Technology is the engine that ensures successful engagement, so why aren’t more buyers focused on it during contract negotiation?
There are way too many car analogies in the HRO industry’s literature. Purchasing a car is quite a different process from making an informed HRO decision. In our industry, you don’t get fined if you outperform or go faster than others nor do you have start-up problems on a cold morning. One commonality, however, is a key element in both environments: the importance of the engine that helps you to get where you want to be, today and in the future.
While most buyers will look under the hood of their car, technology in HR outsourcing is all too often ignored. You trust the dealer that the warranty covers it.
But despite what people might have been led to think in the past, technology choice, deployment, and use significantly enable service delivery and can make or break the viability of an HRO deal. Let’s take a look at how technology should be represented in HRO (re-)negotiations and requests for proposals (RFPs). The
IT considerations, i.e. what are the specifics of the underlying technology platform, should be reflected at the following three levels.
• Strategic Goals. These contain general requirements that the BPO provider must meet and be reflected throughout the providers’ response to the RFP. HRO is not the purchase of a commodity service, and consequently to deliver sustained performance it must rely on sound business foundations such as appropriately leveraged process automation and related technology. Not everything and particularly not all control of cost and quality can be dealt with in a contract. For instance, a part of your process cost will be related to your retained organization (people and IT).
Also, not all cost is fixed or directly related to business volumes, e.g. time and material expenses, governance costs, and one-off projects may add to the total. And if the profit margins of your provider are under stress, you may be faced with pressure on quality or a request to renegotiate. It is against this background that it is important for you, as a customer of these services, to understand how services are being processed and delivered. How your provider will accomplish the strategic and detailed objectives you require is influenced by the technology
choices they have made.
• Statement of Work. Here we deal with specific requirements that touch on certain aspects of the operations that are to be outsourced. The chosen IT solution will have a significant impact on the overall cost structure of the HRO relationship. This includes direct effects (e.g. how the chosen software drives IT costs lower) as well as indirect effects (e.g. how software solutions impact the cost of running processes). It is important that you get insight on the initial transition cost. You want to be up and running as soon as possible with as little impact on staff, processes, and operations as possible.
Proven technology and process change methodologies can support that, and the broader the functionality, the better coverage of processes, regulatory requirements, and reporting needs, which will help substantially to minimize the impact of transition. You may also expect your targeted provider to demonstrate how ongoing process execution costs are reduced through technology.
The cost of monitoring can become sizeable, as BPO processes span across retained and outsourced parts of the process and are particularly difficult to monitor. And clearly, it is important to understand how the provider will leverage the technology to reduce errors and ensure timeliness and accuracy of information.
Finally, your business environment is fluid, and so are your processes. Due to M&A’s, re-organizations and scope or scale adjustments to your HRO relationship, you may incur costs from a changing strategic direction. You’ll want to ensure that the underlying HRO technology platform is flexible and allows for these types of changes without impacting existing operations or the overall
cost structure.
• Detailed Requirements. Process maps, volumes, detailed roles and responsibilities, staff qualifications, etc. are typically lined out in the RFP appendices, including defining post-transaction, outsourcing management/governance/service level management requirements. At this detailed level, you may ask of your provider to explain how the chosen IT solution supports the requirements. What are the relevant capabilities and limitations of the chosen software solution, and what value does it bring to your processes? Best-practice HR support, industry standard business processes, increased productivity of your employees and managers, and real-time workforce information—regardless of whether system or staff are outsourced, off-shored, or retained—are the least you can expect from your HRO provider.
As with cars, it is not about cost alone. Quality and safety (risk mitigation) are equally important.
