What Is Outsourcing?


By Professor Monish Gunawardana INTERNATIONAL UNIVERSITY OF MANAGEMENT The Business Process Outsourcing (BPO) is a practice that transfers an internal job of a company to another company, in a different country, or contracting a com-pany’s task to a company that might be situated in a completely different geographical location. An outsourcing operation occurs when an organization or business, transfers some activities such as Payroll-handling, Insurance Claim Processing or Technical Support to a BPO company in a foreign country. The highly industrialized countries like the USA, Japan, Canada, Germany and UK outsource their tasks to developing countries such as India, China, the Philippines, Malaysia, Singapore, Brazil, Chile and Costa Rica. The well-published tasks of the outsourcing boom involve writing software codes and operating call centers. Anyhow, the outsourcing applications are infinite: remote diagnosis, medical record transcription, processing insurance claims, engineering and many more. Types of BPOs (1) Routine: Call Centers, Data Processing, Hotel and Flight Reservation, Car Rental Services. These types of BPO operations require basic skills in Information Technology (IT), Customer Care, Business studies and good command of English. (2) Discretionary: Optically document scanning, Data verification, Data repairing, Email and Mail list management, Claims processing, Remote secretarial services, After-sales support. These outsourcing operations require good technological and problem solving skills. (3) Specialized: Financial services, Payroll and pensions processing, Desktop publishing, Web designing and hosting, Multi-Media works, Customer Relation Management (CRM), Advanced technical support and Human Resource Management (HRM). These BPO operations are manned by trained knowledge- workers who are well versed in IT, Management, ISO Standards, Six Sigma and methodical thinking. Call Centers When your newly purchased washing machine does not function properly, you will use the ‘toll-free number’ to seek the technical support. The Call Center is the place where you will get a solution to your problem. It receives or gives calls and assists customers. On a busy day, a Call Center agent may attend to nearly 100 calls. Large-scale Call Centers employ hundreds of agents. A small center employs less than 20 agents. These small call centers are becoming more popular in developing countries. They need moderate investment and less sophisticated technologies. Computers, Telephone Lines and Electronic Display Boards and Servers are the common equipment in a Call Center. Big Indian BPO companies like Genepact, Office Tiger and Daksh have Call Centers around the world. When you are calling from South Africa to the Samsung Company in South Korea for technical assistance, your call may be answered by a Call Center in India. They generated millions of jobs for youths in Asia. In addition, Call Centers are the entry point and training ground for the knowledge industry. Hence, our entrepreneurs should invest in this thriving sector to promote Namibia as a wealthy nation. Benefits for Both Worlds The first world is the best client for outsourcing centers in the third world. The USA alone accounts for nearly 50 percent of the world’s outsourcing. And it could save around US$8 billion through outsourcing. The developing nations in Asia and Latin America were heavily benefited by this emerging sector. As per the recent report of the Economist intelligence, Singapore’s total 95 BPO centers place this tiny nation as the Global Per Capita leader in outsourcing. Gartner group forecasts that outsourcing figures in the Asia-Pacific region will grow to US$14.07 billion by the next year. Youths in some developing countries are well trained in Information Technology, Customer-Relation Management, Business Management and English communication. And, they receive the pre-posting training in accent and outsourcing skills before they are placed on a salary scale, which is a fraction of their counterparts in the developed countries. This permits developed nations to buy high-tech services at a low price from the third world countries. Therefore, it helps developed nations to cut costs, concentrate more on the core businesses, and gain competitiveness in the world market. On the other hand, BPO operations bring much-needed foreign exchange, employment and technological innovations to the developing nations. Source of Wealth to the ‘Global Outsourcing Report – 2005’ Costa Rica has risen as a competitive BPO location in the world after India and China. Costa Rica’s BPO industry earns 12 percent of the GDP. India and China skipped the normal development steps and emerged as the knowledge-based economic powerhouses by utilizing the BPO. The Asia-Pacific region will generate US$14 billion by 2007. WNS is an Indian BPO manned by 10,000 talented IT professionals and it operates 9 centers in India, Sri Lanka, and America. China will touch US$29 billion by 2009. Some Indian BPO companies are moving up the outsourcing ladder and shifting their offices to Shanghai and Hungzou in China. The INFOSYS, an Indian BPO giant, decided to invest US$65 million, adding 6,000 IT engineers to its workforce. According to a study of the Analysis International, the world market value of the BPO industry will reach US$94 billion by 2009 and developing nations such as Namibia should plan to use this sector as a springboard to industrialization. Key Requirements In order to achieve success in the BPO industry, the cheap and talented pool of IT professionals, low transport costs and easy access to communication channels such as the Internet are crucial. Graduates with knowledge in IT, ISO Standards, Six Sigma Project Management and methodological thinking are the key requirements for this knowledge-based industry. Those countries willing to invest in human capital development can only survive and thrive in this highly competitive digital age. For example, the regional government of Andra Pradesh in India, to ensure a steady supply of high-tech manpower, has planned to train 50,000 youths by 2007. Costa Rica has become a rising star in the global IT industry by extensively investing in IT education. Since 1988, this country has provided computers for over 1.5 million students, more than half of whom live in underprivileged areas. Namibia’s Shining Hope The BPO industry has opened a door to industrialization and it is a cash cow for third world nations like Namibia. Hence, let us offer advanced technical and managerial training for our youths. Besides that, it is very important to invest more and more on infrastructure improvement to maintain our competitive edge in the global market. India, China and Costa Rica, once rated as hopeless poor countries, have emerged as global players in the knowledge-based industries. I am of the opinion that the BPO industry should be regarded as a shining hope for Namibia.