Business Process Outsourcing

Business Process Outsourcing (BPO) is a concept that involves contracting of operations and services of specific business operator to a third party provider of services. It primarily refers to replacing in-house services with labor from an outside firm.

The reasoning behind this concept is that various businesses have various needs which can be handled efficiently and cost-effectively by hiring another company to provide the services.

BPO is distinct from IT outsourcing which focuses on hiring a third party firm to do IT related activities such as application management, data centre operations or testing and quality assurance.

The concept of BPO was originally associated with manufacturing firms that outsourced large segments of their supply chain.

Often, BPO is also known as ITES-Information Technology Enabled Services. Since most business processes include some form of “automation”, IT “enables” these services to be performed.

The various categories of outsourcing include internal business functions such as human resources or finance and customer-related services such as contact centre services.

The most commonly outsourced services are those of ICT (Information Communication Technology) given that it is less costly to contract a firm to install and maintain a company’s computers, networks and hardware.

The BPO industry across the globe is growing at a phenomenal rate; in Kenya for example the industry employed about 500 people in 2006. It has since grown to over 3500 and is expected to grow even more.

What is offshoring?

The BPO subset of outsourcing is split mainly into two, offshore outsourcing and nearshore outsourcing.  BPO that is contracted outside a company’s country is referred to as offshore outsourcing. Put simply, offshoring , is a type of outsourcing that involves having the business functions done in another country, mostly this is done to reduce labour expenses . While other times it is done for strategic reasons such as entering new markets.

The other dimensions of offshoring

The other dimension of offshoring is nearshoring.  This involves taking the outsourced work to a nearby country.  The model is popular with firms that don’t want to deal with the cultural, language, or time zone difference associated with offshoring.

Importance of BPO/ITES to youth

BPO/ITES is important for job creation to the youth, as a result governments in Africa are keen to take up youth skills development initiatives to impart training to the large number of students in Africa for employment in the BPO/ITES industry.

BOP/ ITES the Kenyan case study

Outsourcing has been identified in the Vision 2030 (Kenya’s development blueprint covering the period 2008 to 2030) as a key pillar and driver of social and economic improvement through job and wealth creation.

The Kenya ICT Board was established in 2007 with a key mandate to market the country as a global outsourcing destination.

The government has developed a roadmap that will see Kenya take advantage of its unique geographical position and it is well developed ICT human resource base to become the preferred destination for outsourcing in Africa. The 2006 Kenya ICT Strategy, Collaboration and Outsourcing, launched by the president of Kenya, created the framework for Kenya to focus on global business process outsourcing as a way of generating jobs for young people and generating wealth for local entrepreneurs and investors.

Africa on the fast track

It now seems that Africa is on the fast track to economic growth, propelled by the breeze of technology.

In the last few years Africa has witnessed innovative IT-Enabled services, prominent is such countries as Tanzania, Ethiopia, Malawi and Rwanda. Significant presence has also been observed in Zambia, Uganda and South Africa. It is notable that the social, economic and political expansion in these countries has been accelerated by the strong forces of Information Technology.

The flourishing IT segment that consist of BPO (Business Process Outsourcing) and ITES (IT-enabled services) are the core sectors that are driving the continent into the epicenter of transformation.

This expansion in Africa can be credited to leading IT companies like Techno Brain which is a third-party service provider and dominates the African BPO/ITES market. Africa is therefore grabbing its share as a preferred destination for offshore outsourcing.

Services offered by BPO/ITES 

The different kinds of services offered by BPO/ITES include customer support, technical support, telemarketing, data processing, insurance processing, internet research and IT helpdesk services.  The cheap labour cost and pool of English speaking Africans have always been the two leading factors contributing to BPO bang in the continent.

The others are the strong quality orientation among players, ability to offer round the clock-services based on the continents unique geographic location. The other is a positive policy environment that encourages investment. 

Why you need to outsource your services 

You need to outsource your non-core tasks and get access to specialized skills and services.

Outsourcing saves you money, time and infrastructure. These benefits emerge from the time zone advantages. It gives your business the competitive advantage enabling you to  enjoy high-quality services that are delivered fast to your customers and you see your business grow.

Africa’s stake in outsourcing

In Africa, South Africa, where Techno Brain has significant presence, leads the effort to expand business process outsourcing on the continent.

Kenya, besides boosting financial service companies as well as strong tourism sector, has its IT sector doing increasingly well.

In 2006, Kenya had close to 4,000 agent positions this number is projected to increase to 12,000 by end of 2012. 

Kenya is said to be in a unique position as an alternative to South Africa.

Within the last 12 months, several companies have been visiting Kenya with a view to locate facilities there.

The resiliency of BPO

In the face of global recession, the BPO/ITES  industry remained resilient with companies across the world paying enormous attention to discovering new markets. This has been accelerated by the demand for domestic markets for BPO services.

This demand for domestic markets, in various African countries, is expected to develop the BPO/ITES sector in the coming years.