Christ the King College

Gingoog City
Bachelor of Science in Accountancy

ACCOUNTING 13

BUSINESS PROCESS OUTSOURCING

Submitted By:

ABRENICA NEL

AÑASCO, JOSHUA

BAUTISTA, RENIER JR.

ABRENICA, NELLY ANNE FAITH

EDER, SWEET JOY

EVANGELISTA, FRANYL GEE

OCLARIT, JANE

SALISE, MARYJEL

Submitted To:

NORMA ARELLANO

February 10, 2025

 BUSINESS PROCESS OUTSOURCING
INTRODUCTION

It’s 1992, the Philippines, a densely populated island nation in

Southeast Asia, has grown from a post- World War II population of about
19 million to 68,820,000 and expanding at an annual rate of 2.5 %.
Corazon Aquino, the country’s visionary first woman president, wife of
assassinated politician, Benigno Aquino Jr. and mother of future president,
Benigno Aquino III, is in the final months of her term. She is inspired by
opportunities to increase Philippines’ participation in the global economy,
while Mount Pinatubo’s 1991 volcanic eruption is still recent memory. The
ground, not yet cleared of lava ash. Human displacement and $700 million
of economic devastation will leave a permanent mark of her legacy.
Also, in November of 1991, the US flag that had been prominent on
the Clark Air Base parade ground since 1945 was, by agreement, lowered
for the last time. An independent republic beginning in 1946, the proud
flag of the Philippines was raised in its stead and flies there still. This is
the setting surrounding the birth of Business Process Outsourcing (BPO) in
the Philippines, now the country’s fastest growing industry, estimated
between 12% and 15% of the country’s Gross Domestic Product. In 1992,
however, Accenture partner and industry pioneer, Frank Holtz, taking
advantage of the growing service-oriented, English-speaking workforce in
the Philippines, based the first Global Resource (call) Center in Manila.

WHAT IS OUTSOURCING?
To outsource, according to Merriam-Webster, is to procure something
such as goods or services, using outside sources, especially, but not
necessarily, from non-union or foreign entities. Many believe that the
origin of outsourcing can be traced to the period from about 1760 to 1840,
known as the Industrial Revolution. It was during this era that Europe and
the United States saw a progressive transition from independent manual
craftmanship to mechanized manufacturing processes. Our premise,
however, is that examples of outsourcing can be found throughout human
history. For instance, when ancient armies and navies required weapons
and ships, the demand was often met by specialized independent
craftsmen such as blacksmiths and ship builders, an early form of
outsourcing.
The basic idea behind outsourcing connects to the recognition of
organizational “core competencies,” the things we do that give us a
competitive advantage. The core competencies of the McDonalds
restaurant chain, for example, are trained staff, efficient processes,
strategic locations and recognizable brand. While McDonalds operates
over 38,000 owned and/or franchised restaurants, suppliers like Tyson
Foods, Hildebrandt Farms and others are the sources of their bakery
supplies, meat, fish poultry, produce and dairy products required to fill
McDonalds menus.
WHAT IS BUSINESS PROCESS OUTSOURCING?
Business Process Outsourcing or BPO is a rapidly growing subsection
of the outsourcing industry. BPO encompasses a contractual agreement
with a third-party service provider to absorb an otherwise internal
business process. The arrangement is typically cost-effective to the
outsourcing party, while the staff, facility and functional expertise are the
provider’s core competencies.
Generally speaking, BPO is either Front Office or Back Office. Front
Office outsourcing involves the provision of services like inbound or
outbound telephone conversations, electronic mail, fax, chat, video and
other forms of direct interaction with a client’s customer base. Typical
applications of Front Office outsourcing include sales, customer support,
technical support, collections, market research and
scheduling/appointment setting. Back Office outsourcing includes, but is
far from limited to, essential support tasks like data entry, claims and
payment processing, HR support services, accounting services, creative
services, IT support and technology development. The key difference
between Front and Back office BPO is direct interaction with the end
customer.
BPO ADVANTAGES/ PERCIEVED DISADVANTAGES
Like any business solution, Business Process Outsourcing should be
done thoughtfully. You should know up front that the clear and measurable
advantages of outsourcing are accompanied by certain business
challenges that must be considered and planned for. The list of
advantages includes:
 Core Competency Focus – Think of outsourcing as a form of
delegation. Both organizations are doing what they do best while
partnering to provide more profitable results and a better customer
experience.
 Productivity Improvements – Focused organizations are more
efficient and as a result, more productive. This applies to the
company doing the outsourcing (the client), as well as the outsource
service provider,
 Reduced Labor Challenges – The service provider absorbs the HR
and labor challenges of what is often a larger BPO team. The client
need not worry about managing attendance, employee retention,
payroll and employee relations. The services are provided turn-key.
 Increased Revenue – Front Office/contact center BPO’s feature their
ability to drive higher levels of customer engagement driving higher
 sales, collections and customer lifetime value as a competitive point
of differentiation.
 Cost Savings – There are a number of ways to calculate the cost
savings one should expect from a BPO. These include lower costs
per production hour, lower cost per sale. Lower support costs per
customer, lower facilities and administrative expenses. There is also
a cash flow advantages as clients gain favorable float since
employee payroll costs are included in monthly billing versus weekly
or bi-weekly.
 Innovation and Expertise – To remain industry competitive, Business
Process Outsourcing firms must hire the best and constantly upskill
their personnel to compel constant innovation and solution
development.
 Increased Capability – Without capital investment BPOs immediately
expand your human resources, geographic reach, physical capacity
and on-demand technology.
5 Types of Business Process Outsourcing
1. Front-Office Business Process Outsourcing
Customer-facing services fall under this category, which also
includes tech support, customer service, sales, and marketing.
Businesses can take advantage of specialized people with distinctive
knowledge and save money by outsourcing web development,
customer care lines, or any front-office services.
2. Back-Office Business Process Outsourcing
Contracting services that are not customer-facing are a part of
back-office business process outsourcing. IT, accounting, business
process automation, human resources, quality assurance, etc, are
among them. A variety of BPO subtypes have arisen, such as IT-
Enabled Services (ITES) BPO, which employs IT analysts, Legal
Process Outsourcing (LPO), which employs paralegals or
consultants; and Knowledge Process Outsourcing (KPO), which
outsources a person with program management or implementation
expertise. Businesses can focus on their core goals by outsourcing
these tasks rather than investing in time-consuming and expensive
internal training and onboarding.
3. Offshore Business Process Outsourcing
When services are outsourced abroad, this is called
offshoring. The availability of resources, political stability, cheaper
labor costs, various tax benefits, and other factors encourage this.
Companies frequently outsource their customer support divisions by
signing contracts with call center providers around the globe,
especially in the Philippines. As a result, companies can get skilled
 labor and services at a reduced cost, lowering overhead expenses
and possibly lowering the cost of goods or services to consumers.
See how you could save 82% in costs by building an offshore team
in the Philippines.
4. Nearshore Business Process Outsourcing
The practice of hiring contractors in nearby nations is known
as nearshore business process outsourcing. For US-based
companies, this can cover Central America, as well as Canada and
Mexico. This type of outsourcing typically takes place when
specialized skills are less expensively available in a nearby country,
but certain considerations, such as time zones or language
proficiency, must be made. An example of this is when a Canadian
business hires a U.S marketing agency to handle its marketing
needs, or a Silicon Valley business contracts Canadian experts to
handle its IT and coding needs.
5. Onshore/Domestic Business Process Outsourcing
The act of outsourcing and receiving services within the
borders of a country is known as domestic outsourcing. This means
that a vendor in one city, state, or province may be hired to supply
services to a company in a different city, state, or province.
Numerous reasons, like the availability of specialist talents in
specific areas or regional variations in prices and costs, may be the
cause of this.
The perceived challenges of BPO, especially those offshore, include:
 Attrition and Loyalty – It is believed that BPOs have higher rates
of employee turnover than captive (non-BPO) companies.

There are several factors that could influence this:

o BPO’s have contractual relationships with clients which
creates a perception of risk in the minds of employees.
o Competitive recruiting of BPO talent.
o Entry level BPO jobs may not be match with an employee’s
career aspirations and academic training.
 Tribal Knowledge – As a third party, a BPO may not start with in-
depth and historic knowledge of the work being outsourced. This will
take time and contractual stability to acquire.
 Less Strategic Alignment – Quite often the BPO is considered an
expendable service vendor rather than a strategic partner. This not
only reduces the likelihood of strategic alignment; it can reduce
value of the process improvement and customer intelligence the
BPO can offer.
  Management Logistics – Since the BPO can be in a different city
or even a different country, a concerted effort is required to build
relationships or effectively schedule direct communication between
the client and BPO team. Occasional travel could be required, the
cost of which should be factored in your decision.
 Off Shore Language and Cultural Differences – If the BPO is off
shore, both the BPO and the client’s teams will need to make an
effort to understand the national culture of the other.
 Poor Quality Control – This perception is typically linked to three
factors:
1) The BPO usually has one portion of a process and only
measures quality within that portion.
2) Employee attrition creates a less tenured workforce,
often making mistakes as they move through a learning
curve.
3) Quite often, the client does not have a structured quality
assurance program and does not invest in the BPO
acquiring these resources.
 Off Shore Hours – Since the two most popular locations for off
shore BPO are the Philippines and India, there would be a
substantial time zone gap. This is less concerning when the work is
back office or business to business, however, Front Office work that
focuses on consumer markets require real time interaction. As a
result, graveyard shifts are the rule, rather than the exception, in off
shore BPO.
 Restoration Challenges – Once the work is outsourced, if the
client wants to re-absorb it, they are often starting from scratch.
This will likely lead to a less than desirable customer experience
until the restoration is complete.
5 Commonly Outsourced Business Processes to the Philippines
Many tasks that can be handled in-house can be easily outsourced.
Among the processes that are most frequently outsourced are:
1. Customer Support:
Customer service support is one of the most commonly
outsourced business processes to the Philippines. This includes tasks
such as handling customer inquiries, complaints, and technical support.
The Philippines is well-known for having a highly skilled and competent
workforce with excellent communication skills, making it an ideal
location for providing customer service support to businesses
worldwide.
2. Accounting and Finance
Many businesses choose to outsource their accounting and
finance processes to the Philippines due to the country's highly skilled
 accounting professionals, plus they can save thousands of dollars a
year in employee costs. (The cherry on the cake).
3. Digital Marketing
Outsourcing digital marketing tasks such as social media
management, content creation, and search engine optimization can
help businesses increase their online presence and reach a broader
audience while also reducing costs.
4. Administrative Support
Things such as data entry, document preparation, and scheduling
are popular process that businesses outsource to the Philippines. The
country has a highly educated workforce with excellent administrative
skills, making it an ideal location for outsourcing these tasks.
5. IT Support
The country has a large pool of highly skilled IT professionals
who can provide software development, network administration, and
help desk support services. Outsourcing IT support to the Philippines
can help businesses save on costs while benefiting from highly skilled
professionals' expertise.
In the final analysis, thousands of businesses utilize Business Process
Outsourcing. This is especially true in the Tech, Finance and Healthcare
sectors and becoming more prevalent in the SMB (Small and Mid-Sized
Business) space. We have been candid about the challenges with the
acknowledgement that better BPO’s will have proven mitigation strategies
to address each of these. As a result, the global business process
outsourcing market size was valued at USD 221.5 billion in 2019 and is
expected to grow at a compound annual growth rate (CAGR) of 8.0% from
2020 to 2027.
WHY SELECT THE PHILIPPINES FOR BPO?
 1992 - Accenture Group created the first contact center in the
Philippines
 1995 - The Philippine Congress passed the Special Economic Zone
Act, lowering area requirements for development and offering tax
incentives to attract foreign investors
 1997 - America On-Line (AOL) established first off shore contact
center in Philippines and Sykes Asia becomes first multinational BPO
company in the Philippines
 1999 - eTelecare founded, first Philippine-owned BPO
 2000 - The BPO industry accounted for 0.075% of the country’s GDP
 2001 - US-Based PeopleSupport moved their operations to
Philippines, providing 8,400 jobs
  2003 - Convergys Corp. opened first two (2) call centers in the
Philippines
 2005 - The Philippines gained 3% of the global BPO market, which
accounted for 2.4% of the country’s GDP
 2007 - eTelecare acquires AOL Philippines in Clark Freeport Zone
 2010 - The Philippines was declared the world’s BPO capital with
525,000 employees and $8.9 Billion in revenue
 2011 – BPO becomes one of the biggest and fastest growing job
providers in the private sector; $11B revenue generated and
638,000 Filipinos employed; 4.9% of country’s total GDP
 2012 - The BPO industry grows by 46% annually since 2006.
Revenue comprised 5.4% of the country’s total GDP 2013 - Revenue
generated climbs up further to $15.5B and 900,000 Filipinos are
employed full time
 2016 - BPO industry is projected to generate 1.3M new jobs, with
17% annual growth
 2017 - The IT-BPM (Business Process Management) industry is the
Philippines’ primary economic driver, drawing in $22.1 billion in.
There are currently over 850 BPO companies registered and
operating in the Philippines. The list includes industry giants like
Teleperformance, Concentrix and IBM Solutions Delivery. The industry has
come a long way since the Accenture experiment in 1992, and If you’re
wondering why the growth has been so substantial, here are a few things
you to consider:
1) The country is an attractive economic alternative to setting up shop
in locations like the United States, Australia, United Kingdom and
Europe. The currencies of these locations are significantly stronger
than the Philippine Paso, creating attractive advantages in labor and
real estate costs.
2) There over 109 million Filipinos that speak English at various levels
of proficiency. The country has strong western cultural influences
which favors diversely cultured populations like the US.
3) The labor force of the Philippines consists of over 60 million people
with another 5.2% unemployed. Over 23% of the labor force are
college graduates
4) Because BPOs offer an expansive array of services, requiring a
variety of skills, they can recruit candidates with almost any
educational background or occupational experiences.
5) The Philippines Technical Education and Skills Development
Authority, as well as numerous academic and vocational schools
offer courses designed to meet the skill requirements of the BPO
industry.
6) The BPO industry offers comparatively attractive career paths,
complemented by competitive salaries and benefits. This makes
BPO companies, employers of choice in the Philippines.
 7) The Philippine government has enhanced its business environment
to ease the administrative challenges doing business through
reforms, streamlined procedures and tax considerations.
8) The Department of Information and Communications Technology
(DICT) has created the National Cybersecurity Plan and Digital
Transformation Strategy to be implemented in 2022.
9) The country has a solid technical infrastructure and world class
operating facilities not just in metropolitan Manila, but in nearby
Pampanga (Angeles/ Clark/San Fernando), Cebu and Davao City
10) As an employer of more than 1.35 million Filipinos, the
Philippine IT-BPO industry is poised to generate around $38.9 in
revenue by 2022. The level of national influence the industry
continues to grow

CONCLUSION
In conclusion, Business Process Outsourcing reduces cost while
offering businesses a host of skill, capacity and technical advantages over
captive operation. And although there are certainly challenges associated
with launching and partnering with BPO firms, these are easy to anticipate
and manageable, especially when approached proactively.
Beginning as an industry experiment in 1992, the Philippines has
come to be known as the “BPO Capital of the World.” The country provides
an excellent working environment for outsourcing service providers and its
capabilities continue to expand. Your selection of a compatible partner is
ultimately the key to reaping the numerous rewards the industry has to
offer. Consider the Philippines.