By Robert G. Williams
Most buyers of BPO services are initially delighted when they trim 30% of their costs on one process and 50% on another. Yet once those costs disappear from the balance sheet, new initiatives to accomplish new thresholds of productivity or revenue growth are necessary and required.
How do successful companies obtain year-over-year efficiency once the initial cost savings are realized? How do they achieve consistent performance and maintain an upward trajectory, even in a difficult economic climate that generally requires significant cost cuts?
Cash Is King
Cash is king. It always has been and always will be, regardless of economic forecasts. To that end, CFOs are required to make certain that their financial supply chain is optimized to ensure optimal cash flow. To ensure that companies have a steady cash flow to develop and grow the business, BPO providers deliver on goals which are not only focused on profit generation, but also on working capital management. It has become clear to many successful CFOs that they need to implement unified financial standards and systems to achieve business goals.
It is critical for BPO providers to engage in business relationships that assure successful partnerships. The practice of outsourcing business processes is maturing, and we are now able to better assess those factors that have led to successful or failed outsource relationships.
High on the list of factors that result in successful BPO relationships is choosing the right partner to support an organization’s business needs; specifically, a partner who values the strategic evolution of long-term BPO and the consistent inclusion of innovation through the endeavor. The ability to provide outcome-based solutions that encompass helping BPO buyers achieve innovation is fast becoming a crucial differentiator.
Three Forks and One Spoon
The data points to three decisive “forks” in the road to BPO outsourcing success: one at the commitment stage, a second at the analysis stage, and the third at the partnership stage. The cumulative effect of these three forks in the road is one big soup spoon — innovation on the part of the BPO provider. Decisions that companies make at the “innovation” juncture largely determine whether or not projects meet expectations.
Following are six signs that you have taken the correct direction at the “forks” in the road to success with your BPO program:
1. Back-loaded benefits. Good outsourcing relationships are built on the expectation of steady improvement year over year, not on one quick hit followed by a flat line. The benefits of outsourcing are obvious: lower costs, focused expertise, and access to the most relevant technology. And because outsourced solutions are driven by automation, business rules, and best- practice processes, they yield higher quality. As the use of outsourcing has matured, companies have realized that outsourcing of individual processes can achieve rapid and significant results with minimal risk. Many outsourcing firms have single-process solutions utilizing advanced technology and best practices to bring a true state-of-the-art solution to a client.
2. Broad outcomes. It is fine to target cost reduction as one of your immediate outsourcing goals, but once the easy dollars have been saved, what will you offer management as an encore? The biggest benefits in staffing outsourcing are not on the cost side; they’re on the income side – growth, cycle times, competitive advantage, revenues, and so forth. Those benefits start to accrue when you and your staff are freed up from A/R manual processes, allowing the BPO provider to come in, automate the processes, and handle the transactions, etc.
3. Relationships trump contracts. Over time, business outcomes and the quality of the client/vendor relationship become the critical drivers of BPO engagements. Contracts are static. Historical documents can frequently become a set of handcuffs, rather than useful business tools when business conditions change rapidly.
Rather than tie success to a bulletproof contract with dozens of cancellation and penalty clauses, it’s much more productive to identify a well-aligned, dependable outsourcing partner with a reputation for solid work, and then build the outsourcing relationship based on a commitment to the business outcomes at the core of the contract, plus a flexible, rational approach to problem solving. Think “partner,” not “provider.”
4. Improvement never ends. Continuous improvement over time requires investment – in new technology and training, for example. These investments, when made by the outsourcing partner, represent business risks. Experienced outsourcing managers have found that risk/reward incentives are good tools to use in driving performance. If you ask partners to invest, the rewards need to accrue to you both.
5. Active governance. Good partnerships are not hands-off; rather, they’re especially hands-on. When problems arise, as they will constantly, they are best dealt with quickly, not at the next quarterly performance review. Best practice in outsourcing requires heavy, if not full-time, oversight by the best project managers available who report to engaged executives and managers on both sides.
6. Innovation: the driving force. With BPO buyers and service providers both working collectively to achieve measurable business outcomes as part of organized and collaborative long-term partnerships, innovation becomes the glue that holds it all together. More often than not, enterprise buyers of BPO services enter into a service provider relationship polarized on the initial cost take-out from the “lift and shift” and gloss over the future initiatives they need to put into practice when they look to find new value through better processes, talent, and technology.
Robert G. Williams is Head of BPO Order to Cash Services for Capgemini.