BPO Becomes a Rising Star
To paraphrase an old Barbara Mandrell song, Kevin Campbell was BPO before BPO was cool.
In June, Exult Inc. named Campbell its chief operating officer. Before he joined Exult, a Web-enabled human resources (HR) outsourcing provider for large, multinational corporations, Campbell helped propel Ernst & Young's Global Outsourcing practice to $400 million. He began his outsourcing career while at Andersen Consulting (now Accenture) in the early 1990's when outsourcing was still synonymous with IT.
"The demand for BPO has never been stronger because we are still in the early adopter phase," says Campbell. Of course, the fact that the economy has slowed is a motivating factor in its rising popularity. He reports interest in BPO has been increasing during the last six months as corporations seek to reduce cost and remain flexible so they can ride out the turbulent times.
He predicts an "explosion in BPO growth" in the next two to five years as three trends merge. First, there is now a critical mass of credible suppliers to meet the burgeoning need. And there is still a wealth of investment capital available to grow BPO suppliers. "Venture money has not disappeared for companies with long term profitable contracts. We are not selling groceries or toys over the Internet," says Campbell, referring to several companies who recently closed their doors.
Second, the business case is strong for BPO: providers can offer better quality service and reduced costs while allowing buyers to focus on their core competencies. As Tom Peters said, "Do what you do best and outsource the rest."
Finally, major corporations have tried BPO and liked it. Two Exult clients, British Petroleum and Bank of America, have been successful with their HR outsourcing, which was built on a strong business case. Campbell says four to six Fortune 500 corporations call the Irvine, California supplier a week to explore the possibilities. He estimates up to 30 percent of America's large corporations are now willing to investigate BPO's possibilities. The thinking has changed from "Why would I ever consider BPO outsourcing?" to "We should look at this to see if this is something we need to do."
As with all outsourcing, the major obstacle is the fear of losing control. Actually, Campbell says most companies find they actually improve the control they have once they outsource. Buyers who set policy and strategy and continue to pay attention to their relationship with their partner will produce outsourcing contracts "that work."
The Exult COO says BPO will yield the best results if buyers:
- Take BPO seriously.
Some prospects explore BPO's possibilities assuming it won't work for them. Shop with an open mind.
- Understand your costs.
It is imperative buyers have a handle on the true internal and external costs of a process before they start comparing them to the supplier's.
- Realize you still must manage the process.
Signing a BPO contract does not allow the buyer to abdicate responsibility for the process.
- Build a relationship with the supplier.
The goal of BPO outsourcing is to create a win-win situation. Take the time to understand how your supplier operates. Invest time in building a working relationship with the supplier.
- Be tough but fair.
Demand a lot from your provider. But understand they are providing a service. Be fair.
- Challenge the way it's always been done in your company.
Question the conventional.
Lessons from the Outsourcing Primer:
- Corporations are interested in BPO regardless of the economy but have a renewed interest as the economy worsens.
- The number of BPO suppliers is reaching a critical mass, spurring the industry's growth. Venture capital is still available to them.
- Success of the BPO pioneers is building a strong business case.