Author: Outsourcing Center, Kathleen Goolsby, Senior Writer

Outsourcing rookies, of course, face many challenges in achieving their desired return on investment because their deals often lack one or more elements that are foundational to success. And all outsourcing relationships encounter challenges that arise in unanticipated situations. But what about experienced buyers and relationships that are more mature? What issues arise in their relationships that make it difficult for the service provider to maintain superior levels of service at all times? Outsourcing Center studied this question within the context of 26 BPO relationships that were nominated in 2011 for its annual Outsourcing Excellence Awards program. The customers and…

Buyers of outsourcing services want their service providers to invest in technologies that bring continual improvement to the outsourced processes. Providers want to invest only where it is also beneficial to their margins in the long run. Therein lies a conflict. Are there reliable predictors of a buyer’s intent for a long-term, mutually beneficial relationship in which providers can trust the customer enough to risk significant investments? Outsourcing Center studied this question by interviewing 20 customers in highly satisfactory relationships at the time they were interviewed. Although all 20 buyers stated multiple times that they were very satisfied with the…

The bulk of most companies’ operational costs are in manpower, says Ragu Bhargava, CEO of Global Upside, Inc., a finance and accounting (F&A) service provider. That’s one of the reasons companies in all industries are increasingly bucking the long-held practice of retaining full-time F&A staff in house. Mountain View, Calif,-based Global Upside, Inc. provides services with a U.S. team in California and Florida serving as the customer service contacts while highly educated U.S. GAAP-trained professionals in India perform the assigned tasks overnight with measurable accuracy and a cost savings of 40 percent or more. The one-year contracts are flexible, with…

There’s no shortage of methodologies and advisories on best practices and risk mitigation strategies for the transition phase of outsourcing relationships. Even so, many buyers encounter situations they didn’t foresee when structuring their arrangement, which cause costs to rise and delay time to value. Outsourcing Center studied these types of situations by surveying companies nominated for the 2011 Outsourcing Excellence Awards program and found the following 10 pitfalls. 1. What you don’t know will cost you The Center asked the surveyed buyers this question: “There is a well-known saying that what you don’t know will cost you. Please describe something…

Ask 10 buyers of outsourcing services for their keys to success in communicating with their service providers, and you’ll hear 10 different answers because, of course, the effectiveness of communication depends on the individuals involved. Some will also say it depends on whether they’re communicating about day-to-day operations, conflicts or opportunities. Others will comment that it depends on their governance structure. While these aspects carry weight in communication success, there’s another factor that takes precedence: the stage in the relationship’s life cycle. Outsourcing Center has studied communication between buyers and providers in hundreds of relationships nominated over the past 14…

At the point where outsourcing service providers or their customers have a conflict that will result in a monetary loss to either party, they’re walking a fine line. If they manage to resolve the issue with a mutually beneficial solution, their relationship will be even stronger than before the conflict. If not, the party that loses in the solution will harbor resentment, causing a rift in the relationship, which erodes the anticipated return on investment. Outsourcing Center studied 112 relationships among those nominated for its annual Outsourcing Excellence Awards program during the past three years, which provided information about how…

Change sometimes brings unintended consequences. When outsourcing relationships several years ago took on the characteristic of delivering services from one or more offshore locations, an unintended consequence was “talent wars” and attrition. Unmanaged attrition among a provider’s ranks leads to unsatisfactory service delivery and higher costs. How can the parties manage this dilemma? Should they both bear the cost of resolving the attrition problem? Outsourcing Center studied 74 outsourcing relationships to determine how service providers and their clients work through the issues surrounding attrition on the provider’s team. The 74 relationships were successful outsourcing deals with all or a portion…

Organizations that turn to outsourcing to achieve their business objectives first develop a business case that includes such components as cost savings and avoidance objectives, business value benefits, and risk assessment of potential negative impacts. But what happens when the initial business case stops working because of unanticipated impacts? Both a Deloitte Consulting study and a PricewaterhouseCoopers study of several hundred executives found that more than 80 percent stated their outsourcing projects achieved their anticipated return on investment (ROI).* For the other 20 percent in each study, one or more components in the business case changed and the parties had…

Innovation is the lifeblood of entrepreneurial companies such as Inherited Health™, an online resource for information about health risks, but it’s also imperative that such companies deliver new products to the market in a short time frame and at the lowest cost. Those were the business challenges – along with having only a handful of part-time IT staff in house – that drove Inherited Health to outsource its R&D to Core Objects (since acquired by Symphony Services), an offshore service provider. “We had three choices: interview and hire a team in house that could build what we needed, outsource it…

Outsourcing Center asked leading outsourcing service providers about their predictions as to the biggest changes that will impact outsourcing buyers over the next five years. Their answers clearly point to a need for buyers to alter their thinking about how, when, and why they engage with providers of outsourced services. Extreme performance requires elasticity Joanne Olsen, SVP, Oracle Cloud Services, believes the biggest change will be the “introduction of complete systems as opposed to a myriad of components that companies must integrate, yielding a complex, brittle architecture that just won’t stand up to the requirements of the ‘new normal.'” That…