Business Process Outsourcing FAQs

Validata has compiled this list of "Frequently Asked Questions" (FAQ's) regarding Business Process Outsourcing.

1. What is a business process?
A group of interrelated tasks that takes input and produces an output that is of value to a customer or to another company. Typical business processes include receiving an order, entering a transaction into a company CRM system, sending a purchase order, etc.

2. What is BPM?
Business Process Management (BPM) is the management of a defined set of business processes. BPM seeks to make certain businesses processes more effective, efficient, and adaptable to changing business conditions.

3. What is outsourcing?
Outsourcing involves relegating any non-core business processes from one's own company to a service provider (vendor) with lower overall cost of doing business.

4. What is BPO?
Business Process Outsourcing (BPO) is a method of using outside vendors to perform non-core business processes like data entry, image manipulation, call center work, etc.

5. What is nearshoring?
The process by which a company relegates one of its non-core internal services to another company located in a foreign, lower-wage country that is relatively close in distance.

6. Why should a business consider BPO?
The main reasons businesses consider BPO are: to cut labor cost, increase operational efficiency, and to free internal resources to focus on core business activities.

9. Why is Mexico ideal for nearshore BPO?
Mexico offers several advantages that can be effectively leveraged by businesses in the US and in other developed countries: Mexico shares a border and similar time zones with the United States. Mexico offers world-class telecommunications and IT infrastructure, which are the backbone for the BPO industry Mexican. Leading Fortune 500 businesses have already set up their own shared-services centers in Mexico to offer financial, accounting, payroll processing, taxation services. Mexico is a relatively short plane flight away from most US destinations; hence the ability to visit one's BPO partner is far easier than with India or China.

10. What is TCM and how it relates to BPO?
Total Cost of Management (TCM) refers to the process of identifying, forecasting and controlling costs throughout the value chain in an organization. Companies use TCM to initiate and manage ROI on BPO projects.

11. What is fixed-pricing BPO?
A pricing model in which a BPO provider agrees to undertake a project for a fixed price. This price may be calculated on an hourly rate with fixed number of hours a week, or it can be tied to a specific set of tasks performed by the outsource provider for a fixed price. There are both advantages and disadvantages in the fixed pricing model: the primary advantage is that companies can accurately budget their BPO project cost; the main disadvantage is that a BPO provider may underestimate the total project cost, later resulting in poor quality services.

12. What is a pay-as-you-go BPO pricing model?
A pricing model in which a BPO provider bills the customer that varies each billing cycle. In some BPO projects customers may not know the actual workload (e.g., number of transactions, call volume, etc.) in advance. Customers can go for "pay-as-you-go" pricing model and the BPO vendor will bill the customer based on the work (e.g., hours worked, number of employees worked, number of transactions processed, etc.) performed on a billing cycle.

13. What is business process reengineering and how does it relate to BPO?
An initiative in which all business processes are redesigned and modified in order to achieve drastic improvement in performance, efficiency, and cost. When companies engage in BPO projects, they often reengineer their business processes and outsource business processes to save cost and improve performance.

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