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Common HR and Payroll Outsourcing Mistakes #4: Misunderstanding what Business Process Outsourcing really is

Posted by: on 18 April 2016 in Human Capital Management

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The term ‘BPO’ can often get confused with other outsourcing solutions. Indeed, outsourcing has a large variety of options and acronyms, including: Application Management Outsourcing (AMO), Application Service Provider (ASP), Software as a Service (SaaS), Managed Services, Comprehensive Outsourcing Services and Business Process Outsourcing (BPO), to name just an important few. The choice must ultimately come down to the business drivers. Outsourcing elements of IT infrastructure or application management is an option that some businesses choose. However, if they were looking for a comprehensive service that could transform the HR function, then they may come to regret opting for a functional arrangement rather than the full service provided by BPO. If there is no transfer of risk and responsibilities, then it is not BPO: therefore it is important for organisations to understand the full range of options before choosing a provider.

The easiest way to identify the relevant outsourced solution is to separate them into Infrastructure, Application, Process and Function:
Infrastructure – the service supplier hosts the IT infrastructure. Here the customer is buying the service of installing, running and maintaining its applications, typically as a form of IT outsourcing (ITO).
Application – the service supplier hosts the infrastructure and the applications and commits to their availability and maintenance. The customer makes use of these applications and remains responsible for operating activities. Application Management Outsourcing (AMO) and Software as a Service (SaaS) are both forms of this. SaaS customers do not pay for owning the software itself but rather for using it, typically as a cloud-based solution; the provider simply delivers the system, not a holistic service.

Process – the customer outsources the management and execution of a single business process, such as payroll outsourcing.
Function – the entire function is outsourced. This is Business Process Outsourcing (BPO). The service provider is in charge of the end-to-end value chain for its client and is fully committed to results.

“The choice must ultimately come down to the business case.”

Without a clear internal consensus for the outsourcing business case, there is a danger that a lowering of expectations ends up with a mix of SaaS and process outsourcing. However, this is unlikely to be as positive as a full BPO offering. Technology and software BPOsolutions are vital to any outsourcing offering. With the number of different options out there, businesses must ask themselves: do we simply want a new software offering, or do we want a holistic service that can transform our operational success? For example, cloud-based technology plays a central role in optimising outsourced processes, and increasingly Employee Self Service (ESS) and Manager Self Service (MSS) mean that HR activities can reach every employee or manager. However, employees cannot be expected to manage their HR affairs in its entirety; they still need an HR expert to approach for advice. With BPO, you should be getting the transformational HR software, AND the advisers and experts on hand 24/7 to provide the support.

Written by: The Connect@ADP Team

Originally published November 17th 2014

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TAGS: BPO business HR Human resources Outsourcing Payroll Payroll outsourcing processing TCO Total cost ownership

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