Adopting the right business process outsourcing model

Adopting the right business process outsourcing model

A B2B (business to business) engagement is generally understood to be a customized arrangement between two equals who know what they want and how to go about getting it. They enter into a business arrangement, usually covered by a legal contract, through which both hope to create value for their respective companies. In most cases one is a client and the other the provider, though alignments and partnerships, such as joining the features of two complementary products to offer a wholesome product to clients, are not unusual.

While the above holds true in most cases, thanks to the rapid spread of technology and large technology corporations offering products and services needed by many companies, now there are many examples of smaller companies accepting the standardised terms offered by a large technology corporation for the use of their product. Accept it or look for another product. They don’t have the time to negotiate each contract individually.

This, the need for doing it faster so that you can do more, exists in the negotiated contract space as well. The company has not been created to spend senior management time negotiating legal contracts with business partners. They have a product or service to create and sell and that is where the focus ought to be.

This is where models come in handy.

What is a model?

In the context of business, a model could be referred to as an arrangement that, on account of its suitability to the parties involved, has been used and replicated a number of times. Given certain conditions that make it suitable, it serves as a good starting or reference point on which other, similar cases could be created.

The business outsourcing industry, thus, could also be referred to as the business process outsourcing model. Once discovered, and used successfully by some, it has been repeatedly replicated by many others. This is not unique to the business process outsourcing (BPO) industry. It is applicable to all industries and situations that can be repeated by others. To elaborate the point, the life insurance industry model could be the pooling of risk by calculating the probability of death and charging a premium to participants for paying out in cases where the event occurs, or someone dies. Many different companies offer their products and services based on this broad model.

With its focus on data-based services, oWorkers has worked on over a hundred different client engagements and evolved suitable models that create a win-win situation for both. An example is the option of input or output based pricing, with the choice resting with the client. oWorkers is recognized as a top three provider in this segment.

 

The core business process outsourcing model

Many successful business models are based on following natural needs and requirements of humans. Artificial needs and aspirations can also be created, but are more difficult to sustain.

As we perhaps already know, business process outsourcing is the outcome of man’s quest for seeking efficiencies and value in all activities he is engaged with, whether in the personal or work sphere. While the informal outsourcing of processes has been carried out from time immemorial, formal business process outsourcing is a more recent phenomenon, perhaps a few decades old, and already a flourishing and growing industry.

Search for value is a core building block of a business, as much as it is of an individual. BPO creates value for a business in many different ways. Some of them are:

It enables a company to focus on its core work, while handling the support functions

With its specialization and expertise in those support functions, since it is a revenue generator for the vendor, it is able to perform them better than the client, for whom it is a cost that needs to be handled while pursuing its own revenue stream in its core business.

With its hiring and training engine, a BPO is able to ferret out talent pools that are inaccessible to most companies. These talent pools are made up of less expensive resources, who are then taken in hand by the training teams and polished to make them fit for handling the client’s business.

As they do not need to be in downtown and high street locations, BPOs can operate from cheaper locations, creating a cost advantage for the client.

Many clients testify to significant savings, up to 80%, when they outsource work to oWorkers. The inherent capability of the oWorkers team, such as the ability to hire temporary resources, creates savings in many different ways that are difficult to quantify. oWorkers can hire a hundred additional resources in 48 hours, obviating the need to maintain a bench that the client needs to pay for.

 

Business process outsourcing model – contract types

There are a number of different contractual arrangements that could exist between the Client and Vendor in a BPO relationship. While each contract would be customized to the unique requirement of the Client and their relationship with the Vendor, as is bound to be the case in any B2B (Business to Business) engagement, there are a few standard formats that have emerged over the years the industry has operated. These can now be adopted by the two parties involved, with relevant customization, saving much time and effort, as these are the arrangements that have been known to work.

Input based model

As the name suggests, the focus here is on the processing capacity that is made available by a BPO partner. In many cases this translates to defining the number of people made available by the BPO. The requirement of people is calculated by the client based on their past experience, with some adjustments considering that the work will be done by an outsourcer. The requirement is further broken down by day of the week and hour, again usually based on the client’s past experience.

The most common method of specifying this requirement is in terms of FTE, or full-time equivalent resources. If factors like leave and absenteeism need to be factored in, that is usually to the vendor’s account. Moreover, it cannot be ‘anybody’ who qualifies as a resource. The skill level and other qualifications required are also specified.

Though this may sound like an arrangement where the vendor works as a recruitment partner, it is much more than that. The specification of required resources is to cater to the expected volumes. The vendor also has responsibility for the performance of the resources being provided. While the client is actively involved in the operations, the contract usually has rewards and penalties based on the team’s performance.

The vendor needs to put in place a management structure, like supervisory staff to manage the frontline resources specified by the client. Some contracts will have the supervisory staff also specified while others, having specified the performance levels, will expect the vendor to put in place the requisite structure.

With its reputation as a preferred employer, oWorkers attracts a steady stream of walk-in job applicants. It prefers to work with employees, and not contractors and freelancers as some of its competitors do. This creates flexibility in deployment and creates a supervisory layer of committed resources.

Output based model

The name makes this business process outsourcing model reasonably clear. The focus here is on production, or the output. The expectation is that the commercials will be based on the output, and not the input or resources provided by the vendor.

But how does the vendor know what to expect? After all, he does not own the business being supported.

That is right. The client will provide an indication of what to expect. In a call center scenario, for example, the client, based on past trends as well as their new initiatives, will provide an estimate of possible calls to be received. The vendor is expected to handle within a given range of the forecast, with penalties for breaching the minimum and rewards for handling more than the peak of the range.

The volume-based arrangement, once again, is overlaid with performance standards. While the volume drives the arrangement, performance standards are also important.

oWorkers is well equipped to expand and stretch time to maximize output. All its centers are equipped to operate on a 24×7 schedule if required. Time zone differences also, sometimes, enable overnight processing of work.

Outcome based model

This is considered by many to be the ideal outsourcing contract which is based on performance and little else. It is believed that the input and output models are stepping stones till the relationship reaches the outcome model, which is also called the performance-based model. The focus is on business results, not an interim surrogate.

In truth, however, business processes are so inextricably linked to many other variables on the client side of the fence that this model often gets ruled out. Continuing with the call center example used earlier, if the client introduces a new product, it could enhance incoming call volumes and if the client finds a fix for the problem customers are calling for, volumes could suddenly drop.

While popular in the ‘product’ outsourcing space, they often meet with resistance in the ‘service’ outsourcing world, even though many consider this to be the purest arrangement.

With its partnerships with technology companies having survived and flourished over time, oWorkers can access the latest technologies for client projects. This creates good outcomes for all parties involved.

 

Business process outsourcing model – ownership

A number of models have been tried with respect to the ownership of the entity actually doing the outsourced work, with the two natural choices, of using a third-party vendor and of doing it under the same company, have remained the most viable. The ‘same company’ model has evolved and offers different options.

Third party

This is the preferred model whenever a dipping of toes in the water is required before diving in. As the industry has expanded, outsourcers have mostly relied on established BPO providers to initiate the activity. This has helped them overcome challenges of lack of familiarity with the delivery location, identifying resource pools and other administrative issues.

Third party providers have continued to excel and grow. Many large corporations have continued to trust external providers with their work, despite occasional challenges of data integrity and decision-making delays. It has a major advantage in not taking away management time on support activities.

oWorkers operates from super secure facilities and protocols. They are ISO certified (27001:2013 & 9001:2015) as well as GDPR compliant.

Owned

The beginnings of the industry were probably under this model, when the companies engaging in business process outsourcing may not even have realized that they were seeding a future industry.

The objective, at that stage, was to take out non-customer-facing activities from the expensive downtown real estate and establish them in a less expensive location. It had a side benefit of attracting resources that were also less expensive. At that stage, not much thought was presumably given to the models of ownership that might be suitable.

With a policy of multi-cultural and multi-ethnic employment that is in place, oWorkers is able to support its clients in 22 languages.

Independent company in the group

Over time, this business process outsourcing model seems to have emerged as one that is preferred by the large corporations. It is a variation of the ‘owned’ model, with the major difference being that the work is outsourced to an independent company with its own identity even though the eventual ownership perhaps lies within the same group as the outsourcer.

The advantage is that it provides an opportunity for the outsourcer to distance itself from the vendor, as it is a separate company, while getting at least some benefits of common decision-making. It also gets the benefit of a lower cost operating model.

With global transaction volumes rising and many large corporations getting larger, there is enough volume for many of them to justify an independent entity only for handling their outsourced business processes.

oWorkers boasts of a committed and satisfied workforce. They get reviews from staff, both past and present, that generally rate them 4.6 or more on a scale of 5.

Build Operate Transfer (BOT)

This is another hybrid model that has been adopted by some.

The client eventually intends to adopt the ‘owned’ or ‘independent company in group’ model but has hesitation on account of a lack of experience in this line of work as well as lack of familiarity with the terrain. They engage with a third-party operator to set up a niche, dedicated delivery unit for them, with some understanding of eventual transfer of ownership to them.

This gives them adequate time and opportunity to understand the model before they end up owning it. Of course, there might also be some escape hatches built in in case they wish to not take it over when the time eventually arrives.

Several unicorn marketplaces around the world trust oWorkers for their BPO support requirements. We hope you will, too.

 

Final words

Whatever be your choice of the business process outsourcing model to adopt, oWorkers stands out as a credible provider and all-weather BPO partner.

They have employed many youngsters from the less privileged sections of society and given them an entry ticket into the global digital economy. Your outsourced work could enable them to engage a few more.

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