Making a case for a tighter cooperation between service provider and software vendor -and why you, as a customer, should care.
Read this sentence twice: Technology is powerless…unless it becomes part of a nice ménage à trois. And if this sounds counter to conventional wisdom, I know what I am talking about. I work in HRO and technology, I am Dutch, and I share a lot of these ideas with an Italian colleague. Sound interesting? Read on.
While many early-generation HR BPO deals showed patterns typical of system integration and process reengineering, success in BPO is more than just process redesign and technology. It is about operational excellence. and as such it must combine the skills of an HR director with those of a COO and a CIO. Some BPO providers—pushed by clients and advisors, insufficiently supported by software vendors, and challenged by internal resource allocation—have failed to realize this point in the past. The result was sometimes a failure to leverage technology to fully harness the key drivers of BPO value: economies of scale, process optimization, and low-cost labor.
This explains a number of unsustainable deals that have left some customers dissatisfied. These situations were also detrimental to customers who have an interest in keeping their long-term options open. This future-oriented flexibility is heavily affected by previous technology choices. And if you think that the only ones to be dissatisfied were the customers, think again: a number of HRO providers have been losing money in these contracts, too.
For BPO customers to reach their goal of improving the quality of their operations while reducing risks and costs, BPO providers have to be structurally advantaged (in terms of labor arbitrage, economies of scale, and process optimization). It is essential that customers accept some standardization around best practices. This allows the provider to leverage a replicable model. This is good for lowering operating costs, hence service fee, as well as being a good starting point for future innovation, which is harder to do from a proprietary or highly customized platform.
The catch is that providers must also be able to transition the customer organization to that ideal state in which structural advantage is achieved. Given the strong influence of technology on consolidating those structural advantages, the relationship between provider and software vendor becomes all the more important. Traditional alliances, mainly oriented towards marketing or punctual system integration support, do not alleviate inability to either transform the current situation to an ideal stage or to operate the platform to minimize ongoing process costs and maximize quality.
In the past, this situation resulted in various problems—e.g., migration of historical workforce data, incorporating new or changed HR processes or tools—and made technology-supported innovation throughout the deal lifecycle cumbersome, costly, or impossible.
The better the triangle among customer, provider and technology vendor works, the less strain standardization will generate on the client. The IKEA project may serve as an illustration: SAP is on the steering committee of the HRO project as well, next to the provider.
A close collaboration between BPO provider and technology vendor, focused on the joint design of processes and technology deployment, would ensure the following advantages:
• Your HRO provider can implement technology at a lower cost if given the opportunity, resulting in improved costs and moving towards more sustainability. In addition, this would allow the provider to more quickly onboard customers or serve new, additional processes.
• The provider can optimize the outsourced processes and limit the strain on the organizations. In addition, advanced self-service and call centers allow for changes without necessarily changes to the user interface.
• Your HRO provider can achieve better business results at a lower cost by smartly leveraging automation, employing best-in-class processes, and minimizing customization.
Successful BPO providers make the most out of their technology investments by ensuring that these investments relentlessly serve their process operations needs. The best service providers also seek the investment and intimate support of the software vendor they choose for their replicable platforms. Customers are best advised to systematically verify the solidity of the service provider-software vendor relationship, for each is a crucial part of the service delivery they require.
