Hundred definitions related to BPO industry

Ajith Dandeniya

At a time when destination Sri Lanka is catching the 'BPO Mania' and we are attempting to become one of the key BPO destinations of the world, the Acronym BPO and some of its related definitions has become the most loosely worded terms and it has been used to define many things related to Sourcing.

Business Process Outsourcing (BPO) is just one segment of Sourcing of which there are many.

Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO) are two distinctly different aspects of Outsourcing

Let's look at some key definitions related to sourcing.

Outsourcing vs Offshoring

Definition of Sourcing is "The process of contracting with a third party for products or services rather than providing those products or services internally."

Outsourcing by its pure definition is used when an organisation 'Source' their work within the same geographical boundary of which the organisation resides.

For example, a bank with their main offices in the UK may 'Source' their work to a location such as Manchester or Liverpool (looked after either by a third party supplier or themselves).

Offshoring by its definition is when an organisation 'Source' their work outside the geographical boundary of which the organisation resides.

For example, an insurance company in the USA may 'Source' their work to another country such as India or Sri Lanka (looked after by a third party supplier or themselves).

The word outsourcing and offshoring is interchangeable and can be used to mean similar things. Therefore, depending on which location Sourcing takes place, one can change the wording.

For example, if we are considering an offshoring location, BPO can mean Business Process Offshoring. However, if the consideration is a location with the geographical boundary, BPO can mean Business Process Outsourcing.

BPO vs ITO vs KPO

Outsourcing or Offshoring can be categorised broadly into three generic areas.

Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO) are two distinctly different aspects of Outsourcing.

Whilst BPO is about outsourcing of Business related Processes, ITO is about outsourcing technology related components.

The processes that fall into the categories of business related processes could be many. For example, Finance and Accounting, Insurance Processes, Human Resources, Legal Processes, Procurement and other administrative functions could be categorised as part of BPO.

ITO however is related to Information Technology as a whole, for example these could be development of software components, testing of software components, maintenance of hardware services, providing IT helpdesk facilities and they all fall under the umbrella of ITO services.

Knowledge Process Outsourcing (KPO) adds the third dimension of outsourcing, which is a more recent invention than the pervious two terms. KPO is related to high-end knowledge process outsourcing. For example, investment research, niche market skills such as medical research activities, engineering design, science research activities could fall under this category.

KPO often can be classified as a mixture of BPO combined with Research and Analytical work.

Call Center vs Operational Center

BPO is often mistakenly referred to as a 'Call Center'. Whilst a Business Process Outsourcing may involve some element of 'Call Center' activity (depending on specific requirements), it is not essential for BPO to contain elements of 'Call Center'.

A 'Call Center' is where, there are staff handling inbound or outbound calls from end customers of a client who has sourced some activity.

For example, A bank may outsource their customer service activities, an insurance company may outsource their Insurance Sales and Service Activities, a Company may use outsourced staff to do sales via outbound calling.

All these activities will involve telephone communications either inbound or outbound from external customers or to external customers. This activity is termed 'Call Center'.

Organisations often (depending on their individual requirements) may deploy 'Call Center' activity (also termed 'Front Office' Activity) as well as 'Back Office' activity which is related to processing of the work of the organisation that does not involve a call to the end-customer.

For example, finance and accounting may have some accounts payment processing, insurance company may have processing the paperwork related to insurance sales or claims work etc which does not require talking to an end-customer.

Whilst some BPO may utilise a hybrid of 'Front Office' and 'Back Office', there are other BPO work that involves purely 'Back Office' (termed 'Operational Center') or purely 'Front Office' (termed 'Call Center').

Captive vs Non-Captive

When organisations 'Source' their work outside their organisation to another location, the governance of this model could be run by the organisation themselves or could be run by a third party supplier.

When the organisation itself governs this model, this is termed 'Captive'. And often could be classified as a Shared Service Center (SSC). Whilst this Centralised activity can be termed 'Captive' or 'Shared Service Center', for this is to be truly 'Captive' or SSC just centralisation does not suffice. It is also possible that the 'Captive' or 'Shared Service Center' to be run by a third party supplier exclusively for the client.

When the organisation hands over its governance to a third party supplier and the supplier themselves looks after services of other organisations in a similar manner, this is termed 'Non-Captive'.

In addition to the key differences described above, there are a significant number of BPO related definitions and acronyms that one would come across in the industry.