Study Shows Outsourcing Best Practices are Changing | Article

interviewing outsourcing providersIn outsourcing, “best practices” are a method, procedure, activity, technique, or process known to produce desired outcomes. Who deems them to be the “best?” Often, it’s an industry or association regulation or recommendation. Sometimes, it’s an expert opinion such as those from an analyst or consulting firm; at other times, it’s a service provider or multiple peer providers that recognize a practice as “best.” They hold the best practice up as one that produced outstanding results in one situation and therefore tout it as a model to follow in other situations. But “best practices” are sometimes superseded by new best practices.

Outsourcing Center conducted a study among 65 of the outsourcing relationships nominated for the 2009 Outsourcing Excellence Awards. Almost half of the service providers stated they developed entirely new best practices for the nominated relationship, which the providers plan to implement with their other customers. Four providers reported that they developed more than one new best practice in their relationship.

The study then analyzed the 31 new best practices the service providers described and found a trend in the drivers for the uptick in developing new best practices.

Drivers for creating a new best practice

Most of the new best practices arose from working through unanticipated challenges that occurred. In addition, although some of the new best practices involved modifying one or more of the service provider’s existing best practices, the majority of the new best practices brought into play new procedures and activities that previously had not been necessary or needed to be modified.

As Exhibit 1 shows, more than half of the new best practices arose from new needs such as complexities in a process (for globalization objectives or mobile processes, for instance) or from a new focus (such as taking a proactive approach or taking a business approach rather than solely an IT approach to a decision).

Exhibit 1: Trend in drivers for developing new best practices

Exhibit 1: Trend in drivers for developing new best practices

Outsourcing Center’s study also found that the 31 best practices segment into seven types of procedures, techniques, or activities (see Exhibit 2).

Exhibit 2: Seven types of new best practices found in study

Exhibit 2: Seven types of new best practices found in study

As Exhibit 2 reveals, study participants reported that creating a new tool, new methodology, or a new training process were the most frequent focus of their new best practices. In all of these cases, the need for a new best practice arose because of increasing complexities in business processes.

Examples of new best practices

Globalization is at the forefront of many newly created best practices. As service providers apply their existing standard best practices to larger, international contract scope, they find that managing the projects requires new techniques, procedures, and activities devised for specific regions. After modifying its existing transition-phase best practices for a customer with locations in more than 100 countries, one provider now exploits its global management governance model as the best-practice blueprint for other similar customers.

Similarly, several providers reported they developed new best practices around software configuration management to support different versions in a customer’s different subsidiaries in different global locations.

Several best practices focus on training and end-user feedback. One arose in a situation where the buyer added new products or services that the provider supported but the buyer’s end users had not performed that work before and had unrealistic expectations for the service. The best practice established training around expectation setting.

In another relationship, the service provider implemented a cross-training best practice of grouping processes that have an affinity in tasks, steps, or system access. Training its resources across these affinities resulted in an additional capacity of 20 percent over contracted capacity.

Another provider implemented a focus group of end users to continually provide feedback on its solution for the purpose of continuous improvement.

A knowledge-transfer and training best practice created for an offshore service provider begins with the customer sharing the standard operating procedures. It then shifts to workshops where the provider’s team plays back its understanding of the procedures. Once both parties are on the same level of understanding, the customer teaches the actual process steps through WebEx Live meetings. This process saves time and reduces the overall cost of transition.

Other providers are establishing best practices that focus on modifying their team’s negative behavioral characteristics. This has better outcomes because the best-practice method gives them new skill sets, rather than just telling them (with or without an incentive) that they need to perform better.

In the human resources world, a service provider’s best practice established a certified Specialist role to serve as a single point of contact for high-impact events such as retirement or death, assigned to handle the end-to-end process including educating the customer’s benefits member.

Another provider of BPO services created a new role of an “Operations Manager” with responsibility for long-term planning. This level of management focuses beyond the day-to-day service delivery and SLA fulfillment level with best practices to build trust and ensure that the provider delivers value above the contractual terms.

One study participant reported that it revamped its existing project management methodology due to the demands of a particular client for evidence of return on investment (ROI). This is an increasing demand in the marketplace and becoming an important decision factor in provider selection. This provider’s best-practice project management methodology now includes ROI templates along with detailed project plans.

As a different example of new complexities affecting standard best practices, deviations in a customer’s back-up process prevented a provider from implementing its standardized best-practice back-up service. The two companies worked together to eliminate as much of the deviation as possible within the designated tools. The outcome was actually a more flexible standard for the provider, which it now plans to use in other client situations.

Among other new best practices for the providers participating in the study are the following:

  • Joint root cause analyses for all critical issues and doing a trending analysis of all root causes captured
  • The buyer’s financial and non-financial strategies to motivate the service provider’s staff on an individual level to achieve more passion and commitment to the objectives
  • Random audits and independent scoring of call center sessions to gather data and discuss variances in provider and customer scoring, with the goal of follow-up to hone processes so that both organizations’ scoring will be within a designated variance of each other

One provider in the study actually established best practices for 242 clinical workflows for a medical center or hospital, which result in the speed and accuracy of patient data presented to a clinician.

Advice for buyers

Outsourcing Center’s annual studies of successful outsourcing relationships clearly indicates that, although some buyers think of them as table stakes, most buyers include “industry-standard best practices” and “best-practice methodologies” among their selection criteria in the service provider selection process. Given the impact of quickly changing technologies and the impact of new workflow requirements because of globalization and mobile processes, buyers of outsourcing services also should consider looking at a service provider’s newly created best practices in these areas.

These types of best practices will result in significant cost, quality, performance, security, and other measurable impacts on the outsourcing return on investment.

How the study was conducted: Outsourcing Center studied comments provided during 2009 by service providers in 65 IT and business process outsourcing relationships worldwide. The information was provided in a written questionnaire.

Lessons from the Outsourcing Journal:

  • Many outsourcing service providers are modifying their existing best practices or creating new ones because of new challenges that arise from complexities in new functions (for globalization or mobilization, for example).
  • Service providers are also modifying existing best practices or creating new ones to accommodate a new need for the buyer or a mutual need to bring about the desired service outcome. Examples include conducting new training methodologies and activities, creating new tools to achieve a proactive perspective on service, or modifying a methodology or decision framework to include a business focus as well as the IT perspective.
  • Given the impact of quickly changing technologies and the impact of new workflow requirements because of globalization, mobile, and other process factors, buyers of outsourcing services should look beyond the “standard” industry best practices and also consider a service provider’s newly created best practices to deal with evolving issues that can impact the return on investment.


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