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Five tips for failproof outsourcing

Dr. M. A. Ketabchi gives five tips for successful BPM implementation in BPOs

The business process outsourcing (BPO) market continues to grow exponentially—from $19 billion in 2004 to an estimated $146 billion in 2008, according to Forrester Research. Many companies, such as TransUnion, are already achieving significant ROI by outsourcing the process.

The point to note here is that companies need to first define their processes, and agree upon desired performance gains, before outsourcing them. Many companies agree with this point. According to a recent Information Week survey of key IT priorities, 67% of those surveyed responded that optimizing internal business processes was a critical focus for their company in 2006. Sophisticated business process management (BPM) solutions are quickly becoming the de facto platform for successfully planning and launching outsourcing.

Through my work with many companies to improve the efficiency of key business processes, I have defined a best practices approach to achieving success in business process outsourcing. Listed below are the five critical components for successful business process outsourcing.

• Before Outsourcing a Process, It Should be Modeled, Analyzed, and Documented: Business process outsourcing is a natural progression of a company’s process improvement efforts, but failures often result when a company rushes into a project without thoroughly streamlining the process first, or doing so together with its BPO providers.

If companies attempt to outsource a process before it has been articulated thoroughly, outsourcing strategies result in lower-than-anticipated returns—and a higher-than-expected level of risk. The reasons for this include much longer time to implement the process, inconsistencies between the implemented process and the desired one, and lack of clear understanding of the controls and metrics necessary to achieve business objectives.

The best way to start realizing the benefits of BPO is to model processes the way they work today, as well as proposed improvements. Using a Process Modeler, everyone in a company, as well as BPM enabled BPO providers can articulate the process, explaining in a step-by-step fashion the manner in which particular processes should proceed most effectively.

Once modeled, employees can visualize each process, see inefficiencies and potential bottlenecks, and identify areas for improvements. Then, all information about a process can be saved in a shared central repository, so employees can collaborate and share ideas to improve the process, thereby making the process more efficient.

This modeling should be enacted with BPM software as it plays a critical role in reducing the risk of BPO. Without a BPM software solution, companies face higher risk throughout the outsourcing process than if they had implemented a BPM solution.

It should be noted that BPM software here refers to software systems that not only allow processes to be articulated and analyzed, but also enables processes to be turned into executable applications. Ability to make processes executable and to provide visibility into and control over their execution is critical for the success of BPO.

Once process modeling and analyses are conducted, process control and metrics are defined, and process improvement efforts squeezed out the most critical inefficiencies from a targeted number of processes internally, businesses are ready for outsourcing. In other words, organizations must decide which processes can gain additional efficiencies through outsourcing to a BPO partner.

• Determine Which Processes to Outsource: The best-understood and most well-defined process can only be driven to a certain level of efficiency before the results flatten out. That’s where business process outsourcing becomes the only way to derive further efficiency and cost reduction.

There are four questions that must be answered before companies consider outsourcing a process:

• Has the process been defined, articulated and documented?
• Have the metrics and control over the processes been identified? Will these metrics and controls be satisfactory to manage the process when outsourced?
• Will selecting a BPM-enabled outsourcing partner provide the right real time monitoring and reports that include the metrics and will it provide ability for the client to control the process as needed to run the business?
• Are there business process outsourcers with experience in the process the company wants to outsource so it can leverage best practices for even greater efficiency?

If the answer to each of these questions is “yes”, then it’s time to outsource the process in question. The key point is that it is important to ensure that documented performance metrics and control over the process can be maintained once it has been outsourced.

Choose an Experienced Outsourcing Partner who Shares your BPM Platform: To reduce the risk, time, and expense associated with beginning the outsourcing process, it is important to choose a BPO vendor who understands and uses a BPM platform and ideally the platform is the same as your own internal BPM platform. This way, you can simply share the know-how and a common vocabulary with your BPO provider and have the process up and running much more efficiently.

Once you’ve decided that you have a candidate process which will gain from outsourcing, it is important to select the right partner for your specific requirements. Again, there are four critical questions you should ask before engaging in a BPO contract:

• Does the BPO have experience with the process we are looking to outsource?
• Is the BPO BPM-enabled?
• Does the BPO use the same BPM platform as we do or will they need to recreate our models and processes to fit their BPM platform?
• Will we always have visibility into and control over the process?

Critical to the success of any process is the ability to have complete visibility and control into the process even when it is outsourced. This means being able to continue to measure results using service-level agreements (SLAs), determining whether adjustments need to be made to improve the process efficiency, and implementing those changes.

Once TransUnion chose to outsource its credit verification process to leading India-based BPO vendor Intelenet Global, the system was up and running in six weeks with only three people on the job. Without the aid of a common BPM platform, it would take twenty people six months to get the same system up and running.

In addition to choosing a BPO vendor who supports the same BPM platform, it is important to choose a vendor that has expertise with the particular process to be outsourced, as well deep knowledge of your industry.

• Demand Visibility Into and Control of Performance Metrics: To ensure that your outsourced process achieves the business advantage sought, it is essential to work with your BPO vendor to define a set of metrics, or key performance indicators (KPIs), for the process. Through the use of a common BPM platform, you will have the necessary visibility into the process, and control over its execution, to make adjustments.

With hundreds of agents working two shifts a day, Intelenet Global was able to give TransUnion total visibility and control over the credit verification process. Not only does TransUnion have a complete view of the operation, but if a questionable credit report is reviewed by an agent in India, it can be instantly escalated to a US-based TransUnion officer.

In summary—clearly define all metrics using process modeler software, generate a document for sign-off, and ask that the BPO vendor sign the document to safeguard the investment in the outsourced process.

Among the most important KPIs are time, cost, escalation, quality, volume and productivity..

• Request Continual Process Improvement: The world’s most sophisticated BPO vendors such as GenPact, Intelenet Global Services, Patni and Tata Consulting Services have the ability to continually monitor their customers’ processes using a BPM platform. As improvement opportunities arise, the vendor can easily share the adjustment with a customer and rapidly make the change.

Designing an enterprise process without a BPM solution that provides comprehensive process modeling and analyses, and process asset management repository is not a trivial task, and typically, once it’s designed and implemented, it can be difficult to change. The beauty of process design and execution using a BPM platform is that changes can be made almost instantaneously–even if it has already been outsourced to a third party.

While many companies perceive ‘outsourcing’ to be synonymous with ‘overseas’ this is clearly not the case. Hundreds of leading companies around the world are reaping the benefit of business process outsourcing while still delivering high-quality service and generating customer loyalty. How? By implementing BPM software and articulating processes internally. By partnering with the right BPO partner—one who has BPM experience and know-how to effectively implement the specific process to be outsourced.

By following the best practices outlined above and deploying a BPM solution throughout an organization, companies can save time and money with an effective outsourcing strategy—while retaining control and visibility into the outsourced process.

The author is the founder, CEO, and President of Savvion Ketabchi@savvion.com