Research Methodology

Research Proposal

Business Process Outsourcing

In

South Africa

Prepare For:

Dr. Christel Troskie-de Bruin

MBA program Lecturer in Research Methodology

University of Stellenbosch

Prepared by:

Roelof Louw

Student Number: 10992510

11 July 2005

Table of Contents

1 Introduction and Background 1

2 Definition of Research Problem 2

3 Preliminary Literature Review 2

4 Research Design and Method 4

5 Timeframe 5

6 Framework for Proposed Study 6

7 Provisional List of Sources 6

8 Date of Completion 7

1 Introduction and Background

In the nineties corporations realised that due to economic and business pressures, corporations need to focus on core business activities. In addition rapid technology advances rendered the provision of IT services free from the business location. The introduction of concepts such as "location-less" and "distances-less" provision of IT services gave rise to an increasing demand for outsourced IT services (Bierce, Spohr and Shab, 2004:5). These technology advances also provided the opportunity to exploit the benefits of offshore outsourcing.

Initially, IT Infrastructure Outsourcing and then later Application Outsourcing were implemented to reduce operational costs and focus on core business. Today Business Process Outsourcing (BPO) is the next discipline many multi-national corporations are embarking on. BPO include functions such as human resource services, financial services, accounting and reporting, billing, procurement, call center management, credit services and customer relationship management. This research will focus on call center management function of BPO.

Initially, one of the main drivers for foreign BPO was cost savings mainly due to currency market fluctuations as well as associated lower labour wages. The benefit from a foreign destination BPO agreement can account for cost savings of 20% to 65% (Rayn 2003:1) depending on the country from where BPO services are sourced.

South Africa is already recognised as one of the most favourite Business Process Outsourcing destinations in Africa as South Africa has already proven to have the capacity and capability in the most important factors when considering a BPO initiative. The decision to embark on Business Process Outsourcing include consideration of the factors such as cultural similarities, level of technological development, IT infrastructure capability, government stability and the workforce.

This research will determine the most pertinent domestic factors in the South African BPO market to secure long term BPO service contracts with multi-national corporations in foreign countries. This research will attempt to answer the question:

* What are the key differentiators to become a preferred destination in the BPO marketplace with specific reference to call center management?

* Which support structures exists to foster these key differentiators within the South African infrastructure, legal, political and economic domains?

2 Definition of Research Problem

Business Process Outsourcing (BPO) is today the most relevant topic within the context of offshore outsourcing. Specific countries like South Africa are targeted by multi-national corporations of major economies such as America and Europe to establish such offshore BPO agreements where the most cost benefit can be realised and the most effective BPO solutions can be provided.

The aim of this research is to identify the key differentiators within the South African context to foster an attractive Business Process Outsourcing environment with specific reference to call center management. Once the key differentiators are identified this research will identify and recommend the support structures that South African organisations should provide within the infrastructure, legal, political and economic domains to foster long term BPO agreements.

The main premise is that the offshore outsourcing market in South Africa was mainly the result of geographical advantages as well as short term profit drives to "test the market". South Africa need to establish itself as a BPO services provider market leader through the institution of a unique BPO industry proposition.

3 Preliminary Literature Review

The following reflects the view of industry professionals and industry research groups on the most prominent factors one would consider when embarking on BPO initiatives in South Africa. These factors can be grouped into four domains namely technology infrastructure, legal, political and economy. The identified factors are:

* The first professional opinion is that of Peter Drube, Business Process Outsourcing (BPO) director of Computer Sciences Corporation who identify some of the prevalent South African factors which support the decision on South Africa as a BPO service destination include:

o Political and Economy stability

o 1st world telecommunications infrastructure

o Legal infrastructure

o Compatibility of legal, judicial and financial systems

o Continuous service improvement

o Western business culture and English language skills

o Government support to foreign investment

o and a well-educated workforce

However, this will only attract new BPO opportunities to South Africa. The South African Information and Communication Technology (ICT) industry must also focus on retaining long standing relationships with foreign service receivers. To accomplish this Drube continues, are factors such as sufficient infrastructure,