Guide to Business Process Outsourcing: Key Practices to Maximize Your Outsourcing Benefits
If you’re a business owner or manager you have probably heard the term BPO and how it can revolutionize your operations. There are several potential benefits to a business process outsourcing agreement. But the potential risks might be what’s holding you back from taking the plunge. Without a proper strategy, and understanding of the pros and cons your outsourcing processes can easily backfire causing more harm than good.
Best Practices for Business Process Outsourcing (BPO)
So how exactly do you make it work for you? Let’s explore some of the best practices we have gathered for you to implement in your outsourcing venture. These practices will help you achieve the maximum benefits of business process outsourcing and avoid common mistakes.
Clearly Define Business and Outsourcing Strategy
Before you plan to outsource an operation it is crucial to identify your need to outsource. Therefore it’s important to develop an understanding of your core competencies and how the work flows within the organization. Mapping out your business strategy helps identify capabilities that permit your firm to make the best response to market opportunities. The remaining non-core processes that support your key competencies can be outsourced.
Factors that you can take into consideration when choosing which business process to outsource include:
- Goals: What do you aim to achieve by outsourcing?
- Internal project sponsor: Is there someone to lead this project internally?
- Business case: Does outsourcing make sense for your business?
- Timing: Is now the right time to start outsourcing?
- Unit culture: How will the culture of the team being outsourced impact the process?
- Workload: How much effort is needed to make this transition successful?
- Management expectations: Are senior leaders aligned with the plan?
- Risks: What potential risks could outsourcing pose to your business?
A part of this process is to also identify your KPIs. In this case, specifically, the ones that are relevant to your outsourcing needs. Once you have established benchmarks for each KPI to measure progress, monitoring them regularly will allow you to make data-driven decisions. Having well-defined goals helps you ensure that your provider is meeting your expectations and making a contribution towards your goals.
Establish a BPO analysis team (BAT)
One of the best practices when considering outsourcing is the establishment of a BPO analysis team (BAT). BAT is a multidisciplinary team usually formed within an organization to assess BPO opportunities by conducting analysis of business operations. The team is established by the organization’s top executive team which then leads all the BPO projects. Establishing a team helps streamline the outsourcing process in several ways:
Current State Analysis
The first performance task for the BAT is to conduct a current state analysis, categorizing and mapping the internal business processes. This helps reveal hidden problems and inefficient procedures that have become entrenched within the organization.
Identifying BPO Opportunities
Understanding the current state allows BAT to develop a process map of the organization. Business Process Map (BPM) consists of tools and steps that can be helpful to identify outsourcing opportunities.
Developing a Business Case
Based on the findings of the opportunity analysis, BAT develops and presents a business case. A business case includes recommendations on business operations that are suitable for outsourcing.
Research Your External Providers Thoroughly
Companies often outsource complex business processes for which it is difficult to find specialized business process outsourcing service providers. This often leads them to hire responders who might not be competent in the area of need but want to expand their competencies. Therefore, it is crucial to look beyond the experience and make reasonable judgments for a proper selection of a BPO partner.
Research Qualifications
Establishing required qualifications for standard items like experience, pricing or location is a crucial step. However, it is also important to focus on strategic items such as their work culture, decision-making style, reputation, customer service, and technical capabilities.
Request For Information (RFI)
To further assess their qualifications, you can directly gather information from the candidates by requesting information. RFI is a questionnaire-type survey sent to vendors to assess their interest in the project.
Avoid Outsourcing Simultaneously
One common mistake businesses make is outsourcing all their critical tasks immediately after hiring the business process outsourcing service provider. This often exposes them to risks of failure due to the vendor’s overconfidence in its abilities. To mitigate risks it is essential to start with smaller tasks and then gradually scale up based on the third party’s performance.
Identify and Prepare for Potential Risks
Just like it is for any other business strategy, risk management is also an essential part of BPO. The decision to implement a BPO solution has several risks that need to be identified through a risk management plan. Some of the risks that can be associated with BPO include:
- Human capital risks
- Project risks
- Intellectual property risks
- Legal risks
- Vendor organizational risks
- Value risks
- Force majeure risks
Preparing for potential risks in advance can allow you to prepare contingency plans to address them effectively.
Implement Good Security Measures
Outsourcing processes often involve the sharing of critical intellectual property, which is a major concern for most organizations. A business process outsourcing strategy must consist of security measures to safeguard against data breaches and cyber threats. These measures include ensuring that your service provider complies with the global security standards to protect your data from unauthorized access. Here are a few measures you can implement to safeguard your data:
- Conduct regular security audits
- Use encryption protocols
- Implement non-disclosure agreements (NDAs)
- Set up firewalls
- Set up intrusion detection systems (IDS)
Maintain Open Communication and Transparency
The key to a successful outsourcing venture lies in open communication and transparency. Articulate your expectations of the service with the provider thoroughly. When discussing your strategy, pinpoint all the necessary aspects of the agreement and prepare a detailed service agreement.
This should include the range of services being provided to the terms of its provision, estimated timelines, and performance rates. Mutual understanding of the expectations allows for less chances of misunderstandings and disputes.
Continuous Improvement and Adaptation
Not all business process outsourcing projects work as planned, nor do your business needs and market environment stay the same. Therefore, it is crucial to regularly review and update your outsourcing strategy. Observe what processes work or don’t work for you over time and implement changes based on the identified areas of improvement. This will allow you to maximize the benefits of outsourcing and position your organization for long-term success.
FAQs
What is BPO with an example?
Business Process Outsourcing (BPO) is the practice of contracting external service providers for internal non-core business operations. Such as hiring an external party to manage customer support, payroll processing, or IT services.
What are the types of BPO?
There are several types of BPO depending on the nature of the services provided such as; front office or back office and the location of the outsourcing partner like onshore or offshore BPO.
What is a BPO company and how does it work?
A BPO company is a firm that provides outsourcing services to other companies for various business operations, allowing them to focus on their core business activities. These companies operate on a contractual agreement to manage specific tasks for them.
To navigate the world of business process outsourcing you need a strategic approach that focuses on planning, communication and continuous improvement. Additionally, look out for emerging BPO trends that may prove to be helpful. The potential benefits of business process outsourcing are clear–increased efficiency, cost and time savings, access to specialized talent and more. By following the practices outlined in this blog, you can access all the benefits of outsourcing effectively through the right processes.