Business process outsourcing is something many client organizations still don't understand. And in the rush to get the deal signed, clients often miss key fundamentals to constructing a BPO contract. If you're the client, what is it that you should avoid in order to have a successful BPO deal?
The Three Common BPO Blunders
Not getting all the stakeholders on board
The key is to identify who all the stakeholders are - both internal and external - and ensure that they are properly involved in the decision. If this isn't done, it is likely that the deal will not even be signed - disgruntled stakeholders can easily derail a complex and sensitive deal. And who the stakeholders are needs thinking about.
Not understanding the economics of the deal
The sustainability of all deals rests on their economic viability for both parties. If the deal begins not to work for just one party, it puts intolerable strain on the deal as a whole. The only way for a client to know whether a deal is sustainable is to understand how the supplier makes their money. If the supplier is taking over your function and doing it better for less, you need to understand how.
There are many methods at the supplier's disposal, including re-engineering, automation, and offshoring. It doesn't matter exactly how, but it does matter that there is a plausible way to deliver the services, charge a lower fee, and still make a profit. If there isn't, then the deal will either collapse or be renegotiated, and that is an expensive problem for both sides.
Deals that work for both sides need to be understood by both sides. There is simply no point in negotiating such a tough deal that the supplier can't make money - the only long-term result will be that either you don't get the service, or the supplier goes out of business.
Not anticipating future change
In modern business, change is constant. The key question: how will the deal handle future changes? Will a deal that is state-of-the-art in 2009 still be good in 2013?
It is a minimum requirement to have a structured change control process, but in itself this isn't good enough. We advise clients to include costed scenarios in the contract before they sign. That way everyone goes in with their eyes open - who pays for what, who takes what risk. You can't control the future
About the Author:
Ben Trowbridge is CEO of Alsbridge, Inc., the independent advisory firm that helps organizations conduct thorough evaluations of outsourcing options for operating their information technology, finance and accounting, and human resources organizations.