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`Costing syllabus being tuned to BPO needs'
February, 07th 2007
"The matching of business processes against resources, in a structured way, is not practised by many BPOs barring big firms."

Mr A.N. Raman
Indian BPOs can trim costs by 30 per cent, said Nasscom (National Association of Software and Service Companies) recently.

On this dramatic finding about the business process outsourcing (BPO) industry, Business Line sought the views of Mr A.N. Raman, Central Council member of the country's premier costing body, the Institute of Cost and Works Accountants of India (ICWAI).

"The matching of business processes against resources, in a structured way, is not practised by many BPOs barring big firms," he says.

"Such a matching comes as a part of the cost management system, and can regularly reveal any mismatch between high value resources being deployed in low end processes," notes Mr Raman.

"Lack of planning in fungible resources may offer a potential of one third of the total potential the Nasscom report talks of. This is generally compounded by the problems of not tuning the HR (human resources) strategy with cost management."

Mr Raman is of the view that business process costing is not done as a best practice for achieving operational excellence, especially by companies that have not upgraded their costing systems. "Process inefficiencies in the form of redundancy, lack of poor quality through rework, and complicated methods push up process costs, which in some cases can even make up to 25 per cent of the operational costs." It is only the enlightened firms that practise activity based costing (ABC) systems, six sigma and TQM (total quality management) for operational excellence, one learns.

Reusable tools should be developed as a part of IT (information technology) strategy, and these can bring down the costs of migration when business processes are transferred from main site to off site, insists Mr Raman.

Since manpower costs make up to more than 50 per cent in BPOs, it is necessary to compute cost per employee grade-wise, suggests Mr Raman. Ensuring the right mix for various processes can contribute to the cost reduction, he adds. "We are quite surprised with the stated position on location costs. With skyrocketing costs of space in metros, certainly the structural costs per square foot can come down by moving to next tier cities," advises Mr Raman. "ICWAI new syllabus is being tuned to the requirements of the BPO segment also as a part of our strategy."

D. Murali

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