Over the years, business process outsourcing (BPO) has evolved where organizations are outsourcing tasks and services to an external provider. The Covid-19 pandemic brought new outsourcing developments and accelerated the adoption of BPO to overcome challenges and adapt new ways to conduct business.
The Economics In BPO
BPO has stretched to most parts of an organization’s business processes from sales, marketing, customer service, human resource, logistics, IT, finance and accounting, administration and manufacturing.
As competition is intense in the business world, more organizations are implementing strategic business methods to improve cost and time savings, efficiency, skilled expertise and business focus, which would mean improving the bottom line and delivering value to the customers and its shareholders.
The BPO sector continues to evolve, with cloud-based technology adopted at an increasingly higher rate. As a user, access to files and data can be done remotely, thus moving away from the organization to invest in hardware for data storage resulting in lower support and maintenance costs.
Decide on the BPO models that fit your business objectives. Carefully chosen models would provide the organization with operational and strategic advantages, continuous business improvement in business processes and formulation of innovative business strategy.
The following guidelines may help structure BPO contracts:
- Determine the scope of BPO service;
- Specify performance levels and targets; service availability, reliability, stability and upgrade. If appropriate, use current performance as a baseline to measure improvement.
- Determine the measurement criteria, the form and frequency of reporting requirements. Consider using “customer satisfaction” based on survey results to measure performance.
- Integrate the organization’s business plan and objectives. Make sure the contract reflects your business plan and goals and is flexible enough to accommodate changes.
- Structure payment provisions to reward performance, share savings and provide incentives, but if applicable and commercially practical, set liquidated damages for non-performance.
- Anticipate increases and decreases in scope or costs. In long-term contracts, structure pricing to cater for changes in scope and cost.
- Actively manage the contract and relationship. Don’t abdicate responsibility. Have a continuous and active focus on performance levels, solving problems and making improvements and shared objectives.
- Balance the desire to quickly cut costs against the need to define the parties’ respective responsibilities clearly.
- Anticipate and plan for the day that the relationship will end and that the services are performed by a different BPO service provider or “recapture” back to the organization.
The nature of the contract and the relationship between parties require careful consideration. The parties must resolve and manage important issues during pre-contract, contract execution, and post-contract. Contract management is crucial to ensure success in any BPO effort.