Not all Business Process Outsourcing (BPO) arrangements are bad. There is always a lot of coverage in the press when a BPO arrangement goes wrong, and historically people have perceived that it is only a cost-cutting exercise that loses jobs overseas and reduces the quality of the service delivered.
For clarity, BPO is typically categorised into back office outsourcing, which includes internal business functions such as human resources or finance and accounting, and front office outsourcing, which includes customer-related services such as contact centre services.
However, BPO, when done right should be seen as a strategic asset for the business, giving you access to expertise and technology that would be impossible for you to afford on your own. The original premise of outsourcing was to allow you to focus on your “core” business and not to be distracted by trying to manage processes that add little or no value to your end deliverables.
Over the last few years, this boundary has become blurred as services that are often outsourced, like Customer Service, become a fundamental part of a companies offering to their customers; yet, businesses can still benefit from accessing third party expertise. Outsourcing is, essentially, “getting the best people to do the work, with the best tools, in the most cost-effective manner”.
As a very simple example, if you needed a large tree to be cut down, would you buy all the required equipment and risk the tree falling on your house or would you seek expertise with access to the right kit? While this is a very simplistic example of “outsourcing”, it makes the point- outsource when others have the ability to do it better, quicker and cheaper.
If we take a real-life example of Business Process Outsourcing, many companies face a dilemma for their Customer Service Operations. Today they provide a phone-line for customers to ring and it can be accessed during business hours. For years this was probably acceptable, but customers expectations are changing. A recent survey by Enghouse stated that 75% of customers see it as important that a company provides Online Communication capabilities (50% increase since 2014) and people expect to be able to contact a company in multiple ways (Phone, Email, Chat, SMS & Social media platforms) and at any time of the day.
For the company to react to this challenge, they either need to invest in a whole host of new technology to enable these new methods of interaction, resulting in the need to hire more staff to cover the increased hours of support, even though the volume may not have increased. Alternatively, they could look to outsource the process to a proven supplier whose only focus is in providing a great customer experience. A key thing to note is that that you are outsourcing a process and not a problem, so you need to be clear on what the desired result is for any element you outsource and that you remain responsible for the overall results.
Another example would be in an invoice processing function -if your volume of invoices has dramatically increased because your business is growing, should you invest in additional staff and new technology to allow you to handle the transactions quickly and efficiently? Or should you consider outsourcing to a specialist who already has the infrastructure (in terms of people, process and technology) to allow you to focus on capitalising on the growth?
Making these decisions are never easy and you need to weigh up all the pros and cons of outsourcing versus retaining in-house. At ERA, we have decades of experience in helping stakeholders make these decisions and then once it has been made, in helping them find the right supplier and getting the best value contracts in place. Get in touch with us today to discuss more about supplier relationship management.
Article by : David Rickard