Two things are certain about Business Process Outsourcing (BPO) in 2013. First, it will continue to grow. Second, many companies will enter BPO arrangements without a clear BPO strategy and without being absolutely clear about the rationale and expected benefits for their businesses.
Strategic Alignment Crucial for BPO Success
Companies who are new to outsourcing often dip their toe in the water by selecting a simple process and then outsourcing it to the first provider that comes along. Such an approach has some merit in the right circumstances – and in some cases opting for a quick solution may be a business necessity. However, the problem is that these organizations do not always have a clear BPO strategy or understanding of where the outsourcing process is taking them in the long term, nor do they understand how the process fits in with their overall business strategy.
As a result, these organizations risk entering into long-term commitments which are sub-optimal and which do not align with their strategic aims. The result is a possible short-term gain, but a potentially painful and costly long-term experience.
7 Steps to a Successful BPO Strategy
This does not have to be the case, or the result. By applying some degree of strategic planning upfront and with some ‘due diligence’, the chances of getting a good result are much improved. A BPO strategy is the route map to achieving the best way to transform your company’s business processes – whether through outsourcing, in-house shared services or through another vehicle. It must nest within and support your overall business strategy, just like the company’s sales, production, marketing or IT strategy. A successful BPO strategy should include the following steps:
1. Process/solution strategy – This is the “what”: what do you want your processes to look like, what is the required output and what are the required service levels? Which processes should be in line for outsourcing and which should be retained by the business? How will the interfaces be managed and who will be responsible for controls? Are you prepared to have the processes delivered remotely from another country, either near-shore or offshore? What will happen to the staff that currently provides the service?
2 Sourcing strategy – This is the “how”: How will the processes be delivered? How do you organize the business to provide those processes, how do they integrate with the other business processes and how should they be organized? This point is critical in determining whether outsourcing is appropriate at all. It may be that an internal delivery, such as internal shared services, is more appropriate for your business needs.
3. Supplier strategy – If outsourcing is the answer, next you need to decide whether you choose niche suppliers, best of breed, one or many suppliers, an established player or a start-up. What relationship do you want with the supplier? How do you want to share the risk and the rewards with the supplier? How do you want to incentivize the supplier?
4. Commercial strategy – How do you want to structure the deal? Should it be a fixed-price contract, or are you looking to develop a partnering structure – whereby both parties share risk and reward and are jointly incentivized to reduce costs and improve efficiency over the lifetime of the deal? Or are you looking for something in between?
5. Systems strategy – Are your systems stable or are you looking to implement new systems in the foreseeable future? Do you do this before, as part of, or after the outsourcing/shared services implementation? Are you looking for the outsourcer to take over or use your existing systems, or do you expect to use the outsourcer’s systems?
6. Transition strategy – How will you handle the implications of the Acquired Rights Directive (ARD) or Transfer of Undertakings (Protection of Employment) Regulations – TUPE in the UK? Are you prepared to handle a ‘big-bang’ transfer of responsibility or do you want to plan a phased implementation? Is this going to be by process or business unit?
7. Operations strategy – How is the new operating environment going to be managed and governed? What is the relationship going to be with the service provider – whether in-house or outsourced – and how is the performance going to be monitored and controlled? What will be the mechanism for reversing the service transfer should delivery not be up to the required standard?
A good strategic plan is vital to the success or failure of any business – every stakeholder group in the company should understand what needs to be done within the organization to fulfill that plan, helping to make the plan take shape. If the BPO strategy is right, everyone will benefit and your business will be allowed to flourish.
Ben Trowbridge is foun