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Success Pyramids of BPO

Jagdish Dalal
Thursday, June 26, 2008
Jagdish Dalal
Even though Business Process Outsourcing (BPO) is becoming common place, and many service providers are competing in the marketplace, there is still a lack of understanding as to what creates success in the marketplace. However, it is evident that businesses are getting more savvy about outsourcing and are gathering more intelligence on prospective service providers before entering into outsourcing agreements. Managing short and long term risks is as important as seeking short term cost advantages from outsourcing. As a result, businesses are looking at providers who can offer more than just low cost labor options. A successful BPO engagement involves consideration of various disciplines and expertise for long term success. In fact, it is these disciplines that form the basis for due diligence when selecting a BPO provider and provide for control over the life of the agreement. The location from which the services are provided – on or off shore – has no bearing on the success or failure of a BPO engagement. If anything, offshore providers have to be more demonstrative of their capabilities and competencies to win and sustain the business. There are two models that are necessary to create a successful BPO environment. One is needed to ‘win’ the business and the second is needed to ‘manage’ it effectively.

1. Winning the BPO Business

The accompanying Figure 1 shows what I call the ‘Pyramid of Success’ for winning a BPO engagement. Successful BPO providers build and maintain their competencies in these areas. As is evident, the pyramid of success depends on many dimensions in addition to access to skilled labor. One face of the pyramid identifies the skills and competencies required to ‘win’ the business; the other face shows what it takes to keep customers satisfied and create a profitable environment. As can be seen, they are totally aligned in their value to a BPO engagement.

Skilled Workforce and Change

Even though labor cost is a part of the basis for an outsourcing engagement, unfortunately, some view it as the key differentiator for winning the business. Offshore outsourcing with a labor rate differential may look attractive at first blush, but it does not form the necessary foundation for a successful long term BPO engagement. A skilled workforce requires a company to also have an effective change management capability. It addresses the issue of effectively managing the recruiting, training, or transferring of employees from the business to the service provider and deals with the human issues related to that change. Change management is not a one time intervention but an ongoing discipline in managing the workforce changes as they occur through the life of the agreement. For some offshore providers, this is a critical element especially when there is a high turnover of employees or dramatic shifts in business processes.

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