8 practices for high-performance BPO

Benedict Hernandez
From the desk of

SINCE its inception in the 1990s, business process outsourcing (BPO) has become standard operating procedure across most companies and industries. But as companies’ comfort levels increase based on initial success, so do their expectations. With the performance bar raised, BPO is becoming a more complex endeavor, going deeper into the value chain of client organizations.

Until recently, companies were looking for something relatively straightforward from a BPO relationship: greater efficiency, streamlined operations and lower costs. Today, they expect more: business insight, innovation, industry expertise, solutions adapted to more individualized needs, and a commitment to continuous improvement. As such, the BPO industry is moving to a “cost-plus” value proposition that can deliver strategic business impact, not just operating cost reductions.

What exactly is the “plus” in that proposition? What separates the best-performing BPO relationships from the rest? Accenture set out to address these questions in a new study, conducted in conjunction with the Everest Group and The Outsourcing Unit at The London School of Economics.

The study found that the full business value from BPO is being realized on a relatively limited scale due to antiquated behaviors and practices. The majority, about 60 percent, are trapped in an outdated mindset that views BPO primarily as a tactical cost-reduction tool. Just 20 percent of those surveyed are classified as high performers and are fully capturing business value from their relationships. These organizations are the practitioners of high performance BPO and they demonstrate best-in-class behaviors and practices across eight areas:

1) End-to-end approach: Holistically managing the scope of the BPO relationship
For those that are most successful, the entire, end-to-end business process is within scope of the BPO arrangement, including elements managed within the client’s enterprise, those run by third parties as well as related processes that may impact overall performance. Service level agreements (SLAs) are important, but both client and provider work together to focus on overall process excellence and the business outcomes to which the SLAs are simply an indicator.

2) Collaborative BPO governance: Adopting a partnership attitude
The disparity between high performers and their peers is particularly evident in this practice. Nearly 85 percent of high performers consider their BPO provider to be a strategic partner; by contrast, only 41 percent of typical performers operate according to that mindset. Collaborative BPO governance is much more than a set of committees or a schedule of meetings; it also comprises the attitudes toward the relationship and the behaviors that strengthen it and drive both parties toward higher levels of performance.

3) Change management: Managing the effects of change during transition and beyond
The gap between high performers and typical performers is large in terms of attitudes toward change management, but especially when it comes to executing a robust change management program. Eighty-eight percent of companies working within a high-performance BPO relationship regard change management as important and execute carefully planned change programs, compared with 62 percent of typical performers.

4) Value beyond cost: Focusing on benefits beyond cost reduction

In high-performance BPO, both client and provider acknowledge the importance of cost reduction, but do not see that as the prime motivation. This mindset manifests itself in several ways, including how the business case for the BPO program is constructed.

Two-thirds of high performers focus on the potential value of business benefits beyond cost alone when creating the business case, compared with only 26 percent of typical performers.

5) Business outcomes: Targeting strategic outcomes, not just more efficient transactions

High performers aim for specific strategic outcomes from a BPO arrangement that can be measured and that can help achieve competitive advantage. Beyond that, they are also willing to forge deals such that an outsourcing provider commits to the achievement of those outcomes—paying a penalty if they are not met or sharing in rewards if they are.

High performers see more potential from the relationship to achieve greater ends: 56 percent are looking to achieve competitive advantage through BPO, while only 28 percent of typical performers aim for that goal.

6) Domain expertise and analytics: Contextualizing data to create business value
As BPO evolves and matures—and, as just discussed, as it enables richer and more complex business outcomes—the field of providers is beginning to separate out in terms of their ability to provide new levels of value. Part of that value is in the ability to use deep domain and industry knowledge—and the ability to analyze data about the functions and processes being outsourced—to more predictably drive business outcomes.

7) Retained organization transformation: Enabling the retained organization to perform effectively in the new environment

High performers place as much importance on internal transformation as they place on transforming the outsourced processes. More than world-class outsourced processes is needed; companies also need to align the retained organization around the outsourced delivery model in terms of roles, responsibilities and requisite skills.

8) Technology as a business enabler: Driving operational improvements and business innovation

Technology should be a source of innovation and advantage, not just the infrastructure of delivery. For example, 40 percent of high performers consider technology provided by the service provider to be an important component of the BPO relationship, compared to only 27 percent of typical performers. Effective technologies and architectures contribute to cost reductions and more efficient operations by streamlining the systems environment and reducing the number of systems involved, often standardizing the technology environment on a unified, centralized platform.

It’s clear there’s a significant opportunity for organizations to capture greater business value from BPO, adopting the behaviors and practices associated with high performance to build new competitive strengths. The research clearly shows that high-performance is not dependent on organization size, industry, geography, tenure or business function involved, making high performance attainable for all organizations.

It’s the manner in which the outsourcing arrangement is planned, established, managed and monitored that matters. Those that continue to view BPO purely in terms of transactional processing and cost will be competitively challenged.

(The author is the BPO service delivery operations lead of Accenture in the Philippines, responsible for the delivery of voice and non voice BPO services from the Philippines to top clients worldwide. He was chosen one of the country’s Ten Outstanding Young Men for business leadership in 2006 and was awarded the ICT Champion Award by the Department of Trade & Industry in 2008.)