Busiess Proess Outsourig: What Wet Wrog & Why It Is S ll ... · BPO is the delega o of opea os ad esposiili es of speifi usiess poesses o e e fu os to a thid pat seie poide. This

Busi ess Pro ess Outsour i g: What We t Wro g & Why It Is S ll Releva t

A Gi kgo Ma age e t Co sul g Pu li a o

HAMBURG | SHANGHAI | SINGAPORE | ZURICH

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A e a ea s of do i a g headli es a d up to

dou le digit ea -o - ea g o th, Busi ess P o ess

Outsou i g BPO as a topi has e pe ie ed a o e all

de li e i o po ate i te est of late.

Ho e e , BPO s ai e efi ts, a el e o o ies

of s ale, asso iated ost sa i gs a d the a ilit fo

o ga iza o s to fo us o thei o e usi ess a e as u h

i de a d as e e .

So hat e t o g?

I this ote, Gi kgo a al ses the easo s fo BPO s fall

f o g a e i the e e t past a d h it o ues to e

a ia le op o fo o pa ies.

Lars Godzik,

Founding Partner, Ginkgo Management Consulting

Introduction

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While the o ept of outsou i g has ee a ou d fo de ades, outsou i g as o l fo all ide fi ed as a usi ess st ateg i . I the su se ue t ea s,

a diff e e t fo s of outsou i g e e de eloped i the usi ess o ld, ith a o pa i g st ategies a d te i ologies.

As o e of the ke su - atego ies of outsou i g, BPO apidl gai ed e og i o a d e pe ie ed st o g g o th i the late s a d i to the fi st de ade of the

st e tu , ith u e s of thi d pa t e do s sp ou g a d o ga iza o s e a i g BPO odels o ld ide.

BPO is the delega o of ope a o s a d espo si ili es of spe ifi usi ess p o esses o e e fu o s to a thi d pa t se i e p o ide .

This a i lude a k offi e se i es a d fu o s, su h as Fi a e & A ou g, H‘, P o u e e t T a sa o Ce te s, o IT & So a e ope a o s, o f o t offi e outsou i g, hi h fo uses o usto e - elated se i es, su h as Call Ce te ope a o s. The p o ide i etu o s, ad i iste s a d a ages the sele ted p o esses

ased o defi ed a d easu a le pe fo a e ite ia. As u e s pa t- eli uish o t ol of these ele e ts, BPO usuall fo uses o o - o e ut i al usi ess

fu o s o p o esses.

BPO is ot to e o fused ith Sha ed Se i es. Both o epts off e o pa ies the oppo tu it to e t alize p o esses o fu o s.

Ho e e , i a Sha ed Se i es e i o e t spe ifi se i es, p e iousl p o ided ul ple pa ts of the o pa , a e p o ided to the usi ess a si gle,

e t alized sou e o g oup ithi the o ga iza o .

‘esou i g a d fu di g of the se i e is usuall sha ed a d the depa t e t suppl i g the se i es eff e el e o es a i te al se i e p o ide , o e ope a g f o a spe ifi all set up Sha ed Se i es Ce te SSC .

Business Process Outsourcing

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Be o d pu el e t alizi g o o solida g se i es, Sha ed Se i es a e o e u like a

usi ess he e the p o isio of the defi ed se i es o es at a ost, ualit a d effi ie o pe e ith e te al alte a es.

As BPO e ui es a su sta al i est e t, oth fi a ial a d o ga iza o al, it te ds to e ese ed fo la ge outsou i g deals fo usi g o

sta da dized o odi es. Also, the highe its le el of outsou i g atu it , the easie it is fo a o pa to i ple e t BPO.

Fo o pa ies ot illi g to take o su h high stakes, seeki g a o e g adual app oa h to outsou i g, o looki g fo a ui ke , less isk etu o outsou i g i est e t, i -

house Sha ed Se i es p ese t a alte a e oppo tu it .

E hi it : St ategi Se i e Ce t aliza o Mat i

This a le fo uses o BPO, its e efi ts, easo s h it has ot ee ee g o ga iza o s

e pe ta o s, a d ho o pa ies a i gate isks i ol ed i BPO ela o ships to i ple e t

a su essful BPO st ateg .

Decentralised

In-sourcing

Centralised

Out-sourcing

LocalisedBPO

RegionalBPO

In-HouseShared Services

IMany Businesses

Today

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• I p oved Qualit a d Delive E elle e. Thi d pa t p o ide s off e o ga iza o s a ess to a pote all la ge a d o e spe ialized tale t pool a d op ized, ho oge eous p o ess st u tu es. This allo s fo i p o ed deli e of fu o s a d p o esses th ough o siste t, e t alized ualit le els ased o

u ifo , p e-defi ed ualit easu es.

O ga iza o s a also e efi t f o a o e all i ease i t a spa e ega di g suppo t e ui e e ts a d a ea t to ha gi g eeds

o e apidl . This, i etu , has a posi e eff e t o the o e all fl e i ilit of the usi ess.

• Busi ess Rest u tu i g. Espe iall fo usi esses ith ed, ust o pa

st u tu es a d poli ies, BPO a off e the adi al easu e e ui ed to eak do these o st u ts a d p o ide the steppi g sto e

to a ds o ga iza o al eff e e ess a d lea e , o e ode usi ess o du t.

Benefi ts of BPO

Despite the o side a le a d o e u a a ted ega e p ess BPO has e du ed of late, the o ept

of outsou i g o - o e usi ess p o esses a d fu o s to a thi d pa t spe ialist e ai s a e a a e p oposi o to o ga iza o s.

Whe BPO p o esses a e a u atel defi ed a d i ple e ted a d the ela o ship ith the e do p ope l a aged, BPO p o ides a a ge

of u de ia le ad a tages.

• Cost Redu o s. Co pa ies a e pe t to see sig ifi a t ope a o al ost edu o s

he outsou i g i te al tasks to a spe ialist that uses est-i - lass ethodologies.

These sa i gs o u i fo of p o ess i p o e e ts, p o ess ee gi ee i g a d op iza o , a d e o o ies of s ale. ‘edu o of ope a g osts is o e of the

ai easo s fo usi esses to i ple e t BPO.

• I eased Busi ess Fo us. B outsou i g o esse al fu o s a d p o esses,

o ga iza o s f ee up esou es, su h as la o , i est e ts o i f ast u tu e, to fo us o the o e of the usi ess. The e pe ted esult of this i ludes highe speed to a ket, ui ke espo se es, a d i eased o e all usi ess agilit .

• Va ia le Cost St u tu e. BPO allo s a o pa to ha ge its ost st u tu e t a sfo i g a po o of its fi ed osts i to a ia le osts. Not o l does this ha e a posi e eff e t o a o pa s ope a g le e age a o, ut also e de s a ia le osts o e p edi ta le.

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“Hidden BPO Cost Drivers & Benefi ts”A gua l the la gest a a o of BPO is its a ilit to p o ide o ga iza o s ith sig ifi a t ost sa i gs o e o e o al usi ess odels.

Whe de elopi g a BPO odel, o pa ies ha e to e a a e of a u e of hidde ost d i e s that fo pa t of BPO set-up a d a age e t. These i lude addi o al osts fo et o ks, staff t ai i g, a d o u i a o , to a e ut a fe . O the othe ha d, he ua f i g the e efi ts of a BPO odel, effi ie gai s f o o solida o , sta da diza o a d task e-e gi ee i g ha e to e i o po ated, as ell.

I Gi kgo s e pe ie e, BPO a pote all p o ide o ga iza o s ith up to % ost edu o s o e o e o al usi ess odels, a d egula l deli e s - % sa i gs.

Background Information

Despite its sig ifi a t e efi ts a d ha i g e jo ed a o side a le a ou t of a e o o e the ea s, o e has to aise the ues o h BPO has falle f o g a e of late.

A e ei g at the fo ef o t of o ga iza o al effi ie de elop e ts a d do i a g headli es ith up to dou le digit ea -o - ea g o th a d posi e i dust fo e asts, BPO has e pe ie ed a

do tu i pu li e og i o hile usi ess leade s a e displa i g oole a tudes to a ds the topi tha efo e.

Sou e: Gi kgo A al sis

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BPO: Not Meeting Expectations?

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• Co plete Outsou i g of Co pete e. The u e o e easo h o ga iza o s fail i thei BPO e tu es is due to the fa t that the te d to o pletel o t a t out thei o pete e a d i tellige e i the ele a t a eas to the thi d pa t p o ide s.

This is highl da ge ous a d a ha e disast ous o se ue es as the o ga iza o loses all apa ili es ega di g the p o esses o fu o s i ues o . As a esult, the o ga iza o is ot i a posi o to a el

a age the thi d pa t p o ide a o e a d loses o t ol of the ela o ship.

As su h, a o ga iza o s fi d the sel es at thei supplie s e a d a e u a le to eff e t e ui ed p o ess alte a o s, su h as s ali g up o do , i teg a g e p o esses to esta lished o es, o taki g pa t of the se i es a k i -house. Fu o s a d p o ess a e o e disagg egated, a d-aid app oa hes a e used to suppo t e uests a d se i e deli e e o es su -sta da d, i e ita l falli g sho t of e pe ta o s.

• I ade uate P o ess Defi i o . BPO e ui es o side a le p e-go-li e eff o ts.

U like p o esses that a e a aged i -house, he e alte a o s a e dis ussed, ad-ho ag ee e ts ade a d te po a

o ka ou ds defi ed, o e the p o esses a e outsou ed, this is o lo ge possi le. It is o l ith sizea le eff o ts a d osts that

odifi a o s a e ade, a d u l these a e ealized the p o ess is i eff e e a d does ot deli e .

The efo e, it is ital to igo ousl defi e the i te fa es to se u e o ued ope a o s f o the po o of the usi ess to e outsou ed efo e it is ha ded to the p o ide , a d lea alig e t ith p o esses that a e to e ai i -house ust e e su ed.

Fo this, a e detailed defi i o of spe ifi a o s is e ui ed, to outli e lea p o edu es a d e e u o paths fo the thi d pa t . It is i po ta t to e e e that BPO is ot a p ag a p o le sol e ,

ut a ea e usi ess suppo t i st u e t. E e u o ithi BPO is i he e tl du a d si pl follo s p edefi ed steps. If these steps a e ot full p o ided, the p o ess eaks do .

The ai easo fo this is that BPO has, i a u e of ell-pu li ized i sta es, ot deli e ed the desi ed esults a d has falle sho t of e pe ta o s.

As a esult, usi esses a e sh i g a a f o the o ept a d a e a of i ple e g BPO. The easo s h BPO has failed to eet e pe ta o s, ho e e , is egula l due to usi esses is a age e t of

the BPO p o ess a d the ela o ship ith the se i e p o ide , as ell as a poo l defi ed o t a t ith u lea goals a d ta gets, athe tha a sho t o i g of the o ept itself.

I Gi kgo s e pe ie e, the follo i g a e the ai easo s h usi esses fail to e t a t a i u alue f o BPO odels.

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A glo al Fo tu e a ufa tu e e gaged Gi kgo Ma age e t Co sul g to op ize its ope a o s i APAC. It suppo ted sepa ate lo al e es ith la gel hete oge eous p o ess la ds apes a d a i g se i e le els pe fu o .

A e a i i al a al sis, Gi kgo suggested to eate a egio alized BPO odel, fo usi g i i all o Fi a e a d IT Ope a o s. Gi kgo pla ed, desig ed a d set up the odel, i ludi g the outsou i g a d e t aliza o st ateg , detailed se i e atalogue desig of the se i es to e outsou ed, a ket a d e do a al ses, a d e do sele o ia ‘FP.

Gi kgo defi ed the e ui ed SLAs a d supe ised the ig a o of the se i es to the thi d pa t e do , a agi g the t a si o a d t eaki g the se i e odel as e ui ed. As a esult, the a ufa tu e

su essfull t a sfe ed its se i es f o geog aphi all dispa ate e es to a e t alized, ghtl a aged BPO odel, a hie i g up to % ost edu o s i so e a kets.

Fi stl , a p o ide s ha e spe ifi st e gths that pla to a ds pa ula lie t e ui e e ts, e it a spe ifi i dust fo us

o tailo ed te h olog a d appli a o s. Without suffi ie t due dilige e, o ga iza o s

ill ot e og ize these e efi ts a d o t take ad a tage of the .

Se o dl , hile fo usi g o the lo est off e , usi esses f e ue tl do t u de sta d the

total ost of o e ship. O e p o ide s uote o l the asi fees a d do t s ope i

addi o al ha ges, su h as addi o al se i es o ha ge o de s.

• E essive Cost Fo us. At fi st gla e, the e see s to e li le that dis guishes a thi d pa t BPO supplie s – hi h i so e ases a

e t ue. O ga iza o s o e pe ei e the to e of si ila size, p o ide si ila se i es, ha e si ila geog aphi o e age, a d p o ide si ila app oa hes usi g si ila te h ologies. With see i gl li le to set p o ide s apa t, p i i g a e o e a ai diff e e ato .

As su h, usi esses p i a fo us is o e o ost as the sele t the e do ith the lo est

p i e. This a e det i e tal i t o a s.

Case Study

“Design & Creation of a Regional BPO Model”

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Not o l does this ea that a o pa a ot ha e hose the lo est ost p o ide

at all, ut it a also lead to a pie e eal, uddled app oa h to the BPO p o ess.

This f ust a o a e a oided if usi esses a e fa ilia ith o e all BPO e ui e e ts, i ludi g p i i g ele e ts, thei i pa t a d i po ta e, a d a e thus i a posi o to d i e the supplie a d p edefi e the off e o te t a d st u tu e.

• La k of Lo al P o ess I teg a o . Withi the BPO p o ess, a o ga iza o is e ui ed ot o l to defi e a e a t p o ess ap fo the p o ide , ut ust also e su e that i te al stakeholde s a e sa sfi ed.

This ea s that i te al usi ess o uit has to e e su ed fo e e p o ess of the

usi ess u its ith tou h-poi ts to the supplie . O e , o ga iza o s do ot ha e a lea o e ie a d full u de sta di g of lo al

p o esses a d p a es.

The efo e, so e p o esses a e u i te o all d opped i the t a sfo a o f o i -house to out-sou ed se i e p o isio a d, as a esult, i te al use s fi d the sel es o f o ted ith i o plete, f ag e ted deli e of se i es.

Thus, leads to a slo do o e e dis up o of ope a o s hi h a e ui e detailed e-

o ki g to e esol ed.

• Co plete Relia e o Ve do . A su p isi gl f e ue t easo h BPO e tu es fail is the u easo a le e pe ta o

so e o pa ies ha e that o e the thi d pa t p o ide has ee appoi ted the ill p o ide a all-i lusi e, o -f ee pa kage , a o e-stop shop to a agi g the e e e gage e t,

hile the u e a take a a k seat.

Needless to sa , this ai e app oa h is a e ipe fo disaste a d leads to e tai failu e.

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Risk Mitigation of BPO RelationshipsBesides the afo e e o ed p e e ta le easo s h BPO has failed to eet e pe ta o s, usi esses a take steps to i gate the isks i he e t to BPO odels.

Ma agi g sho t a d lo g te isk i a BPO ela o ship is at least as i po ta t as seeki g sho t te ost ad a tages f o the , a d a e a hie ed th ough a eful a al sis, p e ise pla i g a d lea l

defi ed ag ee e ts.

• Mappi g of Delive . While legal o t a ts a e e essa i a BPO odel, the should

ot e the ke d i e of isk i ga o . The p i a a to i gate isk is e e p epa a o a d appi g of se i e deli e . Busi esses eed to e og ize the e do s st e gths a d pla to the . This a ell ea that usto e ill ot get thei a ut o sult the p o ide a out the ost eff e e deli e odel. Ma i g the p o ide s est p a es a d i te al e ui e e ts i this a ill o e o e esult i op ized se i e deli e .

• A i o of Supplie E plo ees. A a ea hi h is o e egle ted he hoosi g

a supplie is staff ete o . As the BPO a ket g o s, the fi ght a o g p o ide s

fo ualifi ed tale t i eases, leadi g to high le els of a i o a d isk of loss of o pa spe ifi p o ess k o ledge.

Bu e s should ake su e that pote al supplie s take a pa t e i g app oa h to BPO th ough a de o st ated i te est i ke staff ete o . This a e a hie ed looki g at

a i o le els, ete o poli ies a d e e o du g site isits.

• Se u it Pla i g. The th eat a d pote al i pa t of se u it ea hes is a ke ele e t i the o side a o of a BPO ag ee e t. So u h so that so e o pa ies appoi t a dedi ated se u it a age to la ge BPO deals to ha dle ph si al a d s ste s se u it .

Co pa ies ust e su e that a BPO o t a t lea l outli es the p o esses i ol ed fo

safegua di g thei assets, spa i g s ste s, data, IT, ph si al se u it , staffi g a d disaste e o e , a d i ludes pe iodi se u it

audits.

• Futu e Pla i g. It is i po ta t that o ga iza o s pla e o d the i ediatel ta geted BPO odel a d o side pote al futu e de elop e ts of thei o . Co pa ies

ust e su e that the solu o a d te h olog off e ed is a le to s ale to ha ges i s ope a d is ot o e l usto ized.

This also akes it easie to ha ge supplie if eeded. Fu the o e, it is i po ta t to ha e

a adde du i the o t a t that p o ides the o ga iza o ith op o s at the e d of the life of the o t a t a d sho s a e it pla ,

e it to si pl e te d the e is g ag ee e t o e e take the se i es a k i -house.

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Mu h of the ega e p ess a d a e o BPO has e pe ie ed of late is u jus fi ed. I fa t, ost of it ste s f o a la k of igo a d is a age e t of the BPO ela o ship ai l o ehalf of the

u e , a d ould ha e ee a oided th ough ghte supe isio a d o e lea l defi ed o t a t ag ee e ts.

O ga iza o s should use these failu es as ase studies a d lesso s lea t. As the BPO a ket o ues to g o a d e ol e, so does its akeup a d fo us. While the BPO la ds ape o ues to e do i ated

the la ge e d-to-e d p o ide s, su h as A e tu e o IBM – a d this a ea is egi i g to see i dust o solida o – the e is a dis e i le g o th i s alle o pa ies fo usi g o ke usi ess p o ess

a eas t i g to uild a i he fo the sel es.

Si ila l , e , p o isi g a eas of BPO a d off shoots a e de elopi g, su h as K o ledge P o ess Outsou i g KPO , the outsou i g of suppl hai fu o s a d the o ea le i ease i ul -sho i g.

O e all, BPO is he e to sta . The e efi ts p o ided BPO odels a e too a a e fo o ga iza o s to ig o e. I addi o , as the BPO a ket e o es i easi gl sophis ated a d di e se, po e is shi i g a a f o the e do s to the u e s ho a e i a posi o to di tate thei e ui e e ts a d ha e a la ge a ou t of si gle o ul - e do s to hoose f o .

As lo g as o ga iza o s appl the e ui ed igo a d follo esta lished BPO est-p a es, the ill o ue to eap the e efi ts of su h odels. Su se ue tl , if thei BPO a e pts fall sho t of

e pe ta o s, the ha e o-o e to la e othe tha the sel es.

Summary

HAMBURG

Lehmweg 1720251 Hamburg

Germany

SHANGHAI

83 Fumin Road#08-56

Mayfair TowerShanghai 200040

PR China

SINGAPORE

30 Cecil Street #19-08

Prudential TowerSingapore 049712

Singapore

ZURICH

Sonnhalde 158808 Pfäffikon

Switzerland

GINKGO MANAGEMENT CONSULTING

[email protected]

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HAMBURG | SHANGHAI | SINGAPORE | ZURICH