Page 171 - E2 Integrated Workbook STUDENT 2018

The finance function

5.3 Business Process Outsourcing (BPO)

The third option in the positioning of the finance function is business process
outsourcing (BPO). Outsourcing is the act of giving a third-party the responsibility of
what would otherwise be an internal system or service. BPO is contracting with a
third party (external supplier) to provide part or all of a business process or function.

Many of these involve offshoring, when the outsourced function is in another country.

Advantages Disadvantages

 Cost reduction through  Loss of control. Business areas
economies of scale. may not be able to dictate what
information they need and
 Access to capabilities. A when they need it.
specialist provider can bring
best practice expertise and new  Over reliance on external
investment in resources. providers.

 Release of capacity. Allows the  Confidentiality and a risk to
retained finance function to intellectual property.
concentrate on their role as
business partners, in order to  Risk of unsatisfactory quality.
improve decision making.

Illustrations and further practice

Try case study style question 1 from Chapter 12 of the Study Text.

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