Winning with Process Improvement rather than just BPO services

Large corporations typically offshore parts of business processes that are manually intensive but not business rules-intensive. A good example may be an order management system where the task will be to manually enter details from a purchase order received on paper into an automated order management system. Or where a monthly invoice from a vendor received in paper form may need to entered into an accounting system and a check prepared for payment.

Business rules-intensive processes like health insurance claims or medical billing may often be outsourced but not offshored because of the complexity involved or privacy/security concerns. It may be outsourced to a company that does this for a living and has the expertise to do this quickly and efficiently. There may not be a lot of cost savings involved with these processes as opposed to offshoring.

However, companies get into trouble just looking at the cost savings in offshoring and forgetting that your competition may be engaged in totally shortening the whole cycle -- perhaps introducing new Web-based or business rules technologies that enable them to completely automate the process. It may be a Web-based order management system that enables customers to enter their purchase orders directly into the company’s system, cutting out the paper-based parts totally.

Now the offshored parts of the business process may not actually be saving you money but costing you extra money compared to your competitor!

Baseline Magazine has a very interesting article in March 2007 Issue of their magazine: E-Payment Portal : When Time is Money. It talks about how Memorial-Kettering Hospital is shooting for having 90% of their Invoices from Vendors being submitted electronically themselves in 2007 on their web portal. In 2006 it was about 85% or so. Vendors and suppliers are happy to comply because they will get paid sooner, of-course! BPO service providers banking on providing services doing this manual part of keying in invoices are out of luck at least with this organization.

This is where it helps both buyers and sellers of BPO services to think about the whole business process rather than just the manual parts. Many BPO service providers come from the IT and software development services space. They can probably gain more in the long run in providing process improvements through their IT services and development rather than just the FTE (full time equivalent) compensation model for business process execution. They can bring in their knowledge of Web-based development or business rules engines to effect total process improvement rather than just supply cheap labor to do the manual parts. Cheap labor moves from country to country. Deeper knowledge and contributions to underlying process efficiency and effectiveness makes customers -- customers for life!

Something to think about!