It can be all too easy for organizations to jump in head first when it comes to IT outsourcing and business process outsourcing (BPO). However, organizations need to take a step back and establish where BPO fits into their overall IT strategy. What are they trying to achieve? Faster results? Cost reduction? In addition, what applications or processes are best suited to outsourcing? Typically, transactional systems such as payroll and voicemail can be easily outsourced; however, more sensitive systems such as HR and finance may be better suited to being kept in house. Only by asking these questions can organizations establish an effective BPO strategy.
Beyond strategic considerations, companies must also develop their outsourcing policies which should provide guidelines for the kinds of systems, processes and data that should or should not be outsourced. The outsourcing policies should also inform the requirements for security and compliance that must be met based on the company’s market and industry. Finally companies exploring BPO must consider service level agreements (SLAs). SLAs need to be specific to the business’s needs, and consider information quality and timeliness of the business activity/process. BPO can alleviate the SLA pressures that the business users place on the IT department.
The IT department is your friend not foe
A common mistake is for organizations not to involve their IT department from the onset when it comes to BPO, yet IT is often best positioned to identify any integration challenges and understand any long-term implications of outsourced BPO. The irony is that IT typically ends up being the one that has to manage any resulting outsourcing contracts.
BPO should supplement rather than replace in-house skills
BPO shouldn’t be used to replace an entire business function, such as finance or HR. This would be irrational, as organizations still need their own in-house people to make business-critical decisions. A company should think about their strengths and weaknesses: if something is a weakness in-house, and it isn’t business critical, then outsource it. Key decisions and roles should always be kept in-house.
In my opinion, supply chain (SC) systems should and can be outsourced. While SC is a critical function, with the right vendor and SLAs outsourcing SC to manage the complexity and massive amounts of data inherent in SC solutions makes sense. Critical decisions are still made by internal employees; however information collection, reporting and analysis can be outsourced. BPO also lends itself to SC as many customers are finding it more and more difficult to find qualified SC experts, for example, in the U.S. there are only a handful of universities offering SC degrees, which is putting a strain on the talent pool. BPO for SC can supplement, not replace, a company’s talent pool.
No matter what functional area is being considered for BPO, another key consideration should be change management. Any BPO provider needs to work closely with both the business users and the IT department to coordinate effective change management. What I see in the industry is that the best vendors and the best companies agree on the change management processes, timing and sign off. This is the key overlap between the BPO provider and the customer.
Don’t get carried away with SaaS
When you buy a car, you don’t start by going to the finance manager to talk about how you pay for it, you look at the brand, the model, the features you want and need in a vehicle. Yet when it comes to Software-as-a-Service (SaaS), many are led to believe that how you pay for your software is the most important part. Too many people have become enamoured with the pay-as-you-go or subscription SaaS model, rather than first asking themselves what they want to achieve. Only once that has been established should organizations look at how services are delivered and paid for. In many cases, moving from a capital expenditure to an operational expenditure model can prove more costly in the long term, so organizations need to work with their finance and accounting departments and weigh up the pros and cons of both models.
Ensure your outsourcing partner can meet your long-term needs
It can be all too easy for organizations to get fixated on the big name providers of BPO, but again, the key is to understand what the overall goals and objectives are for outsourcing and the strategic goals of the company. Companies should consider and match not only current capabilities but also the continued capabilities of their outsourcing vendors. And vendors need to show a continued evolution of capability and knowledge to ensure long-term ROI and value.
Oftentimes companies focus on and celebrate a go-live date for a new system, whether in-house or outsourced; however, true value can only be realized after the first year and multiple years thereafter.
Do you have a BPO story you would like to share? If so, let me know. I always enjoy hearting anecdotal stories of BPO in action.