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Understanding the value of BPO: seeing the forest for the trees

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By Russell Ives

It is becoming more and more difficult for Australian companies to remain profitable and competitive in today’s economic climate. Both private and public organisations are faced with economic uncertainty, market complexity, heightened-competition and evolving consumer demands.

These factors make cost control and process efficiency a key priority for businesses attempting to remain competitive and survive. They also create the environment for an effective Business Process Outsourcing (BPO) strategy.

Many c-suite executives see BPO primarily as a means to achieve a reduction in bottom-line expenditure. Little do they realise that an effective BPO strategy can also heighten productivity, enhance customer service and improve competitive differentiation by implementing the following strategic measures:

1. Focusing on business outcomes rather than SLA metrics 2. Fostering an end-to-end approach 3. Creating a strategic partnership with the BPO provider 4. Realising the benefits made available by technology

Our research has shown that those organisations who have implemented a BPO strategy coupled with the above measures have achieved significantly better returns from their BPO initiatives.

Focus on business outcomes rather than SLA metrics

To achieve and sustain superior outcomes, organisations must shift away from simple service level agreement (SLA) metrics to a focus on business outcome metrics. Client organisations must understand the business outcomes and associated metrics they are trying to positively impact through BPO and then ensure that their provider is working to achieve the same goal.

For example, where the BPO service involves customer call activity, typical SLA metrics would include call time and average handling time, while the business outcome is overall customer satisfaction. In this arrangement the BPO provider can complete a satisfactory call and meet the SLA metric but this does not guarantee that the business outcome – customer satisfaction – has been met. Calls can be rushed or the customer’s needs can remain unresolved resulting in an unsatisfied customer.

Alternatively, if the call metric focuses on customer satisfaction – including efficient call times – its staff will be incentivised to resolve customer enquiries during the first call. In the long term, this will lead to less call time per customer (by eliminating the need for additional calls), and greater customer satisfaction – ideally contributing to greater customer retention.

Foster an end-to-end approach when managing the BPO relationship

There is a level of process excellence that can only be achieved through an end-to-end approach and a ‘one-team’ mentality. Successful BPO relationships know that both client and provider must work together on process consolidation, rationalisation and standardisation through the end-to-end value chain and across all business units and geographies. This includes processes within the client’s retained organisation, third parties as well as related processes that could potentially impact performance.

Take the case of a finance and accounting BPO relationship where the provider is asked to post all invoices within three days. This particular process is dependent on prior activity within the retained organisation which can affect the overall outcome. If, for example, technology and training problems mean the prior process is delivering poor quality material to the BPO provider, which in turn is rushing to meet the three day deadline, incorrect invoices may result.

High performers would look beyond the SLA and take an approach focused on the business process or outcome that’s being affected. In the billing example, the client and provider should jointly review the end-to-end process and develop an integrated approach to deliver the desired business outcome – customers paying the invoice on time.

Create a strategic partnership with the BPO Provider

Companies should see the relationship with their BPO vendor as a strategic element of the overall value chain. This shift from a supplier-oriented relationship requires a more collaborative approach, recognition of the integral role the BPO provider will play within the client operations, and typically builds on the trust developed through successful delivery performance. This highly collaborative approach requires a high level of trust and closer working relationships that allow the provider increased flexibility to optimise operations and the ability to ensure business outcomes are achieved.

Highly mature BPO relationships will then look to reinforce the affiliation by building performance incentives into the contract which enhance the alignment between client and provider objectives. The most successful strategic partnerships are achieved when the client enables and supports the provider in being successful.

Realise the benefits made available by technology

Mature BPO programs create an unrivalled source of innovation and a substantial competitive advantage for the client through the combination of operational excellence delivered by BPO and the application of new technology. These new capabilities are then delivered to the clients’ retained organisation, its customers and the BPO provider. Examples include cloud, mobility and analytics which are applied with BPO and deliver superior levels of customer service and competitive advantage.

Already widely embedded in BPO, analytics allows providers to work at a higher level of insight. Leveraging a wide range of transactional data holds important keys to improving operations, developing innovative products and serving customers more effectively. Put simply, providers with mature analytics capabilities can help spin endless amounts of data into insight-driven gold.

For example, a client in the private health insurance industry can use consumer analytics tools to understand and attract customers and then target health management programs as they are enrolled. By registering information about new and potential applicants throughout all customer interactions, a tailored, more customer oriented solution can be provided which will increase acquisition and retention.

Going beyond analytics, cloud computing can provide additional cost and flexibility benefits when applied with BPO. Whilst offering access to the latest system capabilities and allowing organisations to leverage on-demand resources, the cloud can substantially reduce IT operation costs and give organisations access to highly skilled staff that deliver services on the latest systems faster, and with greater transparency and cost control.

If Australian organisations wish to remain competitive and stay relevant in today’s market, they will be wise to consider the potential gains in efficiency, innovation and insights offered by an effective BPO program.

By refocusing on business outcomes, fostering an end-to-end approach, creating a strategic partnership and realising the benefits of modern technology, Australian companies can maximise the capabilities offered by their BPO program, ensuring the strongest ROI and the delivery of real business value.

Russell Ives is Accenture Australia’s BPO Lead.
August 12, 2013
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