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. And many companies, such as GE, are achieving significant success. Yet for many companies, outsourcing has presented significant problems as well. For every GE, there are other more problematic instances, such as Dell, which decided to bring some customer care services for American corporate clients back to the United States from India.
According to Dr. M.A. Ketabchi, a process design expert and chief technology officer at business process management (BPM) company Savvion, companies should first perfect their processes internally and agree upon desired performance gains, before outsourcing them.
Many companies agree. According to a recent CIO Insight survey of key IT priorities, 38 percent of those surveyed responded that optimizing business processes was a critical focus for their company in 2007. And sophisticated BPM solutions are quickly becoming the de facto platform for outsourcing.
Below Ketabachi shares five critical components for successful BPO, using TransUnion, a global leader in credit and information management, and its BPO partner, Intelenet Global, as an example.
–> Tip #1. Before Outsourcing It, Get Your Own Process in Order
BPO 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 its own internal processes first.
TransUnion implemented Savvion’s BPM solution, BusinessManager, four years ago to streamline its complex credit verification process for 30,000 daily credit reports. Its goal was to provide managers with the necessary visibility into each individual loan process to resolve bottlenecks and substantially increase overall system throughput for continued business growth.
In one year, TransUnion had reached a point where its internal process for credit verification couldn’t be improved further internally. So the decision was made to outsource it.
According to Ketabchi, “Once an organization reaches that point at which it’s no longer possible to gain further competitive advantage by optimizing its own execution of a business process, it may be time to outsource it.”
–> Tip #2. 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 – or even diminish. That’s where the promise of BPO comes in.
“A general rule of thumb is that a process should be iterated internally until the investment in improvement outweighs the return,” says Ketabachi. “For example, if you must invest $400,000 in the next iteration, but the aggregate savings of it is expected to be $200,000, no further improvements should be conducted internally.”
It’s also important to ensure that your documented performance metrics and control over the process can be maintained once it’s been outsourced.
–> Tip #3. Choose an Experienced Service Provider that Shares Your BPM Platform
To reduce the risk, time and expense associated with beginning the outsourcing process, it’s important to choose a BPO vendor who uses your organization’s BPM platform. That way, you can simply share the model and get the process up and running much more efficiently. And if circumstances or market conditions ever require it, you can easily pull the process back in-house.
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 have taken 20 people six months to get the same system up and running.
“In addition to choosing a BPO vendor who supports the same BPM platform,” comments Ketabachi,, “it’s important to choose a vendor that has expertise with the particular process to be outsourced, as well deep knowledge of your industry.”
–> Tip #4. Demand Performance Metrics, Visibility and Control
To ensure that your outsourced process achieves the business advantage sought, it’s 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’ll have the necessary visibility into the process, and control over its execution, to make adjustments.
With 750 agents working two shifts a day, Intelenet Global was able to give TransUnion 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.
Ketabachi suggests that organizations “clearly define all metrics using process modeler software, generate a document for sign-off, and ask that the BPO vendor to sign the document to safeguard the investment in the outsourced process.”
Among the most important KPIs, in general, are time, cost, escalation, quality and reporting.
–> Tip #5. Request Continual Process Improvement
The world’s most sophisticated BPO vendors 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.
By partnering with Intelenet Global Services, TransUnion ultimately reduced costs for its credit verification process by 25 percent while maintaining visibility into key processes. In addition, the company gained the flexibility to pull the process back in-house in the future should market conditions dictate.
“Designing an enterprise process is not a trivial task, and typically, once it’s designed and implemented, it’s extremely difficult to change,” says Ketabachi. “The beauty of process design and execution using a BPM platform is that changes can be made almost instantaneously, at any time – even if it’s already been outsourced to a third party.”
CIO Insight research on IT priorities for 2007: