Book Extract: Get your BPO strategy right

Functionality, not cost reduction, should be the most important driver of your outsourcing initiatives

NINE KEYS TO WORLD-CLASS BUSINESS PROCESS OUTSOURCING
Author: Mary Lacity and Leslie willcocks
Publisher: Bloomsbury
ISBN: 9781472918482
Price: Rs 399

One of the many myths of outsourcing is that outsourcing cannot achieve innovation but strategic business outcomes. Our several studies have found plenty of examples to contradict this. Thus, in an accompanying study, 21 outsourcing arrangements were delivering IT and business process innovations, and seven of these were also delivering strategic innovations, significantly enhancing the firm's product/service offerings for existing targets, or enabling entry into new markets. For instance, we found an Asia-Pacific leisure company using providers to introduce technology and processes (to automate and thus speed up) roulette to increase revenues from high rollers. Similarly, a car parts distribution company introduced remote computerised car monitoring to pre-empt mechanical breakdown and provide positive response in terms of spares and repair through its providers.

Increasingly, client organisations are engaging BPO providers to help them with their strategic moves into new markets and new geographic areas, as well as to facilitate explosive growth through mergers and acquisitions (M&A). In short, world-class performers have a different mind set and ways of operating with their strategic providers.

On being allowed into the strategic tent, the provider account executive for a high-tech manufacturer recalled a discussion with the client's senior vice president who said: 'I may yell at you for the quality of your service levels or cost, but the things I talk about with my boss are the things that really matter and that's our ability to support the company's growth in evolving markets'. These were, in fact, the only priorities talked about even at the contracting stage.

Another provider executive at a software tools manufacturer gave an example of client collaborative practices and leveraging provider capabilities in a procurement deal. 'We knew they were a bit of an acquirer of companies and they said they did not have the piece of M&A due diligence about understanding how procurement would be impacted how prices would change, for instance. We (the supplier) became part of this kind of acquisition team and we evaluate contracts and we provided a preliminary report on the impact the acquisition would have on procurement. So, that was a recent innovation we implemented in the last 18 months', he said.

A further example is in a supply chain outsourcing relationship at a manufacturer. The provider said: 'What we are doing now is identifying three or four potential areas where they are having business challenges affecting their profitability and we're figuring out what kind of investments/projects we need to drive improvements to their profitability and then gainshare on the value we bring'.

When one client chose to relocate its headquarters to a new city, they looked for a provider who could recreate back-offices in the new location. The client chose a provider with a global presence and a proven track record of recruiting professionals to enable the move. 'So the move meant that a lot of people needed to be fired in our previous location and we needed to recruit people here in our new location. So it is a challenging move. We selected [the provider] to manage this kind of huge project - [the provider] has the brand image, trust and experience to manage this kind of project', said the client.

The key priority of world-class performance organizations is to focus on business and strategic benefits beyond cost efficiencies. We see top performers achieving this in numerous ways. Invariably, they set off with this initial goal, but they also anticipate the outsourcing experience as a living evolution for achieving improved business performance. This evolution is supported by adopting a cost plus innovation agenda. World-class performance businesses have global ambitions embedded in their evolutionary approach to outsourcing not only to optimise outsourcing services on a global basis, but also to use outsourcing to reconstruct their own business operations to function globally.

Excerpted with permission from Bloomsbury