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Cost management model for a standard business process outsourcing (BPO) project

55 Comments · Business outsourcing

Total Cost Management (TCM) is a term used to refer to the process of identifying, forecasting, and developing mitigating tactics for costs associated with a project.

Individuals familiar with the initiation and implementation of information technology (IT) projects will recognize that this concept is similar to the Total Cost of Ownership (TCO) approach used for software and hardware investments.

TCO is designed to focus attention on the total costs involved with a major IT investment and the organizational changes that are usually associated with such an undertaking.

The approach helps organizations anticipate and evaluate all of the costs associated with an IT project, including the long-term maintenance and upgrade costs that are a part of nearly every IT investment, the human factors associated with adopting and adapting to a new technology, and costs associated with risk mitigation measures that need to be established.

TCM refers to the process of identifying and developing a strategy for managing the costs associated with initiating and managing a BPO project. Provides a high-level view of what we call the BPO Life Cycle.

Each phase of the life cycle has a variety of costs associated with it, some obvious and directly attributable to the project and others hidden and less easily attributed.

For instance, the BPO analysis team (BAT) will often require that non-BAT employees assist with the business-process mapping task.

This means the employees will be pulled away from their normal jobs, it only briefly. Although it may he possible to attribute time-away costs to the BPO project, it is more difficult to attribute costs associated with disruptions in the work unit from which the employees came.

Such disruptions can linger long after the individuals who assisted the BAT have returned to their work units.

Questions about the security of their jobs, doubts about the intentions of the BAT, and wonk-time rumor exchange all sap productivity from the work team. These hidden costs are associated with the analysis phase of the BPO project.

Using a Total Cost Management (TCM) approach, these costs are identified, estimated, and attributed to the BPO project.

TCM involves the overt on direct costs that can be linked to the BPO project, hidden costs that are quantifiable but less easy to identify, and opportunity costs that are nonquantifiable but capable of being identified and estimated. Shows a BPO Project TCM model that includes these varieties of cost categories.


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