BenefitsEngaged Workforce

The Three-legged Stool of BPO

To maximize HRO effectiveness, maintain a three-way channel of communications. Technology providers should be a critical partner of outsourcing discussions.

by Yvette Cameron

In every business process outsourcing engagement, there are three critical parties to consider: the buying customer, the service provider, and the technology provider. Like a three-legged stool, when all sides of the relationship are aligned and engaged, this triumvirate can deliver a strong platform to attain outsourcing business objectives. A weakness in one of these legs, however, just might drive your project—and you—right to the ground.

Today, we all know about the dissatisfaction and unprofitability of many of the first-generation HRO deals—contracts that were characterized by a lift-and-shift approach, which limited profitability and prevented many suppliers from leveraging true economies of scale and process optimization. While a provider’s technology landscape can make or break an outsourcing deal, many technology vendors were often not invited to the discussion in these early BPO relationships. Today’s savvy buyers, however, are starting to insist on not only stronger relationships between their service provider and their technology provider but also for an equally strong relationship directly with the technology vendor. These buyers understand that the strength of these relationships matter; in fact, they are a critical success factor for delivering on the following key value drivers:

• Cost Reductions. Collaboration between the service provider and software vendor can ensure both access to the most knowledgeable technology resources and the development of effective, sustainable processes early on in the provider’s lifecycle. Take the case of an ERP vendor collaborating closely with a BPO service provider who needed to move beyond the challenges of numerous lift-and-shift deals (and resulting customer-specific implementations) to a significantly more scalable approach. The ERP vendor provided the knowledge and skills necessary to support the design of new solutions and integration approaches, resulting in a model that was fully reusable across the service provider’s customers and which reduced the vendor’s interface costs by approximately 80 percent.

Subsequently, customers of the BPO provider realized nearly $200,000 in savings on average during the life of their contracts. Clearly, close collaboration can be good for business.

• Improved Process and Service. To strengthen their leg of the stool, today’s best-in-class enterprise software vendors have developed a dedicated support structure for BPO providers, enabling both customer and provider success at every step. From support in the discovery, evaluation, and blueprint development stages to implementation and ongoing operations, such dedicated support benefits downstream BPO buyers with optimized solutions and processes.

• Reduced Risk. BPO contracts often span five or more years. During this period, the buyer and service provider might not always have full visibility into current and foreseeable future capabilities of the underlying software. This knowledge is required to determine the optimal tradeoff between standard functionality and customization. Collaboration between the technology and service providers helps avoid design decisions, which will be usurped by future changes. It also helps ensure the right implementation decisions are made, which will improve future solution portability. A showcase example of success is the case of a global consumer products organization that undertook HR BPO. This buyer had an absolute requirement for its technology partner to participate in all aspects of the outsourcing project—from solution development to governance. The result is a BPO buyer who is well informed for better decision-making and mitigating risks. Such integration ensures the stability of this three-legged stool, maintaining balance across all legs of the relationship.

For a successful BPO engagement, it is incumbent on buyers and suppliers to ensure that all three parties in the relationship are aligned. BPO service providers early on should seek ongoing and close involvement and support from their technology partners as they pursue service evolution and transformation. Technology vendors must commit to delivering a best-in-class support structure to the BPO service providers—dedicating resources to help their partners to effectively leverage their technology solutions throughout the entire BPO lifecycle. Buyers should require that they have full transparency with their service providers in both the business and IT functions and look for proof points of tight collaboration in the technology relationship.

The growing body of research and case studies around this topic are evidence that where HRO is concerned, three legs are definitely better than two.

Tags: Benefits, Engaged Workforce

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