Business Process Outsourcing (BPO) provides companies with decisive strategic advantages and makes them more efficient. At the same time, however, such a fundamental change in work processes entails a whole series of risks that should not be underestimated. From careful planning, controlled implementation, and ongoing revaluation, there is much you can do to prevent running into problems. By dealing with the following scenarios and possible stumbling blocks, you are well on your way to avoiding the biggest Business Process Outsourcing risks.
Before we move on: Are you familiar with the fundamentals of BPO? Why don’t you take a look at our business process outsourcing primer for business executives!
A study conducted by NC State University has shown that only 6-8% of all companies have ever entrusted back-office tasks to BPO service providers. Many entrepreneurs thus still maintain a skeptical attitude when it comes to business outsourcing. However, there are many benefits of outsourcing, especially for dynamic and growth-oriented companies.
Remember, though, a whole series of things can go wrong with a BPO process. Careful planning is of paramount importance if you want to mitigate these risks. In the absence of in-house expertise, it is usually worthwhile to call in experienced external consultants.
These are the biggest Business Process Outsourcing risks that you need to take into account when making your plans:
1. Choosing the Wrong Supplier
You can run into considerable problems if you end up choosing a provider that does not optimally meet your requirements. But how can you trust a provider whose office is thousands of miles away?
The decision to work with a provider should always flow from a risk analysis, which should answer questions such as:
- Is the area you want to outsource the provider’s core business?
- Does the provider have the necessary expertise?
- How experienced is the company with projects of a similar size?
- How successful has this company been and for which partners have it worked recently?
- What are the provider’s web and social media presence like?
- What kind of feedback has it received from other customers?
If possible, you should also visit the company in person to gain a real-life impression of the operational capabilities of the BPO provider.
2. Inaccurate Definition of Task Areas
Guidelines and rules for outsourced work that are not sufficiently defined or detailed can lead to grave misunderstandings. In order to avoid processes being incorrectly or only partially performed, it is essential that you define guidelines and rules in a meticulous manner beforehand.
The areas of responsibility must also be defined clearly, taking every last detail into account in advance. This way, you will avoid any disagreement over what responsibilities the outsourcing includes and prevent agreements from being wrongly interpreted and implemented.
3. Errors During Handover
The transfer of a work area can sometimes not happen fast enough. Many companies rush back to their core business as soon as a partner has been found for the BPO. Caution is advised here, however: the consequences of a hasty handover can be devastating. Subsequent corrections can demand a lot of time and effort as well as further increase the cost of outsourcing.
Detailed planning, including consideration of all possible risks, is essential to avoid such a scenario. Even after the handover, you must not let go of the reins too quickly. It takes time for the new work processes to become established and function seamlessly. We recommend creating detailed process documentation that you update at regular intervals.
4. Lack of Experience with Outsourced Teams
If you have never worked with outsourced teams before, you run the risk of things getting out of hand. This is especially the case when the outsourced team has a lack of experience. Such a situation can lead to you both working in a vacuum and throwing resources down the drain unnecessarily.
In order to protect yourself against such a situation, especially if you have no experience yourself, you should rely exclusively on experienced providers. In addition, you should maintain ongoing communication and regularly evaluate work processes.
5. Inefficient Knowledge Transfer
The unrestricted transfer of knowledge is an indispensable building block for successful Business Process Outsourcing. Problems can arise in two ways. Firstly, you should not deprive your partner of any knowledge they may lack for the implementation of the work. In many cases, you are all too concerned about protecting your own company secrets.
A second problematic aspect concerning the transfer of knowledge is the handling of know-how that is created by the partner. If you do not regulate this beforehand in a contract, conflicts regarding intellectual property could arise by the end of the cooperation, especially when it comes to software or product development.
Be sure to precisely define the handling of both aspects in the contract. This way, you can ensure that both intellectual property and the protection of trustworthy data are clearly clarified.
All in all, you can avoid most of the stumbling blocks associated with BPO if you always have a viable answer to the aforementioned risks. As is the case with so many other things, having an ingenious plan and implementing it consistently is of paramount importance.
Opportunities:As organizations today expand in different verticals, their core processes also diversify, and this leads to a higher demand for BPOs to address the increasing non-core activities.As companies adopt the use of cloud computing and analytics, there will be various avenues for BPOs to grow.
In fact, cloud is expected to facilitate the Next Gen BPO service providers.Firms will be expected to provide value to the organization, rather than just availing their services at a lower cost.
As such, innovation is expected to play a huge role in furthering development of BPOs.Challenges:The political scenario around the globe is witnessing constant changes, and conditions such as war can adversely affect outsourcing in different countries.Customer satisfaction has proved to be a challenge for BPOs and with the advent of social media platforms, they face tough competition with regards to customer acquisition.BPO industry faces a continuous issue of operating on a minimal budget.
They have to get maximum output from a limited number of resources.Customer attrition also provides a huge challenge to the market, as the client may switch over to any BPO competitor, which is a significant cost to the company.Lack of talent and employee attrition rate are also significant challenges that the BPO industry needs to address.Access full research report on global business process outsourcing market: www.grandviewresearch.com/industry-analysis/business-process-outsourcing-bpo-market
