Causes for failures in business process outsourcing

Causes for failures in business process outsourcing

“That which does not kill us makes us stronger.”

This phrase is attributed to Friedrich Wilhelm Nietzsche, the profoundly influential German philosopher, cultural critic and philologist, though people may be more familiar with the rendering of that phrase by American musician Kelly Clarkson in her song titled “Stronger.”

What is the relevance of this phrase in the context of business? Or in that of the business process outsourcing business, to be more specific?

Businesses and companies are subject not only to man made laws that govern them but also the immutable laws of the world that guide all of us.

One of these laws specifies that nothing in this world can be taken for granted. What happens tomorrow, or the minute after, is subject to a million permutations and combinations. I write this just a day after Rafael Nadal pulled off an astonishing victory in the Australian Open tennis tournament against a 10-year-younger Daniil Medvedev after being two sets to love down.

All companies are set up for success. But do all succeed? Failures in business and failures in business process outsourcing are par for the course. They happen. According to Forbes, 9 out of 10 startups will fail. Even after becoming a small and medium enterprise.

To take a philosophical view, this is a part of the great game, the constant roiling and churning, between humans and entities like companies, trying to jostle for space, gain attention, be successful, get a bigger slice of the pie. The trial by fire that sometimes produces gold. Other times, the fire consumes it. And sorry, this is the free market. Everyone cannot have a slice that is of the same size. The world has experimented with such systems and so far, doesn’t seem to have an alternative to the free market system.

Being a part of the system, BPO cannot be aloof to the governing forces. Some estimate that half of all business process outsourcing arrangements either fail outright, which means either the client withdraws the contract or the provider terminates it, or operate under extremely stressful conditions to eke out a breakeven. Either way, the cause as well as the result is their inability to meet the conditions under which the contract was entered into. Nobody wins.

Learning from the early challenges it faced, oWorkers has rapidly established itself as one of the premier service providers in its chosen area of data-based services. Establishing itself as one of the top three providers in the world within eight years is a creditable achievement.

But there are always reasons for failures in business process outsourcing. Human beings are good at reflection and analysis and explanations. It is another matter whether they will be able to use that analysis and reflection to their advantage the next time or not.

 

No entry barrier

One of the challenges with the initial growth of the BPO industry has been that it did not offer any key skill or knowledge, or intellectual property, or invention, or complexity, or anything else which could serve as a protective barrier around it. The success of the industry was, in fact, built on its simplicity and its ability to break down complex processes into bite-sized chunks that could then be carried out without the need to acquire complex skills or knowledge.

There were, therefore, no entry barriers for anyone to set up a BPO delivery business. While that did not guarantee success, the setting up of the business could be done without much fuss.

This resulted in BPO being viewed as a low-hanging fruit by many people looking for opportunities for investment and business. This also resulted in an over-supply with delivery centers being set up that were barely utilized. The inability to create entry barriers should be considered as one of the failures of business process outsourcing.

oWorkers has seized the opportunity presented by the shifting trends in business. In addition, it handpicked the three locations in Egypt, Madagascar and Bulgaria for setting up its delivery centers from where it serves customers around the world. All three are able to operate on a 24×7 schedule when required.

 

Mismatch of expectation

All actions of a company, being an artificial entity, are deliberate. Each action has a purpose. It is designed to move the company towards one or more goals.

From a client’s perspective, while there are many good reasons for business process outsourcing, the outsourcing decision is taken in search of value. Hence, the expectation was that it would either be done better or at a cheaper cost, or both.

And, if you were the client, if you had a simple process and a complex process, which one would you outsource, or outsource first? The answer is pretty straightforward; the complex one. The monkey goes on to someone else’s back.

From the vendor’s perspective, while they did not have a prior history of doing the job, at least for that client, it was an opportunity being offered to value seekers from the developed world initially, for doing the same work at a fraction of the cost. As there were no entry barriers for new providers, in the face of competition, many providers ended up making commitments without fully thinking through the ramifications, trying to scale up now while pushing the profitability perspective to the future.

oWorkers offers a ‘pay how you want’ option to clients which many find difficult to ignore. They have a choice between the ‘input basis’ and ‘output basis’ pricing options. In any case, the saving of almost 80% of pre-outsourcing cost is a great incentive to choose oWorkers.

 

Reducing tariffs can cause failures in business process outsourcing

In the global scheme of things, with advancement in the telecommunications space, accompanied by the expansion of the internet, BPO services spread to the far corners of the world. A business could be located anywhere and be serviced by a provider anywhere in the world.

The initial result of this opening up was that work started moving from the more expensive, developed parts of the world, to the less expensive and less developed parts of the world, which has been one of the great successes of the industry.

Global corporations moving work to less expensive locations in search of savings were satisfied with even small savings on their legacy cost. This resulted in attractive pricing for providers and attracted both investments as well as talent for employment.

Over time, however, as they got wiser, and also in search for the next round of savings, the pricing gradually became less attractive. This inhibited the ability of providers to invest as well as attract capable talent. It eventually became a tightrope walk between profit and loss and between good quality and bad quality.

From the client perspective, occasionally, their greed to extract maximum value could end up killing a golden goose.

With a transparent pricing structure and efficient operations, oWorkers offers a compelling proposition. When the underlying variables of pricing cause the price to increase, clients often have no issue in agreeing. Similarly, if the pricing can be reduced for the same reasons, oWorkers offers a share of the reduction to clients.

 

Failures in business process outsourcing due to lack of experience

We know that the world is not a free-for-all. A doctor cannot one fine day turn up at the site of a bridge under construction and start directing proceedings. An accountant cannot, on a whim, showup at the court to present arguments for a petitioner. A Math teacher cannot be an effective teacher of Biology. A cobbler cannot become an auto mechanic overnight.

Skill, knowledge and experience count for something. Quite a lot in fact.

While the BPO strategy of deskilling jobs is well understood, and perhaps in business there is value for such an offering, what they miss out on are the skills, knowledge and nuances that come with education and experience. And, whether we like it or not, there is no shortcut for experience and education. One has to go through the process.

In fact, another fact is that if the work for so standardized that it did not require any thinking, smart organizations would have already automated it. It exists as a human process because it is expected that some thinking, some discretion, some judgment will go into it.

With its position as a preferred employer, oWorkers is often flooded with job applications. This gives them the ability to select the most suitable candidates for different client projects. They are then shaped by the dedicated training team for project related skills.

 

Clash of cultures

Can a call center worker situated in the Philippines really understand the challenge of a customer caught in a freak snowstorm in the US Midwest calling in for help as her car has stalled, really understand the predicament of that customer and the urgency? The worker has never experienced a snow storm, or falling snow. She lives in a tropical country where typhoons and hurricanes are the cause of distress.

Can a call center worker in India understand the shrill cries of a caller expressing the urgency of getting his internet fixed since the Super Bowl is about to start? The worker’s knowledge of sport is confined to cricket, which is popular in India.

Admittedly, such cases might be limited to work that involves interacting with customers. However, call center work comprises a large part of outsourced work. It is voluminous and is supported by technology that facilitates tracking, two necessary conditions that often make it a ‘no brainer’ for outsourcing.

Many failures in business process outsourcing have been attributed to this clash of cultures. It has been reported that some companies have reinstated their domestic contact center arrangements in order to reduce the dissonance caused to customers because of a lack of understanding of their situation, and sometimes even their language and accent, by an operator halfway around the world.

Having adopted an employment-based model and not one that depends on freelancers and contractors, oWorkers is able to work with people for much longer periods. This enables greater success in cultural alignment with client needs but also provides opportunities for growth to staff members.

 

Nature of work

Let us face it; the client will have a tendency to outsource work that they may not want to do themselves, for many different reasons.

Sometimes the work is mind-numbingly monotonous and boring and can cause errors through sheer boredom. This can, perhaps, still be handled by providers through different engagement strategies.

More harmful is the type of work that could potentially leave psychological scars on the worker. In fact, these appear to have increased in volume over the last few years. As an example, the growth of social media adoption has spawned a new role, that of community moderation, that perhaps did not exist ten, or fifteen years back. People anywhere can post anything on social media, which is part of its appeal. However, operators and website owners have a responsibility to keep the medium suitable for mass use, apart from, of course, safety concerns arising from abusive and hateful content. People appointed as moderators, and most of this moderation happens through BPOs, often face challenges over a period of time, leading to possible failures in business process outsourcing.

oWorkers is equipped to handle a wide variety of work, including supporting 22 languages. This allows them to become a partner in growth for their clients.

 

Political environment

With its ability to generate employment in less privileged communities, BPO finds favor with politicians who see it as an opportunity to reduce unemployment in catchment areas. Governments also cater to creating enabling conditions for BPO providers to emerge.

The business runs the risk of becoming dependent on these enabling conditions and inured to the harsh realities of the free market. This can cause disruption when the political environment changes, leading to a change in the enabling conditions.

Similarly, the political environment on the outsourcer side can also influence the volume of work being outsourced. A few years back there were claims of BPO taking away jobs from some of the developed nations, leading to business process outsourcing coming under the lens of regulators to the extent of penal provisions being considered.

Wherever it goes, it brings the best technologies into play as a way of repaying the trust reposed by the host locations and clients. oWorkers is ISO certified (27001:2013 & 9001:2015) and GDPR compliant. Its relationship with technology companies also gives it access to the latest technologies.

 

Employee management

Being a people dependent business, management of people acquires critical importance in a BPO. Right from hiring, to training, to ensuring alignment with a job that matches the individual’s skills and aptitude, to creating an environment where she is comfortable and empowered to speak up and seek redressal for issues that bother her, all aspects of people management are important.

That is where dissonance often happens.

Being volume driven, with the revenue generated from each employee being limited, the ability of many BPO companies to pay personalized attention is limited. Their ability to evaluate before hiring, provide training support, all gets driven by the business model. Often employees have nowhere to turn to in case of need. This increases attrition, which increases the need to hire more people, which increases the cost. It becomes a self-fulfilling prophecy.

Eventually it becomes self-defeating. Many failures in business process outsourcing can be traced back to inadequate attention to people.

Employees, both past and present, rate oWorkers 4.6 (on a scale of 5) or above on independent platforms like Glassdoor. oWorkers pays social and local taxes for its staff members. Jobs in oWorkers provide local community members an opportunity to become a part of the digital economy of the world. Your work will enable a few more to get the opportunity.

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