[...]... the reach of the information and data nervous system that was constructed 1 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM Page 2 ESSENTIALS of Business Process Outsourcing over the past few decades.This is revolutionary, and this nearly universal telecommunications infrastructure is a major part of what gives life to the business innovation called business process outsourcing B PO Defined Business process outsourcing. .. (Exhibit 1. 3) Clearly, 10 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM Page 11 The BPO Revolution EXHIBIT 1. 3 Comparison of Asian and U.S Technical Education Bachelor’s S&E Degrees in the United States and Selected Asian Countries and Economies by Field (19 75 19 88) 400,000 United States 350,000 300,000 250,000 200,000 Social & behavioral sciences 15 0,000 Natural sciences 10 0,000 Engineering 50,000 19 75 19 79 19 83 19 87 19 91. .. introduce people to technology and 7 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM Page 8 ESSENTIALS of Business Process Outsourcing vice versa If left solely in the hands of technical specialists, a BPO initiative is likely to fail for lack of paying attention to the soft issues of human relationships, change management, and organizational culture If left solely in the hands of nontechnical managers, it is likely to... radiology lab in Bangalore, Ernst & Young has 200 accountants processing U.S tax returns Starting pay for an American accountant ranges from $40,000 to $50,000; in Bangalore accountants are paid less than half that .1 3 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM Page 4 ESSENTIALS of Business Process Outsourcing Outsourcing of Service Jobs to Escalate In the next 15 years, Forrester Research predicts that 3.3 million service... global leader in higher education, but the rest of the world is catching up quickly As more and more Ph.D.qualified faculty return to their home countries with degrees from Harvard, MIT, Stanford, and other prestigious schools, they are helping to 9 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM Page 10 ESSENTIALS of Business Process Outsourcing EXHIBIT 1. 2 BPO Drivers Business Specialization Broadband Internet Educational... Engineering 50,000 19 75 19 79 19 83 19 87 19 91 1995 19 98 Natural sciences include physics, chemistry, astronomy, biology, earth, atmospheric, ocean, agricultural, as well as mathematics and computer science 400,000 Asia Engineering 350,000 Social & behavioral sciences Natural sciences 300,000 250,000 200,000 15 0,000 10 0,000 50,000 19 75 19 79 19 83 19 87 19 91 1995 19 98 Asian countries and economies include:... loss of about 560,000 positions • BPO will reach $17 8 billion in revenues worldwide by 2005, representing a compound annual growth rate of 9.2 percent for the five-year forecast period.3 EXHIBIT 1. 1 Jobs Expected to Shift Overseas 3,500,000 Total 3,000,000 Office Computer 2,500,000 Business 2,000,000 Management Sales 1, 500,000 Architecture 1, 000,000 Legal Life Sciences 500,000 Art/design 2000 2005 2 010 ... cities in the world At the end of the twentieth century, the Industrial Age gave way to the Information Age, and many workers moved out of factory jobs into information-rich 5 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM Page 6 ESSENTIALS of Business Process Outsourcing I N T HE R EAL W ORLD Does BPO Increase the U.S Unemployment Rate? The Labor Department, in its numerous surveys of employers and employees, has... vilified Business executives and owners praise it as a way to eliminate business processes that are not part of their organization’s core competence Back-office functions, such as payroll and benefits administration, customer service, call center, and technical support, are just a few of the processes that organizations of all sizes have been able to outsource to others who specialize in those 2 4377_P- 01. qxd... California also occurred during the writing of this book and I thank my wife,Amy, for her patience during the process W x 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM Page 1 CHAPTER 1 The BPO Revolution O verview The Internet bubble bursts, and the world keeps turning.Terrorists attack the World Trade Center, and the world keeps turning.The global economy reels in the throes of a major recession, and the world keeps . rate of 9.2 percent for the five-year forecast period. 3 4 ESSENTIALS of Business Process Outsourcing EXHIBIT 1. 1 2000 2005 2 010 2 015 3,500,000 3,000,000 2,500,000 2,000,000 1, 500,000 1, 000,000 500,000 Total Office Computer Business Managemen t Sales Architecture Legal Life. a few of the processes that organizations of all sizes have been able to outsource to others who specialize in those 2 ESSENTIALS of Business Process Outsourcing 4377_P- 01. qxd 1/ 31/ 05 12 :30 PM. ESSENTIALS of Business Process Outsourcing Thomas N. Duening Rick L. Click John Wiley & Sons, Inc. 4377_P-00(FM).qxd 1/ 31/ 05 12 :42 PM Page iii 4377_P-00(FM).qxd 1/ 31/ 05 12 :42 PM Page vi ESSENTIALS of