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Business Process Outsourcing Glossary

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BPA, BPI, BPM ... We’ve rounded up some of the most-often-used words, phrases and acronyms in the business process outsourcing industry and put them together in a BPO Glossary.

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BPO Glossary January 2014 Business Process Outsourcing Glossary Back office functions: Business processes dedicated to the administration of a company, such as finance and accounting (F&A), benefits management, information technology, marketing, logistics, payroll and procurement. Back office functions that are not the core business of an organization are often outsourced to specialist providers. Benchmarking: Measuring the performance metrics of business processes, including costs, productivity and cycle time by comparing them to accepted industry standard benchmarks or best practices. Organizations seek benchmark data to help improve their own work, products or processes. Best practice: A method, process or activity that is generally accepted as being most effective to use in a particular business or industry. Business intelligence (BI): Theories, methods and technologies (such as software tools) that transform masses of raw data into meaningful and useful information for business. Business process: A set of business activities initiated by an event, that lead to the production of a service or product for a particular customer or customers. Typically illustrated by a flowchart with activities and rules-based decision points. Business process automation (BPA): The use of computer systems and software for the automation of complex business processes. Processes can be completely automated, or semiautomated (requiring some human intervention for decisions or exception handling). Business process improvement (BPI): A systematic approach to optimize business processes to achieve better results. Business process improvement, business process redesign and business process reengineering are sometimes used interchangeably to describe changes to a business process--from incremental change to complete redesign--with a goal of measurable improvement. Business process management (BPM): The discipline of managing processes to meet an organization’s strategic goals, establishing systems to measure performance, and systems to educate staff so the processes will be managed effectively. Business process management also is used to describe software systems, often using automation tools, to manage workflows-although it would be more accurate to describe these as business process management systems (BPMS). Business process modeling tool: A software tool for creating business process diagrams. High-end tools include a database for storing models so they can be reused, updated and shared. ©2014 DATAMARK, Inc. www.datamark.net 1

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BPO Glossary January 2014 Business process outsourcing: The activity of contracting out business tasks to third-party service providers. Business process redesign: Focuses on making changes, such as adding business process automation (BPA), to an existing process with a goal of an improved process, as well as continuous improvement after the redesign. The term “business process redesign” is often used interchangeably with “business process re-engineering (BPR).” However, BPR implies a complete “start-over” of the business process, with a goal of eliminating all non-value added work. Business process reengineering (BPR): A business management strategy popularized by Michael Hammer with the Harvard Business Review article, “Reengineering Work: Don’t Automate, Obliterate,” in 1990. BPR focuses on completely rethinking and redesigning business processes from the ground up, to ensure there are no wasteful steps in the process and that the latest technology is used effectively. DMAIC: An acronym that stands for Define, Measure, Analyze, Improve, Control. They are the steps used by Six Sigma practitioners for process improvement projects. Finance and accounting (F&A): Back office process that support a company’s administration. They typically include general accounting, cash management, order-to-cash (O2C), and purchase-topay (P2P). Knowledge process outsourcing (KPO): The outsourcing of business activities that require a high degree of specialist expertise and advanced analytical and technical skills. Some examples include equity research, intellectual property research, business and market research, and legal, medical and scientific services. ©2014 DATAMARK, Inc. Lean: Lean is a process improvement methodology that uses a set of tools to identify and eliminate waste from a manufacturing or business process. Lean principles were originally developed in the Japanese manufacturing industry and later adopted by enterprises of all types to eliminate waste from processes. Six Sigma efficiency and Lean waste-removal methods have been combined to create a “Lean Six Sigma” approach to business process improvement. Legal process outsourcing (LPO): The outsourcing of legal support services (typically those that don’t require court appearances or face-to-face interaction) to a third-party provider. Common services include document review, legal research, drafting of pleadings or briefs, and patent review. Nearshoring: The outsourcing of business processes to third-party service providers in a nearby country, often one that shares a border with your own country. Nearshore outsourcing is attractive to organizations compared to offshoring or farshoring, because travel time is reduced, time zones are similar, and there are fewer cultural and language barriers. Non-value-adding activities: Activities in a business process that don’t add value to a final product or service. Often, these steps are remnants of older processes and continue because of management “inertia”—managers have not taken the time to step back and ask “why are we doing this activity?” Offshoring: The outsourcing of business processes outside the home country, usually to take advantage of lower costs. Offshoring often is used interchangeably with “farshoring,” which describes outsourcing to remote destinations for lower costs, as well as 24-hour service. For example, when staff is done with work for the day in the U.S., it is picked up by staff on the other side of the world, such as in India or China. www.datamark.net 2

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BPO Glossary January 2014 Order-to-cash (O2C or OTC): The business processes for receiving and processing customer sales, from taking orders through various channels, to fulfilling the order through logistics and shipping, and generating an invoice, collecting payment and delivering a receipt. Six Sigma: Developed by Motorola in the 1980s and popularized by its use at General Electric, Six Sigma is a business management strategy that applies statistical techniques to identify and remove the causes of defects or errors in manufacturing and business processes. Outsourcing: A situation in which a company hires another company to do some of its work. Organizations often outsource non-core business functions to service providers that perform the work at lower cost and higher efficiency. Transition methodology: The documented steps and strategies for successfully changing over from one process to another. Business process outsourcing providers will typically have a detailed, documented transition methodology to ensure transition of processes with minimal disruption. Process diagram: A graphical representation of a business process flow, showing activities and the connections between activities. Purchase-to-pay (P2P): Also known as req to check, purchase-to-pay business processes are those used for requesting (requisitioning), purchasing, receiving, paying for and accounting for goods and services. Robotic process automation (RPA): This term is used to describe second-generation business process automation platforms. Providers of the technology describe RPA as “software robots” that integrate with legacy business systems to handle mundane, rules-based tasks. Analysts believe RPA could be a major disruptor to the traditional BPO industry, because robotic systems can operate at a fraction of the cost of a human and work 24 hours a day, 7 days a week, 365 days a year. About DATAMARK For more than 20 years, DATAMARK has provided mailroom management, data entry, document processing and other business process outsourcing services for Fortune 500 companies across all industry sectors. To learn more about our services and solutions, visit: www.datamark.net ©2014 DATAMARK, Inc. www.datamark.net 3

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Business Process Outsourcing Glossary

  • 1. BPO Glossary January 2014 Business Process Outsourcing Glossary Back office functions: Business processes dedicated to the administration of a company, such as finance and accounting (F&A), benefits management, information technology, marketing, logistics, payroll and procurement. Back office functions that are not the core business of an organization are often outsourced to specialist providers. Benchmarking: Measuring the performance metrics of business processes, including costs, productivity and cycle time by comparing them to accepted industry standard benchmarks or best practices. Organizations seek benchmark data to help improve their own work, products or processes. Best practice: A method, process or activity that is generally accepted as being most effective to use in a particular business or industry. Business intelligence (BI): Theories, methods and technologies (such as software tools) that transform masses of raw data into meaningful and useful information for business. Business process: A set of business activities initiated by an event, that lead to the production of a service or product for a particular customer or customers. Typically illustrated by a flowchart with activities and rules-based decision points. Business process automation (BPA): The use of computer systems and software for the automation of complex business processes. Processes can be completely automated, or semiautomated (requiring some human intervention for decisions or exception handling). Business process improvement (BPI): A systematic approach to optimize business processes to achieve better results. Business process improvement, business process redesign and business process reengineering are sometimes used interchangeably to describe changes to a business process--from incremental change to complete redesign--with a goal of measurable improvement. Business process management (BPM): The discipline of managing processes to meet an organization’s strategic goals, establishing systems to measure performance, and systems to educate staff so the processes will be managed effectively. Business process management also is used to describe software systems, often using automation tools, to manage workflows-although it would be more accurate to describe these as business process management systems (BPMS). Business process modeling tool: A software tool for creating business process diagrams. High-end tools include a database for storing models so they can be reused, updated and shared. ©2014 DATAMARK, Inc. www.datamark.net 1
  • 2. BPO Glossary January 2014 Business process outsourcing: The activity of contracting out business tasks to third-party service providers. Business process redesign: Focuses on making changes, such as adding business process automation (BPA), to an existing process with a goal of an improved process, as well as continuous improvement after the redesign. The term “business process redesign” is often used interchangeably with “business process re-engineering (BPR).” However, BPR implies a complete “start-over” of the business process, with a goal of eliminating all non-value added work. Business process reengineering (BPR): A business management strategy popularized by Michael Hammer with the Harvard Business Review article, “Reengineering Work: Don’t Automate, Obliterate,” in 1990. BPR focuses on completely rethinking and redesigning business processes from the ground up, to ensure there are no wasteful steps in the process and that the latest technology is used effectively. DMAIC: An acronym that stands for Define, Measure, Analyze, Improve, Control. They are the steps used by Six Sigma practitioners for process improvement projects. Finance and accounting (F&A): Back office process that support a company’s administration. They typically include general accounting, cash management, order-to-cash (O2C), and purchase-topay (P2P). Knowledge process outsourcing (KPO): The outsourcing of business activities that require a high degree of specialist expertise and advanced analytical and technical skills. Some examples include equity research, intellectual property research, business and market research, and legal, medical and scientific services. ©2014 DATAMARK, Inc. Lean: Lean is a process improvement methodology that uses a set of tools to identify and eliminate waste from a manufacturing or business process. Lean principles were originally developed in the Japanese manufacturing industry and later adopted by enterprises of all types to eliminate waste from processes. Six Sigma efficiency and Lean waste-removal methods have been combined to create a “Lean Six Sigma” approach to business process improvement. Legal process outsourcing (LPO): The outsourcing of legal support services (typically those that don’t require court appearances or face-to-face interaction) to a third-party provider. Common services include document review, legal research, drafting of pleadings or briefs, and patent review. Nearshoring: The outsourcing of business processes to third-party service providers in a nearby country, often one that shares a border with your own country. Nearshore outsourcing is attractive to organizations compared to offshoring or farshoring, because travel time is reduced, time zones are similar, and there are fewer cultural and language barriers. Non-value-adding activities: Activities in a business process that don’t add value to a final product or service. Often, these steps are remnants of older processes and continue because of management “inertia”—managers have not taken the time to step back and ask “why are we doing this activity?” Offshoring: The outsourcing of business processes outside the home country, usually to take advantage of lower costs. Offshoring often is used interchangeably with “farshoring,” which describes outsourcing to remote destinations for lower costs, as well as 24-hour service. For example, when staff is done with work for the day in the U.S., it is picked up by staff on the other side of the world, such as in India or China. www.datamark.net 2
  • 3. BPO Glossary January 2014 Order-to-cash (O2C or OTC): The business processes for receiving and processing customer sales, from taking orders through various channels, to fulfilling the order through logistics and shipping, and generating an invoice, collecting payment and delivering a receipt. Six Sigma: Developed by Motorola in the 1980s and popularized by its use at General Electric, Six Sigma is a business management strategy that applies statistical techniques to identify and remove the causes of defects or errors in manufacturing and business processes. Outsourcing: A situation in which a company hires another company to do some of its work. Organizations often outsource non-core business functions to service providers that perform the work at lower cost and higher efficiency. Transition methodology: The documented steps and strategies for successfully changing over from one process to another. Business process outsourcing providers will typically have a detailed, documented transition methodology to ensure transition of processes with minimal disruption. Process diagram: A graphical representation of a business process flow, showing activities and the connections between activities. Purchase-to-pay (P2P): Also known as req to check, purchase-to-pay business processes are those used for requesting (requisitioning), purchasing, receiving, paying for and accounting for goods and services. Robotic process automation (RPA): This term is used to describe second-generation business process automation platforms. Providers of the technology describe RPA as “software robots” that integrate with legacy business systems to handle mundane, rules-based tasks. Analysts believe RPA could be a major disruptor to the traditional BPO industry, because robotic systems can operate at a fraction of the cost of a human and work 24 hours a day, 7 days a week, 365 days a year. About DATAMARK For more than 20 years, DATAMARK has provided mailroom management, data entry, document processing and other business process outsourcing services for Fortune 500 companies across all industry sectors. To learn more about our services and solutions, visit: www.datamark.net ©2014 DATAMARK, Inc. www.datamark.net 3