Phil Fersht, a recognized BPO analyst, shares with us a discussion with Lee Coulter. Coulter, SVP of Kraft Foods Global Shared Services Group, highlighted some high-level thoughts on BPO, where it’s successful, where it has yet to perform. There are two areas I want to append to the discussion:
1) Behavior is a key player behind success. Lee is right, behavior of both client and provider are the more likely determiners of long-term success. The MSA (master service agreement) is something often toiled over for months, sometimes it’s never even truly completed. Eventually it gets stuck on a shelf and simply gathers dust. Once the process has matured (e.g. after 90 days), it’s typically looked at very infrequently.
As a result, ‘behavior’ of the two parties is precisely the governing factor. The client neglects their responsibility in many cases to execute review processes stipulated in the MSA. At the same time, the provider’s initial sharp focus on that client’s service dulls. The drive to get new clients and their projects into production are always front-of-mind; steady-state projects get sidelined; and, management focuses more on getting the ‘next’ client than on improving the ones they already have invested heavily in. In the end it comes down to: do we like each other, and, are we both happy about the value underlying our relationship? If yes, renew contract. If no, see below.
2) 2nd Generation
Another key issue not discussed very often, is the ‘2nd generation’ engagement. This is a customer who has previously outsourced services, such as AP, and is changing providers. This obviously results from a change in the relationship, and perceived value.
The problem with second generation BPO, is that the client will have outsourced the business process for so long (3-5 years or more), they no longer possess the knowledge to execute, themselves. And, of course, the outgoing provider’s highly motivated to share with you what you need to know;). The result here is that getting to execution with the new provider will demand greater attention to detail, take longer, and likely be more fraught with frustration as a result of knowledge gaps.