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Selecting Outsourcing Vendors
SPICE is the metholodology I have developed alongside some of the leading minds in the industry to strategise, procurement, implement, manage and improve outsourced operations. SPICE is an acronym for "S" - Strategy, "P" - Procurement "I" - Imlementation, "C" - Control & Innovate and "E" - Exit. It is the lifecycle for managing outsourcing contracts. .
I am the founder of call-centres.com with over 23 years of helping organisations to improve the quality of their outsourcing. I was the first person in The UK to gain a Masters Degree specialiaing in outsourcing. I am a published author, a regular speak on contact centres and contributor to publications around the world.
Some common mistakes in call centre outsourcing
Outsourcing contact centres involves a certain amount of rewards and risks and no more so than when doing it offshore. The Rewards are in terms of
(1) reduced costs
(2) process efficiency & effectiveness
(3) increased focus on core activity.
There are of course risks involved too but these can be reduced dramatically if you are aware of the potential mistakes that other companies have made in the past. This document looks at how to identify those risks, eliminate their impact and focus on reaping the rewards from the potential benefits.
MISTAKE #1 NOT JUST COST
The first mistake is to simply focus on reducing cost and not focus on their organizational goals. Many companies have saved vast amounts of money from outsourcing their call centres but there is also an opportunity to look at how outsourcing will add value to their customers, shareholders and employees. It can also add value by customer analytics that can provide increased revenue and improve the way of doing business. BPO can also create value through integration of processes like the back-office and customer facing processes. It can also provide value in terms of technology, access to good talent, increased customer focus and world-class quality practices which the organization couldn't otherwise cost-justify.
Costs should also be looked in the context of other external factors such as responsiveness of the vendor's customer service, guarantees in service-level agreements, Industry expertise and flexibility in terms of changing business needs.
Sometimes extra costs could be incurred in the time and efforts with regard to the control of the business process. Extra costs could be incurred in terms of travel of the management staff and the time spent by the management with regard to the process. These costs are generally not included during the initial stages of outsourcing. This calls for a comprehensive costs analysis and business value obtained, prior to the outsourcing of the business process.
Mistake #2 Improper evaluation of vendors
The second mistake which is very common is the improper evaluation of vendors. Often, selection of vendors purely on price, results in disenchantment with regard to outsourcing. So it is imperative for organizations to develop a detailed, stepwise approach to reviewing potential outsourcers. The three most important criteria are proven track record, requisite infrastructure and the ability to deliver process improvement. Other factors include the following:
- Efficient and suitably qualified staff
- Business expertise to make the process work
- Suitable technology
- Cultural compatibility between the outsourcer and the client
- Industry specific expertise
- Investment in training
- Financial stability
- Quality procedures
- Physical and data security policies
- Size of project being appropriate to the size of the operation
- Disaster recovery plan
- Portfolio of services
Site visits and customer references are also essential in the vendor selection process.
Site visit is essential as it provides the opportunity to meet the senior management, the offshore team, work done for other customers, view the facilities and assess the long term goals of the organization.
Mistake #3 Internal Approval with regard to outsourcing
This is the 3rd mistake. Organizations outsource- for various reasons and lack of skilled staff or high operational costs is among them. This entails keeping the staff informed about the outsourcing decision ' its benefits to the employees and the organization.
Mistake #4 Poor Service Level Agreements and Contracts.
Outsourcing agreements often fail to set the parameters for measuring performance. The result of which is a mismatch of expectations and deliverables. The contract is the most important part of the outsourcing relationship and must clearly define the rules of engagement. At its core is the Service Level Agreement that must clearly specify the organization's expectations from the outsourcing deal
and the deliverables from the outsourcer's side. The SLA must address metrics, report formats, client policies and regulations, confidentiality clauses, detailed security and capacity provisions. Metrics should be chosen carefully based on the process improvement and not from a control perspective. The metrics must ensure that the processes are done on time, with good quality and reduced costs.
In Business Process Outsourcing the Service Level Agreement (SLA) should define acceptable levels of performance in terms of business relevance. For e.g., increased customer satisfaction rates or and online conversion rate'the rate at which online browsers become online buyers for an e-commerce site. The contract should also specify fixed costs, and other costs that can change over time. It must make provision for scaling with the organization's needs. The contract should also incorporate worst-scenario plans, when both the organizations do not wish to proceed with the relationship.
Mistake #5 Inappropriate Control Management
Outsourcing enables an organization to avoid the hassles of building IT infrastructure administrative tasks, responsibility of recruiting training and retaining staff. It also means a single point of accountability for managing the business process. But sometimes organizations expect to retain full control of how the particulars are carried out. This results in mistrust and, minimal use of the vendor's capabilities. The outsourcing decision is taken to leverage the vendor's experience and capability to enhance the business process. Outsourcing is different from consulting, and hence involves delegation of the process to the vendor. The vendor shall carry out the operations \based on the predefined metrics and other aspects mentioned in the service level agreement.
Mistake #6 Lack of clarity with regard to objectives of outsourcing
Organizations often outsource processes without clarity on the business goals that need to be achieved. A top-down approach right from the management level on what processes need to be outsourced, possible results that need to be achieved and the reasons for outsourcing ensures successful implementation of the outsourcing strategy
Mistake #6 Failure to foster a relationship.
Failure to foster a relationship of trust can impact the organization in terms of its competitive advantages and customer relationship management. It is complicated by the fact that it extends across various departments involved in the project from IT
HR and Finance. Outsourcing is a partnership, where both organizations need to work with each other to achieve their respective organizational goals. It is ultimately about trust, the right cultural fit and sharing of business ideals. A right relationship is not just defined by the contracts and SLA. The result is more than reduced costs and greater efficiencies- it's a relationship that delivers value in the long run.
Mistake #7 Short-term focus towards process improvement
The primary focus for outsourcing is reduction of costs, and companies view process improvement as an added benefit. Also companies commit the blunder of focusing on the one time immediate impact of reducing costs rather than long-term continuous improvement. Improvement must come from both the buyer and the service provider's side. Buyers must include continuous improvement in the contractual documents, while the service provider must look at adding value to the business process. Some measures include new metrics, customer analytics and quality issues like Six Sigma and Lean initiatives ' all of which guarantee long-term benefits for both the buyer and the service provider.