Metrics Measure Performance
One of the reasons BPO outsourcing can provide economies of scale and leverage (which gives outsourcing its power) is because the finance and accounting function is similar across both industries and companies. Much of the process has been standardized. I’d estimate as much as 80 percent of the finance and accounting process is similar for each buyer. That means buyers have a limited amount of customization to make BPO fit their unique needs.
This significant standardization makes BPO boundaries relatively clear. The Outsourcing Exchange provides our buyers with detailed process descriptions that have definite process boundaries, so there will be little or no misunderstanding later.
The second important consideration is the metrics associated with performance. As I mentioned in my book, you get what you inspect, not what you expect. Metrics and service level agreements (SLA) provide a quantifiable yardstick for the outsourcing relationship. They show buyers they got what they paid for.
Governance becomes important once the outsourcing relationship begins. Managing an outsourcing relationship is necessary for both parties to succeed. The Outsourcing Exchange includes a detailed governance module.
BPO buyers must also consider the switching and implementation costs. What is the transition really going to cost? The transition period is another place where responsibilities must be clearly defined. Who is going to do what? And both sides must agree on an appropriate time frame.
All of these elements become part of your outsourcing contract. You should be able to tell your prospective vendors:
- What you want to buy;
- How you want to measure results;
- How you plan to manage the relationship;
- The price you want to pay.
Negotiate Price Last
Price is last on that list for a reason. I maintain price is the final element the two parties should discuss. As I outlined in the book, too many buyers negotiated the price first and then discussed everything else after the dollars were set in stone. What happens during the course of the relationship is the price goes up to get the services you really wanted or the quality of the work goes down because the vendor attempts to get everything done as cheaply as possible to remain in your price parameters.
It’s far better to negotiate the exact services you want. Then determine a price for them.
If you want to drive down the price, use competition between vendors to do that. I advise having multiple vendors bidding on your process. Price becomes part of the competition. If you select a single vendor at the outset, you might get some unpleasant surprises down the road.
How do you find a vendor? In finance and accounting, you can look at traditional leaders like Arthur Andersen or PricewaterhouseCoopers. New BPO outsourcers like LeapSource are coming on strong. The Outsourcing Center has the largest BPO supplier database on the Internet. Buyers can easily sort through the extensive supplier list to build a short list that fits their needs.
Outsourcing a business process can be a complicated affair. We designed our Outsourcing Exchange to assure our buyers a high quality product that can be customized to fit their needs. The Exchange compresses the contract negotiation time and substantially lowers the cost of the outsourcing contract process.
In today’s new economy, outsourcing may be the key to economic survival. Learning how to buy a BPO provider can be a very important lesson.
Lessons from the Outsourcing Primer:
- Metrics and process boundaries are two key areas that help buyers measure the results of their outsourcing relationships.
- Negotiate price last. If you want to drive the price down, have multiple vendors bid on your contract.
- The Outsourcing Exchange helps buyers complete a BPO transaction by compressing time and substantially reducing cost.
- The Outsourcing Center’s supplier database, the largest online, is a good place to search for prospective buyers.