Outsourcing or Business Process Outsourcing (BPO), is the hiring of a third party to perform non-core business activities. Although this practice is not new for many organizations, there has been a clear upward trend in outsourcing over the last 10 years. The fact is that the BPO industry has made it possible, to a large extent, for companies to have a more effective cost/benefit system. Most industries have identified those tasks which are not part of their core business and can be given to others to deal with. But on the whole, the popularity of BPO services has been limited to areas such as customer service, invoicing, software development, management of computer tasks (capture, infrastructure management, technical support), and human resources (payroll).
According to Backoffice Pro, an Indian company specializing in research and analysis of market trends, the most important reasons why a company uses BPO are: reduction of costs (42%), efficiency improvements (33%), focusing efforts on the core business (26%), meeting the objectives of staff reduction (24%) and access to experts and specific knowledge (23%). Since the nineties, the pressures to operate with lower costs and be more efficient have led organizations to contract on-shore BPO services (within the same country). However, as also noted by Backoffice Pro, during the 2000s these services underwent a revolution, when Indian companies began to offer high quality services at very attractive prices. This led to a massive hiring from other countries by companies based in America and Europe, establishing a BPO offshore; meaning outside the country in which the hiring company is based. Subsequently, these providers moved their services closer to their customers to close service gaps, creating companies within the client’s region, but in a different country: this is known as nearshore BPO. Finally, these suppliers have taken their companies to their clients’ own countries and are globally combining offshore and onshore services.
However, companies must be prepared to outsource processes and develop at least the following elements:
Well-defined metrics of execution and desired results. It is not enough that the processes are defined, it is necessary to know what are the minimum acceptable parameters under which the process is considered to be running correctly, and what are the expected minimum results. These metrics must be clearly defined to the supplier via contract, as well as the means by which the supplier will regularly inform his client of its execution.
Have the right personnel for the management of the provider. Frequently, I have seen areas which outsource their functions, and imagine that the people who used to do them are now the ones who will supervise the provider. Skills to perform a task and to monitor and manage a supplier are completely different, and not having the right people to guide and help the supplier to fulfil the tasks is one of the most common causes of failure in the relationship.
Establish control mechanisms and performance monitoring. The contracts with the service provider must clearly establish what is required, not only in terms of process, but also in terms of the objectives to be achieved, how the performance of the provider will be assessed and, most importantly, what happens if the objectives are not met. When the supplier commits to achieving a certain level of service and agrees a penalty in writing, this means the supplier understands the limits of their capabilities and knows how far they can commit. In my experience it is very common that contracts do not include penalties to the supplier if the service parameters agreed upon are breached; at least this is the case in Latin America. The worst scenario is having to apply penalties, because it means that something is not working in the relationship.
Establish selection processes for the BPO provider. Choosing a provider based on its price may be an obvious motivation. However, today it is not enough. Organizations must be able to define a selection matrix which analyzes at least: the quality of the services offered by the provider, the technology used, the security in the handling of data, and the certification available for the provider and their employees. Certification in itself does not guarantee success in the execution of tasks. But it is a clear indicator of the maturity of the supplier in terms of internal processes and vision towards its customers, and it will allow us to have traceability in the execution.
It is simply specialization and maturity of BPO providers, along with the development of emerging technologies such as Artificial Intelligence, Machine Learning and automation, which has brought about a new evolution in BPO services. Ravi Ramamurthy, innovation expert and entrepreneur, says that the traditional life cycle of BPO services is made up of:
- Current process within the company
- Transition to the provider
- Integration (on-boarding)
- Business as usual under the supplier
The transformation is thanks to the skills of new BPO players, able to identify continuity problems in the process, generate performance accelerators, and collectively achieve productivity improvements of 50% or more with truly rapid implementation of their services. In this way, the new BPO life cycle is defined as:
- Current process within the company
- Identify performance gaps
- Create performance accelerators (virtual mentors, automations, smart formats)
- Transition to the technology-basedprovider
- Integration (on-boarding) using performance accelerators
- Business as usual, underthe supplier and continuous improvement
Ramamurthy says that this will radically change organizations, as they will be able to take care not only of their clients by focusing on the core of their business, but also of their collaborators. It is this authentic care that generates loyalty. And talented people will have the opportunity to truly develop their skills and dramatically boost their career prospects.
In short, we are facing a new leap forward for business. Things are moving quickly. Each organization will decide how it will face these changes and at what pace. And this is a positive development. The important thing is to be aware of what happens around us; to provide strategic thinking when the time is right.
Autor: Conciliac Team
Backoffice Pro, Business Process Outsourcing : What is a BPO as a concept? Business Process Outsorcing : definition, examples , https://www.backofficepro.com/white-paper/business-process-outsourcing/
Ravi Ramamurthy, The rise of the new BPO – A new Framework (The Existence Curve – Part 2), https://www.linkedin.com/pulse/rise-new-bpo-framework-existence-curve-part-2- ravi-ramamurthy /