Business Process Outsourcing has come quite a long way in the last few years, allowing companies to achieve unheard of levels of sophistication in their market offerings without adding the strain of a vast assortment of new disciplines onto their internal teams. In this article, we discuss BPO as a flexible tool for businesses to use and many helpful tips for doing so.
Outsourcing business processes allows a great many companies to concentrate valuable time and resources towards mission-critical processes within their own areas of expertise.
Calling upon other organizations for assistance in handling specific functions within your own company, such as call center operations, can prove incredibly useful if done correctly. However, getting the Business Process Outsourcing (BPO) approach to task delegation just right can be tricky in practice. This article aims to help by rounding up the best tips and resources on the subject for you to keep close at hand. Read on to learn how BPO works.
How Business Process Outsourcing Works
The technical details of business outsourcing extend far beyond the basics of one company hiring another to cut costs.
Business Process Outsourcing helps not only in reducing costs, but also in procuring more specialized talent for specific tasks, acquiring highly experienced second opinions at no extra cost and even improving on internal processes.
Thanks to decades of development among both vendors of BPO services and recipients of such, the industry has matured significantly, yielding streamlined solutions to a wide variety of business challenges. Among the specific types of outsourcing companies make use of are the following:
This form of BPO is considered the most drastic as it involves companies contracting the services of organizations located relatively far away.
Businesses that resort to onshore BPO narrow their provider options to those located in the same nation as themselves.
Nearshore Business Process Outsourcing involves the use of services provided by companies located closer to the recipient than offshore options would be. A US business outsourcing their customer support functions to a firm in Mexico would fit this designation.
Although Business Process Outsourcing can be handled in a large variety of unique ways depending on industry, function and scope, there are several simple concepts that a company can apply to ensure smooth execution. Read on to discover a few of these as well as a variety of useful resources for leveraging BPO to its full potential.
Business Process Outsourcing Tips
1. Get executives involved in the process.
“In order to create a successful outsourcing relationship, be sure that the executive team in your organization is involved in the decision. It’s critical for management to effectively communicate how outsourcing will not only reduce costs, but also meet the business’ overall company goals and strategic vision. By positioning outsourcing as a true benefit to business, this decision makes it easy for executive buy-in as they can see exactly how a partner outsourcing company will increase productivity and present an overall cost-savings for the organization. Take the time to show executives how outsourcing weaves in perfectly with your strategic vision and include them in the outsourcing planning process.” – Mike MacNair, 5 Tips to Improve Your BPO partner relationship, MacNair Travel
2. Map out growth goals ahead of time.
“Before your company starts the outsourcing process, it is imperative to align your strategic goals to your long-term business and financial plans, as well as pinpoint possible outsourcing partners that have the global presence that your company is looking for. For example, if a hotel chain has anticipated growth and expansion in eastern Europe over the next five years, a localized call center in eastern Europe may be the best strategic location to deliver services based on infrastructure and language requirements.” – Mike Mills, 5 Tips to Ensure BPO Will Help Grow Your Business, CGS Inc.; Twitter: @cgsinc
3. Never overlook IT capabilities.
“IDC predicted that 75% of software enterprises and independent vendors will include AI functionality in at least one application by 2018. Therefore, BPOs embracing new technologies are likely to be more future ready and have a stable outlook moving forward. With this in mind, frequent visits from a senior engineer from the off-shore vendor to the client site during the design phase can help ensure a clear project understanding. The same goes for you; visiting your outsourcing service provider can give you perspective you might miss from afar.” – Nicolina Savelli, 5 Tips for Choosing the Right BPO for Your Call Center, Fonolo; Twitter: @fonolo
For more information on how artificial intelligence can help your company overcome new obstacles, take a look at our white paper, How AI Improves the Customer Experience.
4. Keep quality at the forefront of your outsourcing considerations.
“Despite all the benefits of outsourcing, it is only a good thing if you’re receiving the quality you expect. Anything less than this will be a disappointment.
5. Take your time with BPO strategy implementation.
“Expand what you outsource slowly. Take a step by step approach before implementing a large scale strategy to outsource. Taking this approach allows you to make adjustments, and scale up or back as required as your company evolves.” – Felicia Smith, 6 Effective Tips for Successful Outsourcing, AugmentHR
6. Look for providers who need no babysitting.
“When you hire an outsourcing vendor to work on your business requirements, it’s a given that they are going to take care of everything from the scratch.
“There should be no room for sloppy or shoddy work, and they should be able to produce the results.
“Choosing a responsible vendor who will be in charge of the projects is a must-have so that you only need to supervise them minimally and let them take it from there.
7. Side with providers who are experts in your industry.
“Ideally, the service provider you select will have specific experience with the type of project that you’re undertaking. You don’t want to be somebody’s “guinea pig.” This is especially crucial when outsourcing complex technical projects such as software development. For example, if you’re looking for someone to develop an application for the iPhone, make sure they’ve actually completed commercial projects on that platform for other satisfied customers. This advice holds true for other types of projects as well.
“If you need a business plan for opening a retail store, you’ll get best results if the consultant you hire has verifiable experience in the retail sector.” – Keith R. Crosley, Top 10 Tips for Outsourcing Success, The Balance; Twitter: @thebalance
8. Allow for savings results to be lower than projections at first.
“Although many times companies decide to outsource because they expect to save money, bear in mind that it is very unusual for actual and projected savings to match. Particularly in the first several months of a partnership, plan to save about three quarters of your projected amount, due to adjustment, time loss, and other factors.
“Beginning an outsourcing relationship has costs that may not come to mind at first. For instance, when choosing the right vendor, you will lose time and may encounter fees from networking websites or other sources. Negotiating and drawing up a contract in some instances can carry legal fees, and continuing the relationship will have costs in time or possibly travel.” – Rob Rawson, 15 Essential Outsourcing Tips for Better Decision Making, TimeDoctor; Twitter: @manageyourtime
9. Avoid fixed-cost arrangements with BPO providers.
“Fixed cost projects can be attractive because you can set up a budget and you don’t have to worry about going over that. However, setting up a fixed cost can lead to several other concerns.
“First, vendors often charge up to 50% extra for fixed cost projects to cover possible project risks and delays. Second, every time there’s a change in the scope of the project — which is inevitable — you will have to go through a lengthy and strenuous negotiation procedure. Third, once a fixed budget has been established, your vendor may focus on hitting the set price rather than quality. In the long run, fixed bids prove to be more expensive and strenuous.” – Melissa Patterson, 5 Outsourcing Tips, Futuresoft; Twitter: @FutureSoftIT3
10. Ensure you have control over your project, products and services at all times.
“Your product is your baby, and when you hand it over to a large design firm, you no longer have as much control. You came up with the idea, passionately pursued your vision, and now, you’re ready to bring it to life. If you subtract yourself from the process at this critical moment, you won’t get what you envisioned, and you’ll probably regret it.
“You need to guide the project; push it forward; and always stay in the loop. This definitely doesn’t mean you have to do everything yourself, but you need to remain in control of each step.” – John Teel, 5 Tips for Outsourcing Product Development, Entrepreneur; Twitter: @entrepreneur
11. Look for long-term partnership opportunities.
“When you find someone that does good quality work, that communicates effectively with you, and that is affordable, it’s a more efficient use of your time to work with this person on an on-going basis rather than posting new projects and reviewing lots of bids for each project.” – Marc Andre, 10 Outsourcing Tips That Will Save You Time and Money, ProfitBlitz
12. Choose carefully between individual BPO providers and organizations.
“The advantages of an IT outsourcing agency are obvious. They usually hire highly trained professionals that can be easily replaced if they don’t meet your expectations. Many firms also implement ‘checks and balances’ and handle the entire product development process, thus mitigating any risks. With so many skilled engineers and experienced managers on board, they take on the responsibility to check all work and resolve any issues, if things go haywire.
“Two main hazards associated with hiring a freelancer are relying on a single engineer with no one to check their work, and the possibility of setbacks if your contractor fails to complete the project.
“You can’t expect one developer to be ‘a jack-of-all-trades’. Things happen. Issues come up. One possible solution could be getting a second opinion from an independent freelancer or even a couple of them. Having someone review your contractor’s work can substantially reduce the risk and save you big bucks.” – 5 Outsourcing Tips for Building a Better Business, Skelia; Twitter: @Skelia_company
13. Look beyond savings for greater BPO utility.
“If you’re outsourcing based solely on a cost comparison, you may be missing out on opportunities to learn from some of the best in the biz. By strategically hiring for outsourced services, you can gain knowledge that can lead to the development of new technologies or products.” – Marcell Haywood, The Strategic Advantage of Outsourcing: 5 Outsourcing Tips, Encompass; Twitter: @MarcellHaywood
14. Get details regarding your partnership in writing.
“In the world of business, it’s important that you get every agreement down on paper, with this one being no exception. You might have told freelancers or agencies what you want, but, unless there is a legally binding contract saying that they have to, you could run into trouble somewhere down the line. You should also make sure that important information is always written down so that both parties have something to look back on when necessary.” – Essential Outsourcing Tips For Your Small Business, IntelligentHQ; Twitter: @intelligentHQ
Business Process Outsourcing Resources
15. Avoid common mistakes like poor corporate governance and lacking incentive models.
“Common mistakes in outsourcing include:
- Failing to properly determine the motives, goals and objectives of outsourcing
- Concentrating on cost reduction rather than benefits and the value added
- Sub-standard corporate governance of the outsourcing program over time
- Failure to appoint staff to manage the relationship and contract
- Mishandled communications to staff, customers and other stakeholders
- Inadequate incentive models that fail”
– Rob Aalders, IT Outsourcing: Making It Work, Fujitsu
16. Leverage the outsourcing industry’s continued growth.
“Staff outsourcing is a young industry of only 25 years, facilitated by improving telecoms and IT. Recently the industry has seen a slowdown. Fears of negative growth abound, due to a dearth of new enterprise clients, and the rise of automation and Artificial Intelligence (AI). Contrary to common observation, there is huge burgeoning growth in the outsourcing sector, coming from the oft overlooked SME market.” – Derek Gallimore, The strong future of outsourcing: White Paper, OutsourceAccelerator
17. Outsourcing offers far more than lower costs in terms of competitive advantages.
“While accessing a lower cost of delivery is the initial driver to implement outsourced
services, there are a range of further significant advantages to be captured such as the
access to higher quality resources, constant technology refreshment, the transition from
fixed costs to variable costs, and improved systems integration as a result of the process
and technology knowledge embedded in a BPO provider.” – How to Select, Engage and Manage an Outsource Service Provider, Seaview Consulting
18. Risk and resource sharing are major positives to the BPO Approach.
“The Outsourcing Institute, a strong voice in the field of outsourcing, have built a top 10 reasons that a company would have to resort to such services:
- Cost reduction and operations control
- Improving company focus
- Gaining access to the various possibilities
- Free internal resources for other purposes
- Resources are not available within the company
- Accelerate the benefits reengineering
- Driving is expensive for some time
- Employment equity becomes available
- Sharing risks
- Capital injection”
– Adrian Victor and Alexandru Dumitru Bodislav, Outsourcing: The Concept
19. Use tools like the outsourcing decision matrix to assess task impact and importance.
“The [Outsourcing Decision] Matrix identifies the two most important factors that you should consider when you’re thinking about outsourcing a task:
- The strategic importance of the task. Does the task in question give your business a competitive advantage?
- The task’s impact on your operational performance. How much does the task contribute to the smooth running of your organization? And how much disruption does it cause if it’s done badly?”
20. Companies using an in-house offshoring approach can benefit from outsourcing as well.
“There are many types of partnerships on the menu, all aspiring to improve captive performance while keeping buyers in control. In one partnership model, providers deliver complementary services from their own locations, as part of an overall service chain. In other “hybrid” or “virtual captive” models, service providers are brought in to perform some or all of the work in the captive center itself. It comes down to structuring a partnership that leverages local expertise and resources to drive innovation and continual process improvement, while at the same time reducing costs. As such, an organization’s offshore delivery models tend to evolve over time; there isn’t necessarily a clear line between one model and another.” – Cliff Justice and Stan Lepeak, Captive Audience: How to Partner with Service Providers to Improve In-House Offshore Operations, CIO; Twitter: @CIOonline
21. Understanding the details of an outsourcing arrangement can prove beneficial to any company’s growth strategy.
“There are four main aspects to a typical outsourcing program:
- Program Initiation
- Service Implementation
- Final Agreement
- Program closure”
22. Understanding outsourcing models can help in selecting the most profitable approach.
“Tactical Consultancy is a generic term for a number of value-add services. The client’s business driver here is the access to expertise not available in-house such as UX design, Architecture and Technology advisory, Security assessment and so on. It is usually provided by an outsourcing vendor as a fixed price time bound activity, although for the uncertain R&D type of work, the T&M basis can be considered as well.” – Serhiy Haziyev and Halyna Semenova, What Outsourcing Engagement Model is Right For You?, NetworkWorld; Twitter: @networkworld
23. Streamlining communication with appropriate tools can minimize obstacles in BPO.
“Businesses reap diverse benefits through outsourcing. However, managing multiple outsourcing teams can become a challenge for many companies. When working with outsourcing teams, businesses face challenges in communication, collaboration and information sharing. To engage outsourcing teams personally is another challenge that hinders business productivity.
“Even if necessary technology and skills are in place, it is important to use the right set of tools to manage teams to keep a hold over a project’s progress and track your teams’ tasks.” – Mainak Biswas, 20 Tools to Help You Manage Your Outsourcing Partners, Indus Net; Twitter: @indusnettech
24. Pay close attention to the legalities of risk management when partnering with BPO providers.
“It is easy to assume that outsourcing will transfer all risks and responsibilities to the supplier and fully protect the customer from the consequences of failure. However, whatever the business area and whatever the terms of the contract, it is almost impossible for a customer to fully insulate itself and the practical remedies available may not be sufficient to recompense the customer. The primary remedies for a supplier’s failure to deliver outsourced services are payments (whether in the form of indemnity claims, general damages, service credits or liquidated damages) and termination. Although other remedies may be specified under the contract (for example step in) or generally available as a matter of law (such as specific performance), in practice these additional remedies are rarely practical or used.” – Dan Burge, Catherine Bingham and Amanda Lewis, Risk transfer in outsourcing contracts, Thomson Reuters Practical Law
25. Try adopting a vested outsourcing model to better leverage BPO.
“Focus on outcomes, not transactions. Conventional outsourcing agreements typically focus on negotiating agreements at a detailed per-transaction level, by paying either for a business task or on a per-headcount basis. For simple transactions with abundant supply and low complexity, a transaction-based outsourcing business model is likely the most efficient model. But real weakness in transaction-based approaches emerges when any level of added complexity, variability, and mutual dependency is part of the transaction. The transactional approach cannot produce perfect market-based price equilibrium in variable or multidimensional business agreements.” – Kate Vitasek, Vested: A Business Model for 21st Century Outsourcing, SSONetwork; Twitter: @ssonetwork
How does your business outsource its processes?