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).
Let us get started with
our first topic:
Client-Service Provider
Relationships. Part of this
first topic are key
concepts like: attributes,
Scope of Work (SOW),
Master Services
Agreement (MSA), and
Core Elements.
The nature of outsourcing is
when a client company fully
entrusts or turns-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.
What are at stake are business
sensitive issues like; company
reputation and profitability.
An IT-BPM contract is created for
the benefit of both client or
buyer and the vendor or service-
provider.
A Master Services Agreement
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.
The Statement/Scope of work
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.
Service to be rendered or provided
as documented in the scope of work
it covers exactly what the client is
turning over to the service provider.
Performance standards expected
from the service provider we are
inferring to criteria that is critical to
the client that service provider is
able to consistently attain. 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.
When we talk about
timeline of the contract,
it refers to two (2)
things.
When will the transition
start and for how long
the contract will be in
effect.
When it comes to other
specific operational
requirements, we are
referring to very specific
contractual details that
protect both the client and
service from ambiguity.
Taken together these core
elements empower the
relationship between the
client and the service
provider.
Let us get started with
our next topic; IT-BPM
contract pricing models.

There are two (2)

pricing models: the
fixed pricing model and
the time and material
pricing model.
Fixed price can be described through the five (5)
items. These include both advantages and
disadvantages.
An accessible way to quickly understand this
particular pricing model in everyday terms is
through this example; 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.
The second pricing model is the Time and
Material price model.
The three (3) items describe the definition
and nature of this pricing model.
The Time and Material pricing model can 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 client’s choice of raw
materials and complexity of design will have
a direct impact on cost.
Companies utilize both pricing models. This
gives them greater control and flexibility in
engaging their own respective clientele.
In this discussion 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.
In the next slide we will be
looking at the two (2) major
cost categories that cover all
expenses and/ or costs that
can and will be incurred by
any venture.
In the next segment of this statement we have the
line that reads; “Tangible assets are depreciated…”
Let 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.
Moving on to “… intangible assets are amortized over time.”
Intangible assets are not physical in nature, such as; intellectual
property, patents, trademarks, copyrights and business methodology.
All of which 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 owner’s knowledge and consent.

Similarly, RIM-Blackberry is paying Nokia no less than 50-million Euro.

Next word 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, 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. 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.
In the next five (5) slides we will be looking at
“smaller” details to arrive at a deeper
understanding of this subject matter with
particular focus on the business of
outsourcing.
Compensation like salary and wages refers to
the money paid by an employer for services
rendered by its employee.
Benefits. 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.
A sum of money given in addition to regular pay
for outstanding work – bonus or incentive?
What about this one: an additional payment or
other form of remuneration to employees as a
means to increasing output – bonus or
incentive?
The third component of process
cost is indirect costs, which is
represented in infrastructure and
other charges.
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, let’s 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.
A system 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.
In this discussion we
will be tackling:
BOI qualification, BOI
requirements, and
PEZA.
There are two (2) major
types of regulatory
requirements
External regulations
refer to the various
government
regulations from the
appropriate
government agency.
 Internal regulations refer
to regulations levied by
the industry upon itself to
ensure the
standardization of various
practices for its own
benefit.
 On the slide are some
basic information
about the bureau.
What is important is
the mission or purpose
of the office.
Let us try to understand other
concepts imbedded 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. One desirable by-
product of this investment is the
creation of jobs. Some
international companies brought
their manufacturing plant here in
the Philippines providing us more
jobs.
A clause of what is presented here refers to activities being pioneer
and/ or non-pioneer. Pioneer activities are activities that:
• Involves manufacturing or processing, not merely assembly or
packaging, of goods or raw materials that have not yet been/ currently
produced in the Philippines on a commercial scale.
• Uses a design, scheme, formula, process, method or system of
production and/ or transformation of an element, raw material, or
finished goods which are new and untried.
• Engages in agricultural activities and services which are essential to
the achievement of the self-sufficiency program of the country.
• Produces non-conventional fuels or manufacturers equipment which
utilize non-conventional sources of energy.
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.
I am pleased to share with
you that any IT-BPM
company is qualified under
one-hundred (100) percent
export. Because of that,
many IT-BPM companies
will 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.
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
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.
With these two (2)
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 affect
benefits both member
companies, despite the fact
may be competitors, and
their respective clientele.