients after the acquisition of ebookers by Tecnovate (Sample, 2004). The integration of enterprise’s portal design with knowledge is also useful in creating a strong customer relationship.

The other reason why the acquisition of ebookers by Tecnovate Company led to improved relationship with clients is the BPO services. The services are divided into two groups. There are back office administration services and finance and accounting services. The services are meant to enhance the operations of the company, hence, attract as many clients as possible. Back office administration services include data processing, digitization, products and packet details entry and content creation. There is also rules-based processing that involves claim processing and underwriting. Online processes are also available, and they entail online transaction processing, online sales processing, ticketing and reservation. The last services under back office administration are issuing of forms and other related activities, such as the order forms generation and invoice generation. The second category of BPO services is accounting and finance (NASSCOM, 2004). Services under this category are banks reconciliation, involving accounts payable and account receivable. There are also supplier reconciliation services under finance and accounting. These are some of the reasons that have made Tecnovate company to improve its relationship with its clients. If an in depth analysis of these services can be done, it could be evident that the services ensure that there are no delays while serving customers.

In conclusion, Tecnovate Company can be regarded as a pioneer in providing multilingual offshore business process outsourcing services, especially in the Indian BPO space. Currently, the company has clients in more than 11 countries that speak more than 9 different languages (English, German, French, Swiss, Finnish, Dutch, Swedish, Norwegian and Spanish). This is an immense achievement by Tecnovate Company. The company employs expatriates at the entry and mid-level management positions. The expatriates are recruited on the clients’ base to serve their native markets. Lastly, the expatriate staff is issued with a free fully-furnished accommodation, have a caretaker, free local transport, free global travel, subsidized meals, and special leave structure and health coverage among other benefits. Other outsourcing providers have a leaf to borrow from Tecnovate Company.