Where can a mid-market company find outsourced solutions that offer the capabilities of a tier-one service provider for large enterprises? It’s a question that mid-market companies have asked a lot lately as they are increasingly adopting the outsourcing model for their back-office and IT outsourcing processes.
Patrick Dolan, founder and chairman of BPO Management Services Inc. (BPOMS) of Anaheim, California, says this market ($500 million to $3 billion in revenue and 100 to 7,000 employees) is underserved even though there are around 15,000 service providers aiming at this market. Many of the providers are privately held and under-capitalized, he says, and most offer only a “single, narrowly-focused solution instead of a holistic, comprehensive service offering.”
In contrast, Dolan states BPOMS is “exactly like a tier-one service provider (such as IBM, Accenture, or EDS) in our services delivery model, our standards, best practices, SLAs — but we’re more willing to customize the solution than they are.” BPOMS is also a public company; as such, it understands requirements for its clients’ Sarbanes-Oxley compliance.
The volume of work from a mid-market company is not large enough to attract a tier-one provider. Birchwood Automotive Group faced this dilemma. It has nine dealerships, owns National Vehicle Leasing, and is the largest automotive retailer in the Winnipeg market and one of the largest in Canada. “But we’re small compared to similar businesses in a city the size of Chicago. So larger service providers aren’t interested in us,” says Jim Borger, internal analyst at Birchwood.
Serena Software, Inc., headquartered in San Mateo, California, is an innovator in the software development industry, focusing on application life cycle management for distributed and mainframe systems. It has 29 offices in 14 countries. Even so, Carina Ferrel, VP of IT, says Serena is a relatively small company. “But we compete in an enterprise-class market, so we need enterprise-class systems. For a company our size, the only way to afford them is to outsource.”
Both companies turned to BPO Management Services.
A customized solution
Prior to BPOMS, Serena Software was outsourcing to a tier-one service provider that had been providing unique services to the software innovator rather than the usual offering. “But they became inflexible and wouldn’t do anything out of the box,” recalls Ferrel. “When it was close to contract end, if we had service or enhancement requests, they charged us an arm and a leg, hoping we’d go away.”
She conducted a time-consuming search on the Internet for another provider — looking for a company that owned a large mainframe to share or that had mainframe services in a hosted model. She found Blue Hill Data Services (which was later acquired by BPOMS).
When the relationship began, the provider ran into a challenge. “We needed every one of our software products to be bleeding edge. Back then, the provider was wary of putting untested software on their servers and questioned our requests,” says Ferrel. “Even a system crash can be good from our point of view if it helps us find a root cause of an issue.” The provider, of course, was aiming at stability. The two companies had very different objectives around the service delivery and needs.
But “BPOMS is flexible,” states Ferrel. “They came to understand we’re an innovative software development shop and also came to understand what the sense of urgency is for us at a given time and how to adapt to that. They learned what to react to and what not to react to. And we learned to communicate and provide instructions to achieve maximum service delivery.”
There was another challenge. The initial scope of the agreement just involved buying time on the provider’s infrastructure. From the beginning the provider wanted to provide all the IT support, but Ferrel knew that model wouldn’t work. Not long after, Serena bought its own hardware and the scope changed to managing the hardware operations.
Ferrel says the supplier at first was “adamant about owning things but was flexible and changed their minds later on.” She says BPOMS is willing to listen and figure out what they need to do to meet client needs. She adds that honest and open communication is a key to their successful relationship.
The scope evolved over the past 10 years to the current hybrid hosting solution. Serena owns pieces and parts of the solution, but BPOMS owns most of the hardware infrastructure, and its staff runs the hardware. Serena keeps two in-house system programmers who are responsible for the software, creating environments for users and developing the company’s application products.
Even though Serena now procures its own hardware, the outsourced solution enables curbing the cost of growth. Serena’s capacity at first was 10-12 MIPS; today, it’s 400+ MIPS. According to Ferrel, the company’s operations and monthly expense has remained almost flat for the past 10 years, and it reduced its internal systems programming staff from three to two.
She benchmarks BPOMS services at times of contract renewal and each time has found that the provider is “realistic about costs and gives us a good, fair deal.”
Trust is another key factor in their successful relationship. “We know now how each other will act and what to do to get things done. And we trust their management with things about our company that are not public knowledge,” says Ferrel.
They meet formally every six months or quarterly and check in frequently with each as needs arise. She cites an example of such a need: “I could tell them, ‘We might do such and such. Could you research that for me and tell me how we could do it more affordably?’”
Solution for efficiency
A little over two years ago, Birchwood Automotive Group in Canada had a storage challenge. The company creates at least 10,000 sales and leasing files a year (with 30-60 pages in each file) and needs to retain them for at least seven years. Borger says about a year ago they were contemplating building a facility to store these files and other documents.
“But we really wanted to store them in a way that would make them more efficient to access,” he explains. Sales personnel frequently looked up something in the files and then didn’t return them. “If they’re not returned, we’re lost. These papers can save us in a court case. And we need to look at the leasing files constantly regarding receipt of monthly payments.”
The IT department looked at various storage suppliers’ offerings. Birchwood chose Adapsys (since acquired by BPOMS), which was recommended by one of Birchwood’s smaller leasing companies.
BPOMS scans the Birchwood groups’ documents and then hosts them for easy accessibility. BPOMS prices the service per document, and the price decreases as volume increases. The service level agreement is for a five-day turnaround.
Praising BPOMS, Borger says “they have bent over backwards for us.” That partnering approach was present from the beginning, when Birchwood gave its new service provider a four-month backlog of files.
The service provider also partnered with Birchwood during the transition at its nine different locations to help gain end users’ buy-in and train them on the new system. Some balked at first, says Borger, not wanting to follow new procedures such as removing staples from documents before sending them to be scanned. But he says everybody is on board now and happy with the service.
Now the sales staff can access files from their laptops and get updates on the lease fleet. More importantly, the ease of accessibility to files results in peace of mind. Borger says, “When customers have issues, we can answer their questions quickly — and with the facts in front of us.”
Comprehensive, holistic services
BPOMS has a comprehensive range of solutions covering back-office activities and IT. Birchwood’s solution is part of the BPOMS ECM (enterprise content management) division. This area includes finance and accounting documents as well as some documentation projects for municipalities (such as digitizing birth and death records). The other two divisions are ITO and HRO (human resources outsourcing), which is delivered in a Software-as-a-Service (SaaS) model.
The company also has offshore capabilities in Russia and India for “heavy lifting” or large application development and maintenance projects. They use an onshore-offshore model with a small team of onshore people who manage the larger offshore project teams. Clients have the advantage of BPOMS managing the offshore work for them; most mid-market companies are too small to manage and coordinate offshore projects. In addition, the company has a nearshore service delivery option in Canda for U.S. clients.
Dolan founded the company in 2005. His insights into the nuances in provider capabilities come from working for ACS, EDS, and Citicorp in the 1980s and from successfully growing two other companies: SMS (acquired by Infocrossing) and Infocrossing (acquired by Wipro), which provided comprehensive ITO and BPO solutions.
In today’s world, executives must manage their companies more closely and meet their growth and profitability commitments by doing more with less. They need greater efficiencies, improved productivity, and lower total cost. This is especially true in the mid-market where there currently is enormous pressure to reduce back-office spend.
As Dolan points out, the on-demand offerings of BPOMS mean clients can enjoy services such as customized disaster recovery, data migration, open systems, and mainframes or mid-range server hosting and yet pay for only the amount of processing power they need. And, unlike the inflexible experiences many clients encounter with some tier-one service providers, customization is part of the game plan at BPOMS.
Serena Software’s VP describes another important benefit of working with BPOMS — the longevity of the staff. “It’s not a company with a revolving door. Their people are happy, and you can tell it by the way they work.” She adds that the relationship is based on a partnering mind-set and skin in the game so it will be mutually beneficial. So far, the outcome over the past 10 years is “a tremendous relationship.”
Lessons from Outsourcing Journal:
- The mid-market ($500 million to $3 billion in revenue and 100 to 7,000 employees) is underserved even though there are around 15,000 service providers aiming at this market. Many of the providers are privately held and under-capitalized, and most offer only a single, narrowly focused solution instead of a holistic, comprehensive service offering.
- Mid-market companies are best served by providers that operate like a tier-one service provider (such as IBM, Accenture, or EDS) in the services delivery model, standards, best practices, SLAs but unlike tier-one providers, also are willing to customize the solution.
- When a client’s core business is producing innovative products, it should choose a service provider that is willing to adapt to different needs and not always aim for stability.
- Mid-market companies are usually too small to have resources to manage and coordinate offshore projects. They benefit from using providers who have onshore staff to manage the larger offshore teams for the client.