Successful Case Studies in Business Process Outsourcing

14th March 2012

In the early days, Business Process Outsourcing (BPO) usually consisted of particular outsourcing processes such as payroll. It has now grown to encompass a number of functions that are considered ‘non-core’ to the primary business strategy.

The NOA seminar for Successful Case Studies in Business Process Outsourcing took place on 14th March at Eversheds, Manchester. The aim of the seminar was to highlight recent NOA successes and share best practice

From Transaction to Transformation: KPMG and EquaTerra

KPMG EquaTerra is the largest independent third-party Sourcing advisor in the UK with over 150 dedicated sourcing professionals in the UK and Europe.

Jonathan Howgate, Principal Consultant, KPMG Sourcing Ltd, outlined the organisation’s value assurance policy, highlighting the importance of holistically reviewing all outsourcing arrangements.

Recommendations from the review help move contracts to an optimal state.

• The review policy looked at the methods, benefits and negatives of analysing performance, process, potential and other aspects of outsourcing contracts

• As an outsourcing contract reaches maturity, the continuous review process can help deliver further value to service providers and clients

Successful outsourcing case study: Rail Settlement Plan

Stephen Green, Head of Operations, Rail Settlement Plan Ltd, introduced the successful outsourcing case study of the Rail Settlement Plan. British Rail goal was to enable passengers to use the national railway network seamlessly, and found that outsourcing may be the most efficient way of doing so.

• Business operations division British Rail Business Systems was sold to a major outsourcer

• The services provided needed managing on behalf of Train Operating Companies so the Rail Settlement Plan was created

• It has proven to be the right model – RSP concentrates on understanding business needs and translating them into programmes and managing resulting services

• Green also made observations on the links between risk transfer and influence on technology and influence.

Successful BPOs

Tom Bridgford, Partner and Head of Commercial and Outsourcing, Evershed, gave a general insight into BPO as well as defining successful BPO and the problems and pitfalls that may arise in any process.

• Business Process Outsourcing includes services such as procurement, finance and accounting, HR and facilities management. The benefits can include lower costs, budget control and a better quality of service

• However, defining ‘good’ BPO can be problematic. Lack of clarity in the ITT or difficulties in measuring current success can lead to outsourcers finding it difficult to define whether BPO has been successful. This highlights the need for a robust negotiation process between supplier and client and clearly defined work-streams for each schedule

• Problems will often occur in BPO, but relevant steps should be taken to minimise damage. These include reporting to the client in advance, discussing how to prevent future occurrences and identify future damages

BPO in India

Bhupendra Mistry, Alliance Manager and Statistical Programming & Analysis at Hoffman la Roche took us through the successful case of Roche Holdings who outsourced their business processes to India.

At the 2006 Global Capacity Building Initiative, Roche identified their long term strategic goals, and it was decided that in order to achieve them, BPO was a suitable solution.

Firstly a rigorous selection process ensued that the most appropriate outsourcer was selected.

• Several country and model choices. India proved most suitable

• All relevant vendors in India were considered. Researched vendors to evaluate overall capabilities, presence in India, experience in pharmaceutical development

• Presentations, proposals and vendor visits helped to determine final vendor

Once the vendor was selected, Roche’s Indian BPO began to operate, and over a period of time, built a professional relationship and increased operations, all whilst ensuring excellent quality.

Breakout Sessions

The breakout sessions were focused on BPO hot topics such as the mapping of business functions and the security of outsourced data. Questions posed included:

• Is mapping always fundamental and needs board approval?

• What can go wrong during mapping?

• Should you always have a backup?

• How can you guarantee continuity if you terminate the contract?

• What are the impacts on other parts of an organisation?

• Do your existing providers offer the complete service offering?

• Who deals with your process mapping internal, consultant (external) or CSP/intern?

Two particular questions that were raised were:

• What three things have gone wrong in your deal?

• How would you have done it differently?

When addressing these questions, three main areas were covered:

1. Scope & relationships

a. Scoping - Failures by customers to properly scope their requirements and include these in the formal contract inevitably leads to problems. The parties do not have matched expectations at the outset and customer expectations do not necessarily materialise into the service they ultimately receive.

b. Due diligence - Difficulties with due diligence exercises from a supplier perspective, often caused by scoping issues (as in (a) above) and difficulties in obtaining the required information (from either the client or an incumbent provider), resulting in a lack of understanding by the supplier of the required services and difficulties with pricing an uncertain scope.

c. Delivery – Failure by supplier operational teams (the ‘B Team’) to deliver on promises made by supplier sales teams (the ‘A Team’).

d. Third parties – Problems with third party providers (for example, sub-contractors of the customer on which some of a supplier’s activities are dependent, or a supplier’s own sub-contractors) can create tension between customers and a lead supplier. Ensuring that there is a process for identifying responsibilities, defining roles and ensuing appropriate controls are in place help to lessen any impact.

e. Trust – A key element of any successful outsourcing. A poorly scoped outsourcing (particularly on a first generation outsourcing) may lead to disagreements very early on in the most fragile stages of the relationship.

2. Pricing flexibility and changing business needs of customers

a. Evolving customer businesses requires a flexible and accommodating contractual relationship, including flexible pricing mechanisms (for example, indexed charges). Provider innovation (in 3 below) is also required to tackle these changes.

b. Gain-share mechanisms – These mechanisms can be difficult to draft, but problematic if not properly agreed at the outset. An unsuspecting customer may receive an unexpected invoice from a supplier demonstrating savings achieved, with little or no clarity around the required process. It was generally agreed that other mechanisms are, however, well received by both customers and suppliers to recognise efficiencies / performance, including service credits and bonuses (i.e. risk / reward).

3. Continuous improvement & innovation

a. Customers will expect continuous improvement of service delivery and quality throughout. Incentivisation (e.g. gain share, risk/reward etc) is often key to successfully implementing any such contractual obligations, and (as mentioned in 2 above) innovative suppliers will develop successful relationships with customers where they can identify innovative solutions as the customer’s business develops/changes.

In summary, when mapping - objectives need to be clear and consistent throughout the whole process. It is crucial that your supplier is validated and services are well defined in terms of supplier fit and flexibility.

The seminar concluded with networking drinks. To view the full set of slides please visit the members’ area of www.noa.co.uk