Business Process Outsourcing - Literature review Example

Accounting Information System Student’s Name Institution of Affiliation Introduction Business Process Outsourcing (BPO) refers to a practice whereby a firm contracts some of its processes to a provider who offers third-party services. Initially, this process was mostly utilize by manufacturing firms, which used to outsource various segments of their supply chain. BPO mostly targets both back office and front office operations. Back office operations mostly target internal functions of a firm, such as finance, accounting and human resources. Front office operations normally target services that are related to clients, such as those offered through a contact centre. Offshore outsourcing mostly comprises of contracting BPO services to a company that is situated outside a given country, while near-shore offshoring describes BPO contracting to a country that is close by. Most BPO contracts are normally based on information technology. For instance, Philippines overcame India as the biggest outsourcing industry around the world (Halvey & Melby, 2007). This paper will discuss the BPO initiative by Jetstar Australia, and the benefits and drawbacks that it realizes as a result. Jetstar Airways Overview Jetstar Airways an organization that specializes in the provision of low-cost air services in Australia. The headquarters for the company are situated in Melbourne, Australia and it is a fully-owned subsidiary by Qantas. The company was established to cater for the threat that Virgin Blue low cost strategy posed in the region. The firm emanates from the two brand strategy by Qantas, whereby Qantas Airways provides premium services in the marketplace whereas Jetstar provides airline services for the low-cos segment. Jetstar airways provides broad range of products to cater for the domestic, regional, as well as global services from the major base at Melbourne Airport. It uses a broad range of fleet airlines, which include Boeing 787 Dreamliner, Airbus A330 and Airbus A320 airplanes. Just like its Qantas parent, the company rivals with Virgin Australia. The company also has various sister airlines, which include; Valuair, Jetstar japan, Jetstar Asia Airways, Jetstar Hong Kong, and Jetstar Pacific Airlines (Bamber, Gittell, & Kochan, 2013). Jetstar Business Process Outsourcing For Jetstar, it prefers the Philippines business process outsourcing industry, since it has emerged as one of the pillars for a company’s growth. The industry has been witnessing tremendous growth in the past 10 years, and at a rate of 46 percent since 2006. In 2013, the BPO industry witnessed 26 percent growth, and managed to generate exports amounting to $9 billion. The major reasons as to why Jetstar prefers this region is because the labour costs are significantly low, the workforce practices positive employment ethics, the professionals are highly skilled, and globally competitive, and portray high proficiency in the English language. The Philippines is highly accustomed to diverse western traditions and customers, and its strategic location has made it an appealing outsourcing destination in the planet. With this form of cultural compatibility, the region ensures that Jetstar is capable of coordinating, directing, as well as communicating easily (Contact Center World, 2011). Jetstar regards his suppliers as a source of investment, where it is capable of spreading its risks, thereby allowing it to witness various high paying dividends unlike the case of other airlines. For Jetstar, it currently operates with five IT personnel on a full time basis whose role is to manage various outsourcing associates comprising of Sonnet (desktops), IBM check-in), iGate (development of applications), Telstra (telecommunications), Zensar (BPO and application development), and CapGemini (a data warehouse). The company also partners with other suppliers, such as PM Partners (managing projects), 4looop (Middleware), Sissit (research and development for SMS), and Vadaleon (developing applications for Airport and Airlines) (Contact Center World, 2011). For Jetstar, it aims to pursue an IT Financial Management outsourcing plan, which will help it to adopt a unique approach where it can manage the suppliers in an effective manner. The company usually manages outsourcing agreements as well as suppliers, just the same way it does with investment portfolio. By adopting an investment portfolio, the company is capable of managing its risks, thereby allowing it to weigh them based on sufficient returns (Halvey & Melby, 2007). The IT personnel at Jetstar has outsourced various services among its broad range of suppliers in the same manner, the major complexity that the company witnesses in this case emerges when a particular supplier develops reliance on various services so as to give out a certain outcome. For instance, those who provide applications require other suppliers who provide them with sufficient infrastructure to ensure that the system is available, and can give out the appropriate outcomes. This is an issue that the IT staff at Jetstar address by delegating simple responsibility. This form of infrastructure is normally self-sustaining and correcting (Contact Center World, 2011). Most of the higher-level suppliers in the case of Jetstar are those who are endowed with the role of providing business outcomes as well as addressing the needs of suppliers who they rely on, especially in the event of servers or certain systems. Here, one of two of the company’s outsourcing suppliers normally manage the other practices. Each of the IT staff members are then endowed with the role of breaking down each of the models. For instance, if 100 percent of the outsourcing processes are allocated to the IT department, then the manager for engineering systems normally comes to them when they fail to manage the systems, especially when they go down (Halvey & Melby, 2007). It is the role of the engineering managers in the event of business process outsourcing to ensure that they manage the systems when they get down appropriately. Though the IT system in the company has been outsourced, this does not mean that it should alter the manner in which it operates. Jetstar stipulates that the times when it used to develop its unique applications are over, and does not require significant resources in-house. Currently, the prevailing services are usually packed up into the cloud. This contributes to the idea that it is not just about how the services are developed or managed, but the manner in which they are managed. This way, the company ensures all the outsourcing services are delivered adequately (Bamber, Gittell, & Kochan, 2013). Pros and Cons of Outsourcing for Jetstar ` The outsourcing process makes Jetstar to realize competitive advantage since it is capable of delegating various processes to outside agents thereby allowing it to witness benefits that are affiliated with cheap labour, high quality services, and high levels of innovation. Though this practice portrays an appealing picture, it is appropriate for managers to learn how to cope with the process, especially in the event of possible shortcomings, which could heavily impact on the core processes of a firm. Therefore, to analyse the opportunities that the BPO practice portrays to Jetstar, it is vital to evaluate the benefits and drawbacks on this process (Asefeso, 2011). Benefits of Outsourcing By participating in business process outsourcing, Jetstar realizes various benefits. Based on the availability of highly qualified personnel in the Philippines, Jetstar manages to realize better revenues since the employees are highly productive, thereby enhancing the returns it realizes on the BPO investment process. The cost of labour in the country is cheap thereby lowering the overall costs of production, and increases the opportunities of the company in terms of realizing economies of scale. Also, since the labour force is highly knowledgeable, the company is able to tap into their knowledge thereby providing it with better opportunities for innovation. The time taken to manage the organization is freed, thereby making it possible for the company to emphasize on its core competencies. Moreover, the company realizes speed in terms of delivering activities that have been outsources, and also boosts the utilization of resources while reducing the outflow of cash (Asefeso, 2011). Drawbacks of Outsourcing Though the BPO practice is mostly weighted by its pros, there are some drawbacks that Jetstar should focus on while engaging in the process. Firstly, the company is highly likely to lose control of its business processes since third-party providers deliver the services. The people who are hired may not be competent enough to handle specific tasks, thereby resulting to low quality services, whereas the turnaround time may be negatively affected. Handling issues during the outsourcing practice is slow for Jetstar, since it may be challenging to contact a client. This results to sluggishness while tacking a pressing issue. Moreover, Jetstar experiences difficulties while managing particular activities thereby making it to witness benefits as well as results that are lower than anticipated (Asefeso, 2011). Conclusion Business process outsourcing is a practice that businesses from diverse parts of the globe are embarking on to help them address processes that are not core to them, though they are costly to implement. The Philippines for instance is one of major regions where companies outsource various services, since they manage to take advantage of labour, the costs of production are cheap, the workforce is highly skilled, and tasks are handled at a faster pace. By embarking on outsourcing processes, Jetstar has realized significant economies of scale, thereby boosting its competitiveness locally and internationally. However, before embarking on a business process outsourcing practice, it is appropriate for an enterprise top evaluate the pros and cons to determine whether it will address the pressing issues in a firm. References Asefeso, A. (2011). Business Process Outsourcing Unleashed. London: AA Global Sourcing Ltd. Bamber, G. J., Gittell, J. H., & Kochan, T. A. (2013). Up In the Air: How Airlines Can Improve Performance by Engaging Their Employees. London: Cornell University Press. ContactCenterWorld. (2011). Jetstar to Transfer 400 Airline Jobs to Philippines. Retrieved from http://www.contactcenterworld.com/view/contact-center-news/jetstar-to-transfer-400-airline-jobs-to-philippines.aspx Halvey, J. K., & Melby, M. B. (2007). Business Process Outsourcing: Process, Strategies, and Contracts. New York: John Wiley & Sons. Read More