BPM Module 3

BPM
101 (Introduction to Business Process Management) Lecture Notes

MODULE 3
IT-BPM ENGAGEMENTS
Introduction
Lets go back to our previous example your preferred breakfast. Assuming that you
have decided to prepare a cheeseburger. You go to the market and a meat vendor calls
your attention. She offers you her products, which she says are fresh. You request for
ground beef with not much fat in it. She promised you that her ground beef is lean. You
look at her products and you decide to buy a kilo of beef. She scoops the meat, weighs it
on her scale, and hands you a kilo of beef. You go home to prepare your burger patties.
Upon closer inspection at home, you notice that your ground meat has chunks of fats
inside. You become suspicious and you weigh the said meat on your own weighing
scale. To your surprise, the beef weighs less than a kilo. Can you imagine how
frustrating this situation would be if it happens in real life?
In business, it is important that both the buyer and seller or the client and the service
provider have a clear understanding of their respective duties and responsibilities. This
is more crucial in large-scale partnerships like in the IT-BPM industry. In this module, we
shall discuss how business partnerships between and clients are helped by properly
drawn contracts and how contracts can protect each others businesses.
Learning Objectives
At the end of this module, you should be able to:
1. Describe the attributes of a client and service provider relationship

2. Define the BPO Contract, Scope of Work (SOW), Master Services Agreements
(MSA), SLA (Service Level Agreement), KPI (Key Performance Indicators)
3. Discuss the core elements of a BPO contract
4. Define the BPO financials
5. Differentiate CAPEX and OPEX
6. Discuss the different regulatory requirements
Client-Service Provider Relationships
Outsourcing involves a client company fully entrusting or turning over the successful
delivery of a service formerly handled in-house to either a third-party or shared service
center service provider or vendor- company. There are several issues at stake here.
A client company is normally concerned with:
Quality transition of processes

Efficient operation of business functions that were once handled in-house
On the other hand, a service provider company is concerned with:
e-Service Management Program (e-SMP) 1

IT-Business Process Association of the Philippines (IBPAP)
University of the Philippines Open University (UPOU)
BPM 101 (Introduction to Business Process Management) Lecture Notes

Scope of service (What it will deliver to the client)

Performance measures (How it will be assessed by the client)
From both parties, at stake are sensitive business issues like company reputation and
profitability.
To address these issues, an IT-BPM contract is created for the benefit of both client or
buyer and the vendor or service-provider.
As a result of these relationship attributes, the IT-BPM contract is a unique,

tailor-fit agreement captured in a document that resembles a performance contract.
The IT-BPM Contract
An IT-Business Process Management (IT-BPM) contract is a formal agreement between

a client and a service provider to take over a pre-agreed portion of the client's business
operations.
This pre-agreed portion is documented in the contract as the scope of work (SOW).
The IT-BPM contract, with all its attachments, assumptions, and documented
agreements, is referred to as the master services agreement (MSA).
Lets now discuss MSA and SOW in a more specific terms.
Master Services Agreement
The Master Services Agreement or (MSA) is covering agreement that

summarizes terms applicable to every job-order with the service provider. It is a
contract that contains generic terms regarding requirements and obligations of
the contracting parties, which in this topic are the client and the service provider.
It has the following elements:
a) Service to be provided
b) Performance management, issues, change management
c) Country laws
Groups (a) and (b) are the operational elements, used day to day. Group (c)
generally is just-in-case terms.
Scope of Work
The Scope of Work (SOW) describes specific work to be delivered, by when, at

what cost.
It is a formal document that captures and defines the work activities, deliverables,
and timeline a vendor must execute in performance of specified work for a client.


The SOW usually includes detailed requirements and pricing, with standard
regulatory and governance terms and conditions.
The SOW:
- Can be similar to a job order
- Is generally an attachment/addendum to a Master Agreement, points to

covering terms
- May state that in case of terms inconsistency, the SOW or Master

Agreement supersedes
Core Elements of the IT-BPM Contract
A typical IT-BPM contract is composed of the following elements:
Service to be rendered or provided as documented in the Scope of Work

(SOW)
Performance standards expected from the service provider; Service Level
Agreements (SLA), and, Key Performance Indicators (KPI)
Timeline of the contract; start date (go live), and, duration
Costs to the client
Other Specific Operational Requirements
Lets discuss each element in more detail.
Service to be rendered or provided refers to service to be rendered or

provided as documented in the scope of work (SOW). It covers exactly what the
client is turning over to the service provider. This can include a whole range of
different processes -- outbound, sales calls, inbounding queries, subscriptions,
call, chat, sms or even social media, data encoding, reporting or analysis type of
work, design work, engineering, architectural work, even delivering food or
flowers or mail, physical deliveries, any process that the clients wish to have a
service provider provide can be included.
Performance standards refer to the to criteria that the client finds critical for the
service provider to consistently attain. For example, a service provider that takes
calls for another company regarding directory assistance sets the performance
standards at an average of sixty (60) seconds to complete one call. If the agent
hits the average, he/she delivers what is expected from him. If he/she fails and
takes more time to finish a call that makes him/her inefficient and would incur the
company some added cost.
Performance standards expected from the service provider are really captured in
Service Level Agreements (SLA) and use of Key Performance Indicators or KPIs.
Examples of this include:
o Handle time and average handle time for calls

o Sales volumes attainment whether on the phone or otherwise

o Customer satisfaction ratings or CSAT

o Error rates
o Availability or uptime of systems
o Other metrics that clients wish to measure to check the performance of
the service provider as included in the contract.
Timeline of the contract refers to two things: (1) When will the transition start,
and (2) For how long the contract will be in effect. It is a detailed schedule of
when the transition period starts and when the service provider assumes control
of the contracted processes
In terms of type per duration, most contracts are typically multi-year contracts,
however and when deemed most effective, on-demand contracts may also be
put into effect
Costs to the client refers to the payment made by the client to the service
provider for honoring contractual agreements.
Other Specific Operation Requirements refer to very specific contractual

details that protect both the client and service from ambiguity. It usually covers
the following:
Who will provide the service

Qualifications of personnel
Location of operations
Outline of reporting procedures, decision-making, and escalation of
problems
Legal provisions (e.g., non-competition, confidentiality)
Taken together these core elements empower the relationship between the client and
the service provider.
If you wish to see an example of an IT-BPM contract, you may download Sample
Contract.doc from the course site.
Pricing Models
The price of the service to be provided is a very important part of the contract. It has
implications to the cost of the service and the profitability of the businesses of both the
client and the service provider.
There are tow pricing models: (1) Fixed price, and (2) Time and material.
1. Fixed Price:
This pricing model is easy to plan and more predictable than other pricing
models.
A fixed, pre-agreed price per unit is negotiated (e.g., a fixed price per call or a
fixed price per transaction)

Advantages for service providers: For service providers, it enables them to know
in advance what they would actually be receiving from their clients based on
what they are going to deliver.
Advantages for clients: From the clients perspective, its provides greater
certainty of the cost that theyre trying to control.
Disadvantages: There are several risks with capital requirements and possibly
lower flexibility for the clients. An example would be when in times of low
volumes that you would actually still be paying the same price for the services to
be provided.
Its essentially a fixed price that you pay whether every month or at a particular
period and its easy to plan for and its very predictable. Its negotiated at the
beginning of the contract and can be for something for a particular transaction
such as a fixed price per call or a fixed price per transaction if its a non-voice
transaction. The advantage..
Lets consider this example to explain this pricing model. You and your group mates
decide that you will be having your next group meeting at McDonalds. There is no way to
predict with one hundred percent (100%) certainty what you and peers will order when
you arrive at McDonalds. On the off chance that you all decide to order the same
combination value-meal, you can predict exactly what the total cost will be.
Similarly, because the pricing model is fixed to begin with, there is absolutely no way
that you can get a price-off if you request that the pickles in your burger be removed and
the drink replaced with one of a lower value.
2. Time and Material
The price for service is based on the time and material that was used.
Used when a service is very flexible and it is not predictable in terms of how
much time and material is needed.
In some cases, a maximum price for the service is negotiated by the client/
customer to build in some control or safety level.
This pricing model is flexible but it is not necessarily as predictable in terms of how much
time and resource are needed. When volumes are unpredictable for example, at some
point a hundred seats (agents) are needed but then because of the increases or the
spikes in volume, a hundred fifty seats are now required. The service provider would
need to be able to provide that additional resource and at times, it would actually cost
the client even more to be able to get those additional resources. This would cost the
client more than the fixed price contract. In practice, a mix of these two kinds of
models are actually used. This gives them greater control and flexibility in
engaging their own respective clientele.


The Time and Material pricing model can also be better understood if we take a closer
look at establishments that primarily offer made to order products and services. For
example, tailoring shops that specialize in wedding attire or printing shops that make
invitations for events. In each instance, the clients choice of raw materials and
complexity of design will have a direct impact on cost.
You may now watch the video Establishing a Client-Service Provider

Relationship. After watching, ask yourself the following questions:
What are the major stages in the development of an IT-BPM engagement

between a client and a service provider?
What are the major elements of an IT-BPM contract?
Why is IT-BPM contracting important to the client? The service provider?
IT-BPM Contract Financials: CAPEX-OPEX
The profitability of a product or service is significantly determined by the type and

amount of costs incurred.
In this section, we will be tackling the following: CAPEX and OPEX, associated process
costs, and we will also be looking at the elements or components of loaded costs.
CAPEX vs OPEX
CAPEX (or Capital Expenditure) is a business expense incurred to create future

benefit. Expenditure on assets like a building or the physical space, machinery,
equipment or upgrading existing facilities so their value as an asset increases.
OPEX (or Operational Expenditure) is the money the business spends in order to turn
inventory into output (throughput). These are operating expenses, which also include
depreciation of plants, and machinery that are used in the production process.
Those expenditures required for the day-to-day functioning of the business, like wages,
utilities, maintenance and repairs fall under the category of OPEX.
Table 1 summarizes the difference between the two types of business expense.


Table 1. Comparison between CAPEX and OPEX

Basis CAPEX OPEX
Definition Capital expenditures are OPEX refers to expenses
expenditures creating future incurred in the course of
benefits. A capital ordinary business, such as
expenditure is incurred sales, general and
when a business spends administrative expenses
money either to buy fixed (and excluding cost of
assets or to add to the goods sold or COGS,
value of an existing asset taxes, depreciation and
with a useful life that interest).
extends beyond the tax
year.
Also known as Capital Expenditure, Capital Operating Expense,
Expense Operating Expenditure,
Revenue Expenditure
Accounting treatment Cannot be fully deducted in Operating expenses are
the period when they were fully deducted in the
incurred. Tangible assets accounting period during
are depreciated and which they were incurred.
intangible assets are
amortized over time.
In output/throughput Money spent on inventory The money spent turning
accounting falls under CAPEX. inventory into
output/throughput is OPEX.
In operations Costs incurred for acquiring Costs associated with the
fix assets (property, operation and maintenance
equipment) of fix assets.
Examples Buying computer hardware, Salaries and benefits,
acquiring intellectual maintenance and repair of
property assets like computer hardware,
patents. utilities, rent, business
development and employee
engagement expenses
In terms of accounting treatment, CAPEX cannot be deducted in the period when they
were incurred and that tangible assets are depreciated and intangible assets are
amortized over time.
Please take note of the line that reads: Tangible assets are depreciated...Before
proceeding with our discussion, let us us first define some terms.
Tangible something that is capable of being perceived with the sense of touch
Assets items with economic value owned by an individual or a corporation
which could be converted to cash
Depreciated lessened or diminished the value.


So if we were to take that entire thought together, we come to understand that it simply
means any item that we can touch that belongs to a company loses its value over time.
That is why second-hand cars are significantly cheaper than brand new cars even if they
are of the same model. This holds true for; cellular phones, appliances, clothes, etc.
Now lets move on to the statement ... intangible assets are amortized over time.
Intangible assets are not physical in nature. Examples of which include intellectual
property, patents, trademarks, copyrights and business methodology. While they may be
intangible, these assets are worth billions of US dollars or Euro. In recent technology
news, Samsung lost to Apple in court. The resulting loss was because of patent-
copyright infringement. An infringement is the intentional or unintentional profiting from
an idea, design, concept that is legally owned by another individual or corporation
without the owners knowledge and consent. Similarly, RIM- Blackberry is paying Nokia
no less than 50-million Euro.
The term we need to be clear about is "amortize". In accounting terminology,

amortization refers to expensing the acquisition cost minus the residual value in a
systematic manner over their estimated useful economic lives to reflect its consumption,
expiry, obsolescence or other decline in value as a result of use of time. For example,
lets consider training bonds. Your company sent you to a highly specialized certification
course for Six Sigma at the expense of the company. You were be required to sign a
bond that requires you to render additional X years of service using the knowledge and
skills that you acquired in the course for the benefit of the company. Just like in
amortization, the expenses paid by the company for your course is written off over a
period of time. If you opt to leave the company prior to the expiration of X years, you
will be required to pay for a sizable portion of the cost paid by the company for your
certification.
Components of Process Cost
Process costs associated with roles (activities-processes-tasks) that may be outsourced

via the offshoring outsourcing strategy can be categorized as: (1) Labor cost, (2) Direct
costs, and (3) Indirect costs.
1. Labor Cost. This refers to the sum of wages, salaries, benefits, bonuses and
incentives paid to all employees.
Compensation like salary and wages refers to the money paid by an employer for
services rendered by its employee.
Benefits are of two (2) types: the ones required by law that the employer provide
to its employees and ones provided by the company or the employer.
Bonuses are given based on what an employee has done while incentives are
given to motivate an employee towards the goals.
2. Direct Cost includes the following:
Employee Development (Training), Employee Relations Programs


Employee Tools/ Equipment; desktop computers, communications
Coordination and Management: travel, representation, meetings, and,

workshops
3. Indirect Costs are represented in infrastructure and other charges.
Infrastructure: Infrastructure-related expenses related to maintenance of the

network, e-mail, any other employee shared services, rentals, and other
usual costs that the business will incur with or without the operation in place.
Other charges: For more global multi-national BPMs, these could include
head office or regional cost allocations, any interest costs, capital, foreign
exchange gains or losses especially if youre transacting in foreign currency
outside of US dollar and peso.
For us to explain infrastructure costs, let us look at our malls with multiple vendors. Each
vendor pays a fixed rental price along with other mall amenities like electricity and water.
So if the mall were to offer free Wi-Fi to shoppers and guests, is it really free?
Now when it comes to other charges, lets look at Coca-cola as an example. You would
have to travel very far to find a Coke-less area of the Philippines. This nationwide
availability is made possible through a well- thought distribution system. This is a system
that is heavily dependent on the efficiency of multiple stakeholders with each
representing a hand-off before the final customer or consumer. The shared costs here
are the components of that distribution system long-haul freight, trucks, delivery vans,
delivery tricycles.
Components of Loaded Annual Onshore Cost
The loaded annual cost is the summation of the previously mentioned key costs such as
compensation, the benefits given to employees, and all the infrastructure related costs,
direct or otherwise, that drive into the project. To summarize, loaded annual cost covers
the following:
1. Compensation: Salary and Bonuses
2. Benefits: Training, Health and Life Insurance, Profit Sharing, Pension Matching,
Workers Compensation, Employer share of payroll and Social Security taxes
3. Infrastructure: Facilities, Venue Rent, IT Support
Summarizing all these into a single number provides the management with the
understanding of what it really costs to drive the business either from a cost from head
count or per seat, a count per transaction or any other cost basis to be able to really
simplify the cost component driving the operation. They would then use this loaded
annual cost and compare it to their annual revenue and really assess whether or not the
project as described in the contract is really making their business money.

Regulatory Requirements
Just like any industry, the IT-BPM has to adhere to certain regulations required both by
external agencies and by the industry itself. In addition, companies that would like to
enter the industry must also be aware of the incentives provided by the government to
investors in IT-BPM.
There are two major types of regulatory requirements: (1) External/Adherence to

government regulations, and (2) Internal/Company regulations.
1. Adherence to Government Regulations (External). External regulations refer

to the various government regulations from the appropriate government agency.
Below is a list of government agencies that have a regulatory relationship with
the industry:
Board of Investments (BOI)

Bureau of Internal Revenue (BIR)
Bureau of Immigration
Department of Labor and Employment (DOLE)
Pag-Ibig Fund
Philippine Economic Zone Authority (PEZA)
Securities and Exchange Commission (SEC)
Social Security Services (SSS)
Data privacy Law
2. Industry/Company Regulations are institutional and operational standards/

policies/ guidelines implemented by the service provider. Internal regulations
refer to regulations levied by the industry upon itself to ensure the
standardization of various practices for its own benefit.
Lets discuss the external regulatory requirements one by one.
Board of Investments (BOI)
The BOI is a Republic of the Philippines agency created under the Department of
Trade and Industry.
It strives to attract direct investments into the country to contribute to economic

growth and jobs creation in the Philippines
BOI Qualification

According to BOI, a Philippine enterprise can register their project with the BOI if the
proposed activity is listed as a preferred project in the current IPP. The said enterprise
may engage in domestic-oriented activities in the IPP whether classified as pioneer or
non-pioneer.
Let us try to understand other concepts embedded in this paragraph. First, let us look at
IPP or Investment Priorities Plan. The IPP is an annually released listing, approved by
the Office of the President, of promoted areas of investments eligible for government
incentives. Some international companies brought their manufacturing plant here in the
Philippines providing us more jobs. One desirable by-product of this investment is the
creation of jobs.
Through BOI qualification in undertaking IPP projects or activities, a business entity may
avail of attractive fiscal and non-fiscal incentives. The point of course of these incentives
is to make the Philippines the ideal location to set-up and run their operations.
However, an activity that is not listed may still be entitled to incentives if the following
conditions are met:
At least 50% of the production is marked for export (for 60% Filipino-40%
Foreign-owned enterprises); or
At least 70% of production is marked for export (for more than 40% Foreign-
owned enterprises)
For foreign-owned firms or those whose foreign investment exceeds 40% of the
outstanding capital stock who can engage in domestic-oriented activities, can only be
registered with the BOI if they propose to engage in an activity listed or classified in the
IPP as pioneer.
However, if it fails to meet the pioneer classification, it can likewise opt to be an export-
oriented firm to qualify for BOI registration. However, this time, the export requirement is
at least 70% of actual production.
Any IT-BPM company is qualified under one hundred (100) percent export. Because of
this, many IT-BPM companies look to the Philippines as a preferred destination.
In each instance, the objective of an organization is to gain BOI qualification. What is

apparent is that the Bureau protects the interests and promotes the growth of the
Philippines.
BOI Requirements:
DTI Registration: Sole Proprietorship

SEC Registration: Corporation, Branch Office, Regional Headquarters
Audited financial statement and Income Tax Return for the past three years (if
applicable)
Board Resolution to authorized company representative
Accomplished Application Form 501 and Project Report


If a company is a sole proprietorship, it has to submit a DTI Registration. If it is a

corporation, then they need to submit an SEC Registration.
A board resolution only applies to companies registered as corporations.
Philippine Export Processing Zone Authority (PEZA)
Another entity created for the benefit of the Philippine business sector is the PEZA.
PEZA promotes Philippine investments, extend assistance, register, grant incentives to

and facilitate the business operations of investors in export-oriented manufacturing and
service facilities inside selected areas throughout the country proclaimed by the
President of the Philippines as PEZA Special Economic Zones.
The development of Special Economic zones throughout the country, and the very
competitive incentives available to investments inside PEZA Special Economic Zones
are embodied in the Special Economic Zone Act of 1995 (Republic Act No. 7916), a law
passed by the Philippine Congress.
Qualifications under PEZA
Export-oriented enterprises that are found in any of PEZA special economic zone
PEZA Requirements
Duly accomplished and notarized PEZA application form and anti-graft certificate.
Corporate Profile (including that of parent company, if applicable)
Board Resolution authorizing the filing and designation of a representative
Securities and Exchange Commission SEC Certificate of Registration, Articles of
Incorporation and By Laws (if not available, submit draft of Articles of
Incorporation)
Project brief (i.e., Information on Market, Technical, Financial and Management
aspects of the project to be registered)
Data Privacy Law Republic Act No. 10173
This act aims to protect individual personal information in information and

communications systems in the government and the private sector, creating for this
purpose a national privacy commission, and for other purposes
Given the highly interconnected nature of our personal and professional lives, a law such
as this is helps secure and keep separate personal information from company
information.


The advancements in personal electronics smart phones, tablets, storage devices like
memory cards and thumb drives and cloud or online storage all present a potential
threat in maintaining the integrity of company as well as client information.
Republic Act 10173 is a means by which the government intends protect its private as
well as corporate citizenry.
After discussing the external regulatory requirements, lets take a look at the industry
regulatory requirements.
Industry Specific Requirements
The following are two internal regulatory requirements relevant to IT-BPM:
Industry Specific Regulations - Control of communication channels and

information systems: ARTICLE 16- (1)
The communication channels and information systems of the bank shall be
controlled to ensure that information obtained within the bank is reliable,
complete, traceable, consistent, in a suitable format and character to meet the
requirement, and accessible by relevant units and personnel in a timely manner
Industry Specific Regulations - Auditing of partnerships subject to

consolidation: ARTICLE 34- (1)
Banks shall take all necessary measures to ensure that their internal audit units
can inspect all activities and units of their consolidated partnership without
limitation
With these two examples, it is evident that it is in the best interest of an industry and its
members to implement and enforce such measures. The cumulative effect benefits both
member companies and their clientele, despite the fact they may be competitors.
You may now watch the video lecture IT-BPM Engagements.
After reading all the materials and viewing the video, prepare to:
Participate in the online discussion forum,
Do the online quiz in the course site, and
Do the mid-term course requirements.


Summary
In this lecture material, we covered client-vendor relationship, attributes of the IT-BPM

contract, IT-BPM contract financials, and the regulatory requirements relevant to the
industry.
Glossary
Amortization
The systematic repayment of a debt; in accounting, the systematic writing off of
some account over a period of years.
Bonus
A payment, which is backward looking and usually discretionary or at least not
expected from the employee(s).
Incentives
A plan, which is forward-looking. Payment is tied to the achievement of specific
objectives that have been pre-determined and communicated to the employees
that are on the plan. The purpose of the incentive scheme is to influence
behavior to reach the objectives by providing an incentive to work towards the
goals.
Key Performance Indicator (KPI)

A set of quantifiable measures that a company or industry uses to gauge or
compare performance in terms of meeting their strategic and operational goals.
KPIs vary between companies and industries, depending on their priorities or
performance criteria. Also referred to as "key success indicators (KSI)".
Service Level Agreement (SLA)

A part of a service contract where a service is formally defined. In practice, the
term SLA is sometimes used to refer to the contracted delivery time (of the
service or performance).
References
http://www.merriam-webster.com/dictionary/amortization
http://www.investopedia.com/terms/k/kpi.asp
http://en.wikipedia.org/wiki/Service-level_agreement
http://compensationinsider.com/what-is-the-difference-between-a-bonus-and-an-
incentive/
http://en.wikipedia.org/wiki/Master_service_agreements
http://en.wikipedia.org/wiki/Statement_of_work
This lecture handout is adapted from the Fundamentals of Business

Process Outsourcing 101 Teachers Guide (2014) produced by the IT-Business Process
Association of the Philippines (IBPAP).


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BPM

101 (Introduction to Business Process Management) Lecture Notes

At the end of this module, you should be able to:

1. Describe the attributes of a client and service provider relationship

Client-Service Provider Relationships

A client company is normally concerned with:

Quality transition of processes

On the other hand, a service provider company is concerned with:

e-Service Management Program (e-SMP) 1

Scope of service (What it will deliver to the client)

As a result of these relationship attributes, the IT-BPM contract is a unique,

The IT-BPM Contract

An IT-Business Process Management (IT-BPM) contract is a formal agreement between

Lets now discuss MSA and SOW in a more specific terms.

Master Services Agreement

The Master Services Agreement or (MSA) is covering agreement that

It has the following elements:

The Scope of Work (SOW) describes specific work to be delivered, by when, at

e-Service Management Program (e-SMP) 2

- Can be similar to a job order

- Is generally an attachment/addendum to a Master Agreement, points to

- May state that in case of terms inconsistency, the SOW or Master

Core Elements of the IT-BPM Contract

A typical IT-BPM contract is composed of the following elements:

Service to be rendered or provided as documented in the Scope of Work

Lets discuss each element in more detail.

Service to be rendered or provided refers to service to be rendered or

o Handle time and average handle time for calls

o Customer satisfaction ratings or CSAT

Other Specific Operation Requirements refer to very specific contractual

Who will provide the service

2. Time and Material

e-Service Management Program (e-SMP) 5

You may now watch the video Establishing a Client-Service Provider

What are the major stages in the development of an IT-BPM engagement

What are the major elements of an IT-BPM contract?

Why is IT-BPM contracting important to the client? The service provider?

IT-BPM Contract Financials: CAPEX-OPEX

The profitability of a product or service is significantly determined by the type and

CAPEX (or Capital Expenditure) is a business expense incurred to create future

e-Service Management Program (e-SMP) 6

Table 1. Comparison between CAPEX and OPEX

e-Service Management Program (e-SMP) 7

The term we need to be clear about is "amortize". In accounting terminology,

Components of Process Cost

Process costs associated with roles (activities-processes-tasks) that may be outsourced

2. Direct Cost includes the following:

Employee Development (Training), Employee Relations Programs

Employee Tools/ Equipment; desktop computers, communications

Coordination and Management: travel, representation, meetings, and,

3. Indirect Costs are represented in infrastructure and other charges.

Infrastructure: Infrastructure-related expenses related to maintenance of the

Components of Loaded Annual Onshore Cost

1. Compensation: Salary and Bonuses

3. Infrastructure: Facilities, Venue Rent, IT Support

There are two major types of regulatory requirements: (1) External/Adherence to

1. Adherence to Government Regulations (External). External regulations refer

Board of Investments (BOI)

2. Industry/Company Regulations are institutional and operational standards/

Lets discuss the external regulatory requirements one by one.

Board of Investments (BOI)

It strives to attract direct investments into the country to contribute to economic

In each instance, the objective of an organization is to gain BOI qualification. What is