Don't Give Your Process Improvement Over to a BPO

  • February 10, 2012
  • Scott

Adam Deane has once against sparked a discussion in his comments – this time about BPM and BPO – and he ends with the question: So why are BPO and BPM not talking to each other?”

I might not have commented on the post, but for reading Neil Ward-Dutton’s response, and then Evan McDonnell’s response. Neil points out that CapGemini’s BPO offering uses IBM BPM (Lombardi), Steria’s F&A uses Nimbus/TIBCO.  And AWD from DST.  So it looks like there are a few examples – perhaps not getting much press.

Evan’s comments were even more interesting to me, crediting BPO providers with some foresight.   He rightly points out that BPO has largely been “lift and shift”, and that they’re running out of steam (but trust me, there are still low wage geographies and polutions for BPO providers to exploit).  Evan goes on to describe the BPOs with foresight and the great benefits they will achieve by adopting BPM.

I have no argument with that – clearly any company with scale, and customers, will benefit from good leverage on a BPM suite/system/solution.  BPO providers are, after all, just companies like yours and mine.

But I took some issue with the idea that we aren’t hearing about their success because they’re keeping it secret, and wrote:

I file this under “I could tell you about our successes, but then I’d have to kill you” (smiley face)

BPO organizations are/were not exactly known for being innovators. I didn’t notice any of them “anticipating” the lack of cheap labor – their whole business was typically based on the premise that the cheap labor pool was virtually limitless. It is no surprise that they are late to BPM, late to process improvement (for real). And a BPO’s process improvement is not for the customer’s benefit, it is for their own. As a customer to a BPO firm you have to own your own process improvement.

You might think I’m crazy or talking nonsense. Does Apple leave it to their suppliers to figure out how to improve their processes or their manufacturing? Or do they go in there and make it happen at a detailed level? Don’t think you can just hand off and walk away. If you do, you’ll find something that went from differentiator (when you made it a core competency) to commodity (when you stopped differentiating on it), eventually turn into a weakness and a cost center (after BPO has set in for a couple years). Only by then, you’ll have lost the critical internal organizational expertise to run that outsourced process…

There are benefits to BPO, but big risks as well. Handle with care.

Of course, many people would argue that most companies don’t do this investment in process and people – but whether companies do or do not invest, it is pretty clear that they should be investing.

As for BPOs, trust me, when a company’s whole business model assumes that individual people are not valuable nor interesting, it is hard for them to suddenly retread for the world where skilled labor is more expensive, and choosier.  Instead, they migrate down the experience ladder, or the education ladder, until they find people who meet the right cost structure (often regardless of the impact on customer outcomes).

To the BPOs out there: invest in people and process, it is the best way to add value for your customers.  But to the customers of BPO vendors – own your own processes.  Improve them.  Don’t let all the benefits of process improvement accrue to someone else.

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  • Labor is typically the largest business expense and lowering that cost– whether by outsourcing to a BPO, crowdsourcing, or even by complete automation — will
    continue to be a significant factor as companies recover from the economic conditions and attempt to manage their business with less.  All this, while continuing to innovate, grow and respond to their customer’s servicing expectations in the new social and mobile world.   

    A BPO cannot survive the scalability and unique client and customer servicing requirements without making continuous process improvement and BPM a critical component in their business model.  I do agree that for process improvement, it should not be all about one
    or the other.  Speaking from personal experience, the best relationship between a client and a BPO (or any
    relationship for that matter) is one that is a partnership…with shared goals, objectives, and transparency.

    •  In most businesses, labor costs have already been reduced over the last 4-10 years in mature economies (without considering BPO).  There are pockets that are exceptional in the other direction (software engineers for example).

      Most businesses don’t grow by lowering labor costs, they tend to shrink.  As we’ve grown our own firm, we haven’t done it by reducing labor costs, we’ve done it by building value for customers.  However, many parts of our business could be considered “outsourced” that might have been done in-house 10 or even 5 years ago.  For the labor that you need to get your business done, I’d advise not focusing on labor costs, rather, focusing on output and results. 

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