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Is your Business Process Outsourcing (BPO) Deal Doomed to Fail?

surrender.pngAccording to a recent Dun & Bradstreet study, 20% of all business process outsourcing (BPO) deals fail within the first two years. Per the article, a major reason for the failure can be attributed to the “nail it down” approach which focuses on a tight and detailed pre-designed specification of requirements without regard to the BPO suppliers expertise and experience, arms-length dealings with multiple potential providers and old-fashioned adversarial contract negotiations with a focus on squeezing out the lowest price for the services (without regard for the effect on the business and end consumer).

 

Nail-it-down deals tend not to work for the following reasons:

 

  1. Suppliers Are Not Asked To Design The Solution – this is a really strange behavior, since the reason the business is contracting with the supplier is because they are experts in the field.
  2. Deals Are Based On False Economics – it should always have a strategic business focus – how does this relationship move the business forward. Instead the focus can be on the easily measured metrics defined by the people creating the contract. Yes, metrics need to be defined, but it’s the businesses goals that override any tactical metric. One good thing to ask is if the metric is being measured today and who is actually doing something based on that metric today. If it is the revenue generating side of the business that’s great. If it is an administrative convenience, probably not so good.
  3. Adversarial Negotiations – Anything that can be done to define a win-win situation is well worth the effort. No one wants their supplier to go bankrupt supporting a deal that just puts everyone at risk. Yet, that is exactly the behavior seen by many tough negotiators. Ask the supplier if the deal structure will allow them to innovate during the life of the deal as well as how and why? Frankly, if the company was doing so well at the process that is being outsourced, they probably wouldn’t be outsourcing it. Give the supplier the ability to make the operations better, not just “turn the crank”.

 

What experiences have you had with BPO deals? Do you have a success or failure story you want to share? Or some tips and tricks?

 

You can also learn more about how HP is helping clients with BPO via the following customer case studies:

 

Comments
security management service(anon) | ‎12-14-2011 06:01 AM

Nice article,awesome comments.I really enjoyed reading.I loved it all and equated with 99% of it.keep posting.

BPO Services(anon) | ‎04-16-2012 06:04 PM

In BPO industry its very important to understand the clients needs and his mind coz he/she is overseas and you are going to provide business services that are related to his/her success. As per my experience in BPO, understanding clients mind and requirements is critical and needs your focus.

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About the Author
About the Author(s)
  • Steve Simske is an HP Fellow and Director in the Printing and Content Delivery Lab in Hewlett-Packard Labs, and is the Director and Chief Technologist for the HP Labs Security Printing and Imaging program.
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