17/01/2017
Where is the challenge in outsourcing?
Selecting a service provider is just the start of the outsourcing journey. For many multinational or global organizations, ensuring a successful transition to the new service provider is a complex and difficult effort. The intent here is to describe practices that worked well and helped avoid the pitfalls.
Allow me to elaborate, every single step
As an outsourcing organizations, there are multiple layers of challenge & change, we must forsee :
1) Among global companies, the selection of an outsourcing service provider is the often the result of a global project, yet the implementation must be conducted locally. Depending on the organizational structure and culture, this can create tension between global and regional leadership. Strong local management of the transition is a key success factor in realizing the anticipated benefits, but this endeavor needs to be viewed within an organizational framework.
2) In early BPO contracts, the service provider usually would move work to its own delivery centers, without any staff transfer. In recent transactions, however, some service providers have been keen to build a regional staff presence, and this has created opportunities for meaningful transfer of staff to the service provider. Whether or not staff members are transferred as part of the agreement, it is vital to understand and comply with the many variations of human resources (HR) law across the globe.
In some cases, affected staff may choose to leave once communication of impending outsourcing spreads across the organization. This can impede the knowledge transfer process and subsequently impact the transition plan. Additionally, those staff members who remain in the organization may resist imparting their business knowledge to the service provider’s staff for fear of losing their jobs, leading to gaps in knowledge capture. Careful change management and communication are essential.
3) Global or multinational organizations rarely have common, standardized business processes across all geographies. Typically, regional and local variations of a so-called standard are in use, often with local variations in IT support. The very fact that the process is being outsourced is often the first indicator that process standardization and quality issues exist.
The contract with the service provider will include a description of the services to be delivered, usually couched in the “what” rather than the “how” style. Therefore, details of how the process is currently performed are normally excluded from the contract. The agreement may also include obligations for the service provider to improve or transform the process to a common, standardized best-practice. However much due diligence is conducted by the service provider before the contract signing, it is always a surprise for the provider to discover the extent of process variation and the difficulty in creating a new common process. With that in mind, the transition plan must include time for comprehensive knowledge capture and process documentation by the service provider.
4) The transition will have profound effects on organizational roles and responsibilities. These will primarily affect the function being outsourced (e.g., the finance department), but will also have a ripple effect on roles within other areas of the organization.
Managers of the affected staff members will no longer have line responsibility; instead they will be receiving the service from the new provider. Managers will not be able to “just ask” their staff about operational issues as they did previously, because there now is an “arm’s length” relationship with the service provider.
Old relationships have been broken and — thus — managers often feel disenfranchised. New roles are now required to interface with the service provider and create added value to the business. The extent of the change affecting retained staff cannot be underestimated. Extensive training and coaching may be necessary to impart new skills and competencies.
5) It is unlikely that formal service levels existed between an internal department and its customers. However, one of the major performance management tools for business process outsourcing is a formal service-level framework.
The new contract will describe how service levels should be managed and usually will include an initial set of service-level definitions and targets. The challenge for both client and service provider is to implement these in a practical and meaningful way. Although the client will have various contractual remedies in the case of no or poor measurement, it is often difficult to implement such measurement from the time service delivery by the provider commences. Difficulties arise through lack of clarity of service level definition, lack of appropriate process/system triggers that can be used to start/stop measurement, regional process/system variations and simply the fact that service levels have never been measured before.
It is important to stress that it must always be the service provider’s responsibility to set up measurement tools and produce quality reporting. The client may help with access to internal systems, etc., but must not allow itself to be dragged into doing the service provider’s work.
6) In most cases, the business process under review will be supported by technology of some form. This may range from a single integrated, global enterprise resource planning (ERP) system through various regional ERP versions to stand-alone software applications. Accessing this technology from the provider’s delivery centers is necessary for service delivery — this is the easy part of the transition.
It is likely that the service provider will plan to implement workflow technology within its delivery center to support its control of the process. Extending workflow into client functions (upstream and downstream of the provider-run process) can also offer benefits of transparency. However, it is easy to overcomplicate user requirements.
As always, it is important to keep it simple, and avoid “paralysis by analysis.” If process transformation and harmonization is to be conducted, it will have major impacts on the enabling technology. It is all too easy for the transition to get dragged into complex issues with ERP changes and release schedules, resulting in delays to process transformation. It is important to not allow a business change program to become an IT project.
7) It is easy to assume that a global or multinational company will have full business continuity plans in place and that these are regularly tested. However, this often is not the case, especially for business support functions such as finance or HR. Although the contract with the service provider will likely include provisions for business continuity plans, this is usually thought of as an IT issue, rather than a business responsibility.
This is generally due to confusion between IT disaster recovery and business continuity. The transition of internal service delivery to external provider-driven delivery has many risks. The client organization must see continuity of service as fundamental to the success of the transition; hence the need for comprehensive business continuity plans to be in place.
Only few things to be worried about, we'll cover solutions on my next update !!!!
