Speak the Same Language
19 November 2010 Cathy Tornbohm
When companies consider business process outsourcing (BPO), their expectations are often not met because of the prevalence of misleading buzzwords. Cathy Tornbohm of Gartner examines what companies need to consider, and what to avoid, when approaching BPO.
In the world of business process outsourcing (BPO), the current vogue for business buzzwords and phrases – 'innovation', 'transformation' and 'core or non-core' – should be banned from BPO or internal shared service discussions. Buzzwords set misleading expectations about what can be achieved. The argument about what are core and non-core processes could go on indefinitely.
It is typical for organisations to look to locations with lower labour costs to consolidate the business processes of customer management centres, finance and accounting, human resources, procurement and, more recently, legal and corporate support services. Generally, businesses use a potentially toxic and misleading combination of buzzwords and management theories that have been developed over decades, but are not necessarily applicable to today's process delivery options.
Firstly, when a company begins to debate the future of its business processes, it will probably hold a meeting to decide what is core and non-core.
A better way to debate this is to consider what can be bought in the market place that will provide the service better, faster or more cost effectively than the current process metrics.
The logical step, therefore, is to compile current process metrics of the effectiveness and efficiency of a process. For instance:
- How long does it take to do process X?
- What are the labour and system costs for using process X?
- What is the opportunity cost to the business for not being better at process X?
- What are the options for getting better at process X?
These are far more tangible and worthwhile questions than asking if something is core or non-core because the majority of an organisation's activities can be performed remotely by a third party.
Secondly, 'transformation' means change, and, when you outsource a process, it is a given that something will change, even if that change is minor or mundane.
Again, a buzzword is employed that is almost impossible to define beyond its actual meaning. Yet clients ask for transformation, and then complain when it doesn't happen.
It is far better to spend a little time understanding how better practice fits in the chosen process and understanding what it will cost in terms of internal change and the process outsourced to enact it.
A different perspective
The word 'innovation' is used in IT outsourcing to try and 'incentivise' an IT outsourcer to add technology to the outsourcing deal during the five to ten years of a contract.
The use of the word in this context has been transferred from the IT community to the world of business process outsourcing, with little success. This is because it is hard to define what innovation is and what it means to a business process. What happens in reality is that incremental improvements are made to the way the process is carried out. Therefore, measured and priced business process improvements are needed from a contract, not vague notions of 'innovation'.
Indeed, continual or continuous improvement is not always needed. For example, if a process takes ten days to complete, a company can choose to:
- run it using cheaper staff in a cheaper location, such as India or the Philippines
- run it and then get the provider to improve the process over time
- move to the provider's way of delivering the service and craft a new delivery mode.
However, it is important to highlight that this is a set of options that need to be evaluated based on the factors outlined as to what will suit an organisation for the next five years until other alternatives arise.
Cloud computing and paper rationing in the workplace, for example, would potentially allow for greater degrees of process automation and less need for heavily staffed remote process delivery centres.
Above all, when approaching BPO, don't let buzzwords confuse what is actually being bought.