Business Process Outsourcing Must Be Managed Correctly

by Phil C. Solomon on March 11, 2012

in BPO

This is an interesting article highlighting the importance of developing a deep and open relationship between BPO partners and having mechanisms in place to ensure high performance outcomes.

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Many companies are not achieving all the potential benefits of business process outsourcing (BPO) by failing to implement proper management practices.

This is according to a new report from analyst firm Accenture, which surveyed 263 BPO service buyers and found that only 20 per cent could be classified as “high performers”.

Key management behaviours associated with effective BPO include taking a holistic approach to managing the BPO relationship, as well as a collaborative approach to governance, a grasp of strategic outcomes and a prioritisation of change management.

Other key objectives include appropriate use of enabling technology and appropriate use of domain expertise and analytics, in addition to a focus on wider benefits beyond simply reducing costs.

Mike Salvino, group chief executive for BPO at Accenture, said: “The results indicate that BPO arrangements deliver greater business value when the client and provider engage in deeper relationships and leverage practices that drive high-performance BPO.”

Gartner has predicted that the BPO sector will expand by five per cent this year, having grown by 6.3 per cent in 2011.

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{ 2 comments… read them below or add one }

Bob Wambolt March 13, 2012 at 1:45 PM

Phil:

You made some great points regarding how BPO organizations need to sell more than their ability to reduce costs for their clients.

Along with having the expertise related to the outsourcing solution being sold, the organization also needs the systems in place to perform appropriate analytics. For example, if I was a provider interesting in outsourcing some of my receivables, I would want information such as: What is your net collection ratio over a certain time frame by payor? What is considered best practice by the industry, and how do you compare, etc.

I have noticed that some BPO organizations may be good in one area, but could be average or less in other areas. Providers often just give their receivables via an alpha-split to a few companies, and then compare. You may be just comparing poor vendors to other poor vendors. It may be a better strategy to give 100% of the business to the BPO company that shows the most benefit. Some may be great at self-pay accounts but not so good at third-party liability, etc. BPO organizations need the tools the show the value delivered to the client. Providers also need tools to evaluate their BPO partners, otherwise, what is stopping the BPO organizations from removing resources from the account once they have had it for a year or so?

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Phil C. Solomon March 16, 2012 at 12:02 PM

Bob,

Outstanding points you have made in your reply. As you have noted, understanding strengths and weaknesses of BPO vendors and being able to track performance is paramount. Business intelligence (BI), is one of the fastest growing area of focus for RCM providers and it should be. Without a good understanding of what a baseline of performance is or what they should expect as best practices, it is analogous to bowling with a sheet covering the pins. It would be hard to pick up a split without knowing where the pins are!

Best,
Phil

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