The full business value available from business process outsourcing (BPO) is being realized on a relatively limited scale due to deficient management behaviors and practices, a new report from Accenture shows.
The BPO Research study is based on a survey of 263 buyers of a range of BPO services such as finance & accounting, procurement, human resources and supply chain. The report shows a relatively small number of BPO buyers – 20-percent of those participating in the study – have succeeded in extracting greater business value from their BPO relationships than the majority and can be classified as “high performers.” The report also validates eight best-in-class practices that are strongly correlated with high performing engagements. By adopting these practices, buyers can realize greater business value than “typical” BPO engagements deliver.
The study shows that high performers in BPO exhibit eight core management behaviors and practices including:
- Taking a holistic approach to managing the scope of the BPO relationship. High performers consider the entire, end-to-end business process to be in scope, including elements managed within the client’s enterprise, those run by third parties as well as related processes that may impact overall performance.
- Adopting a collaborative approach to governance. Collaborative BPO governance is much more than a set of committees or a schedule of meetings; it also comprises theattitudes toward the relationship and the behaviors that strengthen it.
- Making change management a priority. High performers execute carefully planned change programs to manage the effects of change during transition and beyond.
- Focusing on benefits beyond cost reduction. Both client and provider look for value beyond cost – cost reduction is important but is not the prime motivation.
- Targeting strategic business outcomes. High performers aim for specific strategic outcomes — not just more efficient transactions – that can be measured, such as helping clients increase revenues.
- Leveraging domain expertise and analytics. Clients look to their providers’ deep industry knowledge and ability to analyze data to more predictably drive business outcomes.
- Aligning the retained organization with the outsourced processes. High performers place as much importance on the client’s internal transformation as they place on transforming the outsourced processes.
- Using technology as an enabler. In high-performance BPO relationships, technology is a source of innovation and advantage, not just the infrastructure of delivery.
“This study clearly shows that the industry mindset needs to change for organizations to capture the full business value of BPO, where engagements are measured by business outcomes and improving clients’ business performance rather than just cost reduction,” said Mike Salvino, group chief executive, BPO, at Accenture. “The results indicate that BPO arrangements deliver greater business value when the client and provider engage in deeper relationships and leverage practices that drive high-performance BPO. Those who are able to bring these elements to their relationships will be well-placed to succeed – and those that continue to view BPO purely in terms of transactional processing and cost will be competitively challenged.”
The research also found there are statistically significant differences in the performance and behavior of high performing and typical BPO relationships. Some of the widest statistical differences were in areas focusing on mindsets and attitudes, or on the execution of “soft” programs such as organizational alignment and collaboration or change management.
Survey results indicate that a collaborative, approach toward governance is important to create high performing BPO relationships. In collaborative arrangements, clients consider their BPO provider to be a strategic partner, and senior leaders from both sides commit their time to the relationship. A broader stakeholder alignment and involvement of senior leaders mean that high performing engagements are better able to productively resolve their conflicts than normal engagements.
- Nearly 85 percent of high performing BPO engagements consider the service provider to be a strategic partner compared to 41 percent of typical engagements
- In 75 percent of high performance BPO engagements, senior leaders from both parties spend time to understand each other’s objectives and strategies compared to 33 percent of typical engagements
- 90 percent of the high performers reported that the client and provider were able to productively resolve conflicts. This was true only with 44 percent of typical performers
Other key behaviors that showed significant differences in results include:
- Making change management a priority.
- 77 percent of high performing BPO engagements have successfully executed change management plans compared to just 34 percent of typical engagements
- Nearly 85 percent of high performing engagements proactively refine their objectives as the relationship matures compared to just 40 percent of typical engagements
Focusing on benefits beyond cost reduction
- 67 percent of high performing engagements include business benefits beyond cost in the business case compared to 26 percent of typical engagements
- 58 percent of high performers will consider service options with greater value, even at higher costs, compared with 31 percent of typical performers
Targeting strategic business outcomes
- 56 percent of high performers seek competitive advantage through BPO, while only 28 percent of typical performers aim for that goal
- 64 percent of high performing engagements place more focus on capturing other benefits as they achieve cost reduction compared to 40 percent of typical engagements
- More than half of high performers (54 percent) have contract performance incentives in place, compared with only about a fourth (24 percent) of typical performers
Salvino said, “By adopting the behaviors and practices associated with high performance BPO, organizations can capture significantly greater business value and build new competitive strengths, ranging from accelerated speed to market, enhanced innovativeness and stronger customer loyalty to savvier talent management, and top-line growth.”