While BPO can be a powerful lever to eradicate deficiencies, cut costs, improve quality, and strengthen control, many of these benefits are often relegated to 'by-products', as clients focus instead on the cost advantage of replacing internal headcount with low-cost, third party resources. As long as BPO is still being summed up, summarily, as a 'lift & shift' or 'my mess for less' activity, the real benefits of outsourcing will remain elusive. So, how do you ensure you care embarking on a positive, rewarding relationship with your BPO service provider? The article offers 10 tips to help you drive a more productive BPO partnership.

1. Strategic Sourcing: 10 Tips on Managing Your BPO Vendor
David O’Sullivan, Co-founder and Partner, Chazey Partners
Explains how to ensure you get the most out of your BPO provider – and not the other way around
hat continues to drive outsourcing as a
sustainable model for business services is the
provider market’s ability to offer Services,
Products, Capability, and lower Cost. Translated, this
means corporations can leverage, for example, a third
party’s expertise in transaction processing, travel and
expense platforms, eInvoicing, and statutory and tax
compliance; as well as benefit from its offshore, lower
cost, human resources.
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2.
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While BPO can be a powerful lever to eradicate
deficiencies, cut costs, improve quality, and strengthen
control, many of these benefits are often relegated to “byproducts”, as clients focus instead on the cost advantage
of replacing internal headcount with low-cost, third party
resources. As long as BPO is still being summed up,
summarily, as a “lift & shift” or “my mess for less” activity,
the real benefits of outsourcing will remain elusive.
Don’t choose BPO because it is “easier”: Some
companies that opt for BPO do so under the mistaken
impression that BPO is “easier to manage” than a
Shared Services Organization (SSO). This is not so, for
many reasons, not least of because an SSO and its
customer are both on the same team, reporting to the
same board. Differences, where they occur, are still
subject to common targets.
Tip: Outsourcing does offer a certain arm’s length
neutrality, but beware of interpreting this mainly as a
means of “control.” Your end customer cares first and
foremost about seamless delivery and excellence. That
is your priority and it will take both BPO and SSO to
make it happen.
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3.
The reality of modern day business process outsourcing,
however, promises much more.
So, how do you ensure you are embarking on a positive,
rewarding relationship with your BPO service provider?
Here are 10 tips to help you drive a more productive
partnership:
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1.
Don’t fail at the starting gate: The best
intentions can get lost in the legalese of contract
negotiation, and a weighty Statement Of Work and/or
Master Agreement can do a lot to derail a relationship
before it has even started. Also, beware: When
negotiating, remember that you need to consider
tomorrow’s business circumstances, as well as today’s.
Don’t get locked into a virtual straightjacket by basing
your requirements only on the needs of the present.
Tip: Many organizations have re-designed the
engagement model and commercial relationship to
incentivize both parties to behave collaboratively, thus
encouraging a “win-win” situation, as opposed to “usagainst-them”.
Process ownership equals responsibility (and
that works both ways): Time after time, experience
shows us that BPO clients are not leveraging their
service providers optimally. The most obvious
stumbling block is that although clients insist on
retaining ownership and responsibility for the entire
process, they do not always recognize that it also
makes them responsible for the outcome. Customers
that fail to connect the dots typically do not realize the
end-to-end process benefits available within their own
organization.
Tip: This abdication of responsibility to the
BPO, without entrusting it with ownership, leads to
disappointments and frustrations on both sides: the
client suffers lower than expected benefits/services;
and the BPO finds itself hampered by the client’s
inaction in resolving upstream process issues.
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2. 4.
Embed innovation in your contract: While outsourcing innovation is as hot a topic as ever, it is often difficult to
see where this is being applied. The root of the problem may well lie in the contracting and negotiating process, where
the relationship, and the culture that defines it, is cemented.
Tip: Ensure your contract includes a financial commitment on the part of the outsourcer to invest in innovation, or process
improvement. If it’s not there, the incentive on the part of the provider to drive change will be minimal, at least.
5.
Know what you want and prepare methodically: Carefully consider what it is you are trying to achieve.
Regardless of the model you end up choosing (SSO, BPO, or hybrid), the decision-making process should take a similar
approach and include similar criteria.
Tip: Don’t take a short cut straight to BPO without going through this process, even if your mind is already made up. You run
the risk of underestimating hidden costs and being overcharged, as well as, according to a Deloitte survey, a 39% chance of
vendor termination, a 61% chance of senior management escalations in the first year (53% in 2nd year), and a 15% chance of
reversing the operation to bring the function back in house.
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3. Understand what you are buying: Even after decades of outsourcing, many organizations still do not know the
difference between “strategic sourcing” and “tactical procurement”. You simply cannot contract for Finance or HR services
as you would for a ream of paper. Too often, the procurement of technical skill-sets to perform certain activities are
confused with buying services to manage the office landscape. This means you are overlooking significant opportunities to
drive strategic decisions.
6.
Tip: Strategic Sourcing is different. While some of the essential elements of tactical procurement, like vendor management
and sourcing, do overlap, there are some key elements that differentiate the strategic nature of sourcing:
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7.
Strategy & Relationship: The BPO vendor
relationship is a strategic relationship. Typically,
outsourcing will form part of a corporation-wide
transformation initiative, focused on driving efficiency
and effectiveness. Such a transformation is necessarily
long-term, and impacts not just the financials, but
also human resources, technology, sourcing, and
operations. The outsourcing element forms an
important part of this journey.
8.
Tip: Rather than assuming a rigid customer-vendor
relationship, view the outsource provider as a partner
on this journey – one who can leverage their extensive
process and functional expertise in support of your
corporate objectives.
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Project Management: Most outsourcing
operations are guided by a Master Services Agreement
(MSA). As most roll-out or transformation roadmaps
are not confirmed prior to the MSA being signed,
however, nor are the detailed functional requirements
known up-front, you need to allow for this in your
planning. Moreover, each roll-out requires a separate
“purpose of project” agreement (like a contract) or
even a contract itself. While the MSA will usually
present an over-arching reach on the relationship,
each engagement may entail nuances that are unique
to the roll-out, and need to be managed accordingly.
These may include different types of services,
resources or costs.
Tip: Instead of buying services one at a time, scope
and consolidate your plan for a larger span of activities.
Also, remember to incorporate a strong element of
project and change management in the program, and
review the MSA periodically.
www.ChazeyPartners.com

4. 9.
Operational Effectiveness: While the planning
and early stages of BPO are characterized by setting
expectations, the BPO vendor relationship takes on a
different dimension during the stabilization and
normal operational mode. Here, the emphasis is on
performance management, services management
(through SLAs/SPAs), process management, etc.
Issues, where they inevitably arise, need to be
positively and proactively managed and resolved.
Invest time in developing a robust structure to capture
these issues, have protocols in place for escalations,
and, most importantly, have mechanisms that address
repeated issues in a comprehensive way (root cause
corrections).
Tip: Another important facet of operational
effectiveness is to develop a structure that maintains
and updates policies, regularly provide refresher and
new training for the workforce, and build two-way
communication channels to update and engage teams
on critical issues.
10. Governance: The extent to which you have invested
in governance represents the single largest
differentiator between success and failure. Whether for
periodic relationship appraisals, creating a project
management office, managing operational risk, or
simply undertaking a new services implementation … a
governance council plays a pivotal and crucial role. In
extreme cases of dispute resolution, the governance
council becomes the key intermediary between the
operations and BPO vendor.
David O’Sullivan
Co-Founder & Partner
Chazey Partners
Tel: +353 86 384 8573
enquiries@chazeypartners.com
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ABOUT THE AUTHOR
David has over 20 years’ experience at a strategic and
operational level in driving business change and
transformation with multinationals in a broad range of
industries. He has established and optimized business
critical operations, implemented global ERP applications,
and outsourced and offshored other functions. As well as
co-founding and building Chazey Partners, David has held
a number of top level roles including COO of a Technology
company and Corporate Controller of a global Consumer
Goods company. He has also been at the forefront of
leading significant global change with companies such as
Whirlpool and Thomson Reuters in a number of capacities
including Project Director and global Head of Shared
Services.
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Since the 1990s David has led and driven global business
transformation programmes that have realised significant
cost, service and control benefits through the introduction
of new operating models in Finance, HR, Procurement, IT
and Sales.
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David is a Chartered Accountant and graduated from
Trinity College, Dublin with a degree in Economics &
Political Science.
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Tip: Make sure the governance council includes
representatives from operations, senior management,
and support functions as well as vendors, and that the
team is guided by a set of principles that are aligned
with the objectives of services delivery. The governance
council should be run according to a unique set of
objectives and mission.
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www.ChazeyPartners.com