• Abstracting and indexing
• Document Management
• Call centres Data capture and processing
• Data warehousing
• Electronic publishing
• Legal transcription
• Litigation support
• Medical records management
• Medical transcription
• Remote secretarial services
• Technical writing
• Telemarketing
• Teleservices
• Order Fulfillment
• Accounting Services
• Database Design and Programming
• Web site design and management

The range of administrative and customer support services provided through offshore back office operations is growing rapidly (by at least 15%-20% annually) as corporations in developed countries strive to reduce fixed overheads by contracting out routine functions. Given the information technology support available, any service that does not require face-to-face contact with customers can be provided in an offshore ‘back office’ because it is ‘footloose’ (not bound to a particular location).

Projections for rapid growth

On the basis of the Organisation for Economic Co-operation and Development (OECD) projections, including demand for Year 2000 computer code conversion, the global market for long-distance services which could have been provided by developing countries was estimated at about US$ 438 billion in 1998, or at least 15% of non-OECD total exports. Similar estimates by the World Bank suggest that developing countries may be able to double their 1997 exports of commercial services, which were valued at US$ 398.8 billion. With the growth in exports of business support services from developing countries averaging 14.3% annually between 1990 and 1997, back office revenues for 2002 are projected to be in the range of US$ 778 billion.

Why is it growing so fast?

More and more businesses are subscribing to back office services. This is because there are important strategic benefits to be realized for businesses subscribing to back office services. These include:

• ability to focus on the company’s core business;
• reduce operating costs;
• improve processes;
• better use of capital;
• fuel revenue growth.

 

Trends in outsourcing Over the past 25 years, the types of service activities being outsourced have changed considerably. As one traces the history of back office operations, one can see the convergence of several trends affecting which activities get outsourced:

• Minimizing input production costs. Long before current digital technologies were in use, United States corporations were shipping hard-copy documents and tapes abroad and receiving the data back in electronic form. The initial contribution of digital technologies was to provide the infrastructure for internal data support services (i.e. information processing) to be ‘shipped’ faster and less expensively from one production location to another.

• De-linking the front end. As global tele-communications costs began to drop and the quality of the global telecommunications infrastructure improved, companies started to move their toll-free reception numbers offshore. Locations like Jamaica invested in teleports to attract reservations and general reception contracts to augment basic data-processing contracts.

• Accessing specialized skills. By the late 1980s, organizations had begun contracting out (or outsourcing) specialized functions that were not part of their core business. Moving that outsourced activity abroad was an easy next step, justified by the ability to remain focused on core business. The availability of more cost-efficient telecommunications supported corporate decisions to search globally for the technical skills they needed and so optimize their use of talent.

• Customer service outsourcing. The growth of the Internet and online connectivity made possible the provision of technical support and problem resolution for customers from remote locations. Call centre activity began to accelerate.

• Business process outsourcing. As corporations started to focus primarily or exclusively on their core business, entire support processes began to be outsourced (i.e. business process outsourcing). Some of the earliest examples were payroll processing and credit card processing.

• Administrative support to global networks. With consolidation on the increase, global networks needed to rationalize their support services. For example, airlines, hotel chains, tour operators, travel agencies and car rental agencies are all striving to create a global brand through partnerships that provide a seamless ser-vice, supported by pooled purchasing and marketing functions

As a result of these trends, only managerial responsibilities, core processes and the operational review process are routinely kept within an organization. The 1999 Outsourcing Trends Report estimates that soon 50% of an executive’s budget will cover outsourced activities, and the ability to leverage outsourcing relationships will be an important element of managerial success. The report also documents the overall shift from a preoccupation with cost savings to strategy as the primary reason for outsourcing support activities.

There have also been changes in the structuring of outsourced activities. When back office operations were initially created as captives (or subsidiaries) of parent companies, they were treated as cost centres but have since evolved to profit centres.

Country- and region-specific activities

While the movement to back office operations originally involved going offshore in order to lower labour costs, most countries now have at least one firm providing back office operations. As demand growth shifts to higher value-added customer service functions, developing countries are facing increasing competition from developed countries which are able to offset higher wage structures with specialized skills and significantly lower telecommunications costs.