How to Render BPO Sourcing Less Complex, by Engaging and Participating in the Process
Complex Nature
Outsourcing and Offshoring. Business Process Outsourcing. Managed Services. These terms mean to move service capability out of an organization, relying on it to work and be more effective while done by others, elsewhere. Sourcing of such services is clearly complex: you need to define the right service, process, organization and governance; you want to leverage the vendor to figure it out, but know you need to steer it too; you need to decide who to be part of the project, with which responsibility.
While a strategic sourcing professional should be at the core of any such endeavor, much can be done from the business side as well. It is the owner of a to-be-externalized service that has the most stake in it, so it is smart to not shy away from the task.
Often Done for the First Time
If your organization has dedicated strategic sourcing professionals, it makes a lot of sense to work with them from early on and let them lead the process. They can grasp and standardize your requirements, begin the mapping with existing services on the market, navigate among possible service locations and vendors and advise you along the way. Chances are, if you weren’t already part of sourcing such services, that some significant pieces of business work will be new to you:
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Definition of Service. Sure, you did that before. But unless you are already operating a charge-per-unit service based on a published service catalog, the work to get in on paper correctly, completely, consistently and including normal variations is no quick task. You will see.
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Process Analysis. This is also something you’ve done, but not in this way. With outsourcing, processes need analysis in terms of dependencies and required care in execution. A vendor will not magically prioritize like you do; you need to make your priorities explicit, and highlight areas where the vendor is free to propose and design processes.
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Business Case. The sourcing business case is a little special; every cost in the baseline which is not replicated in the sourcing case is expected to go away when the outsourcing is implemented. This is not a theoretical topic but one that requires up-front verification with budget holders.
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Contract Lingo. The type of language that needs to go into the contract is special. A lawyer will lead the contract drafting, but there is a lot you can do to help. The process of finding the right clauses helps both the buying and the selling teams to visualize and prepare for the new service. The quality of contract wording affects the understanding of the contract and future service management and governance. There is no need that business professionals get trained as paralegals but there are certain schedules you want to fully grasp, such as “Service Definition”, “Vendor Obligations”, “Customer Obligations”, “Pricing” and “Escalation Process”.
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Compliance. When sourcing for the first time in your organization, you will get impressed by the control function rigor around many topics. Cyber Security is just one example. You will need to learn a little bit about each such topic as you go along.
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Governance. The system for tracking and acting on contract performance needs to be built before it can be implemented. Broken down and specific accountability early on in the sourcing process pave the way for productive service design, negotiation, implementation and management.
Who Is Competent to Define Services?
It is good to start looking where the accountability for the service lies, with a process or capability owner, if you have one. Then, find people with interest, broad experience and good process imagination who are effective in interviews and meetings and as problem-solvers, people who document well and communicate clearly. As an accountable person, be clear with the sourcing team what you want and need. Say how you want to work, allowing them space to operate. Exert your accountability while charging them with responsibilities; move accountability to them (specific individuals) where that is possible. In selecting business team members, I generally don’t think experience in outsourcing (or offshoring) is critical – far more I believe that traits matter.
Make sure that whoever crafts the business of the transaction has autonomy, but is not alone. Review important parts as a group. Check critical elements, such as the business case and service deliverable definitions, with specifically accountable persons. Understand the design. Vendor innovation is great and often a driving reason for outsourcing, but make it a point to always understand processes and information handling, even when they are external.
The Vendor's Role
At some point of the process – after needs analysis, market analysis and high-level solution design – one or more vendors will be invited for discussions and one will be (pre-)selected. It helps to connect well with this vendor and to co-create the solution. Without duplicating work, a bit of overlap between what the vendor designs and what you design is good. That builds a foundation for identifying more and better solution options, so it is effort well spent. Consider also to work with open books, whereby each party’s business case is shared with the other, hence building appreciation for the other party’s situation.
Remember that just like you, the vendor is investing a lot prior to there being any business transaction. Both of you have committed in your organizations that the deal will happen, and be satisfactory. Be respectful of both your and their time and efforts.
Tying It Together
Much can be said about the best way to negotiate a deal, but this article is not about about that. Either way you go about it, the deal needs to come together and it needs to be good for both parties.
There is a common bias from the business side to be aware of. Did you ever think that:
“if we insist to have that in the contract then we will get it”
This is only true to an extent. If something is important, it needs work to ensure that it will happen (or not happen, if that is the point). This is especially true for topics relating to your accountability for compliance, which you can never outsource. As I wrote in another blog post, I think there generally is improvement potential in contract management. It’s also much harder to manage an unclear or unspecific contract. Any effort up front to write the set of agreements well is worth it. You certainly want to be clear and extensive about the vendor’s obligations, but you also want to be clear about yours.
Another caution to business stakeholders is the handover from sourcing to operating the service. Often it is unavoidable that the contract, once live, goes into management by a different team than the strategic sourcing team. When that happens, there needs to be a good handover. Contracts must be read, understood, and accepted.
Own It
These were thoughts about how you as business manager or owner can approach the complexity of strategic BPO sourcing. If it is a current topic for you, and if you are in between needing a consulting team and swinging it yourself, consider taking help from an independent consultant. For example, me. I am not bound by a need to sell services. I take your perspective. I have opinions and will state them, but also tailor the solution to you, where you are at and what you want and need. I bring experience and can help you connect with others, inside and outside your organization. If you want more manpower, I can scale up with others or be your sounding board when you source services from a larger consultancy.
I discovered my passion for service sourcing because of a great respect for money and people, people who buy, people who deliver and people who get serviced. Sourcing is truly complex and often does “fail” in one or more ways. Deals and people can develop a bad reputation because of avoidable lapses in attention and care in the sourcing process. It’s cool to be part of creating solutions, and to learn more about what works best.
I’d be interested to hear your comments or feedback and welcome you to contact me. I’m interested in your opinions and would like to get to help you professionally, if you have a need and my approach resounds with you. If you want to test first, to get a feeling for what it would be like to work with me. I wrote you this article: Do you need more you?
Feel free to contact me if I have made you curious. I would like to get to help you professionally. The first hour and a half of trial advisory is free, if you want to set us up for a video call. Book it here.
About the Author
I am a manager and business partner independently working for clients in the greater Zurich area and sometimes abroad. I have vast experience in service design, strategic sourcing, vendor governance and financial performance management. I am fascinated about well-functioning systems, with clear rules of engagement and respectful and interest-based collaboration and negotiation. My work includes business plans and business cases, outsourcing transactions, risk and financial frameworks and policies, and service transformation. I act as trusted advisor and leverage experiences gained in consulting (McKinsey, Accenture) and in industry (Zurich Insurance, UBS) in service delivery and capability building. A socially apt relationship-builder and confident communicator and negotiator, I interact with care and have a track record of achieving change. I energize from people, and care about both organizational performance and people’s health. Read more about each area, and check out my work.
