BPO, Contact Centre, Human resources, News, Outsourcing, theOutsourcing-guide

Multi-sourcing: When One is Not enough

The trend in outsourcing and BPO deals towards smaller deals continues. In managing smaller deals multi-sourcing offers significant benefits but there also challenges. The greater number of additional  vendors involved increases the level of complexity and management resources required to ensure the different parties work effectively together.

Businesses are no longer willing to sign up large outsourcing deals that span multiple years due to concerns over vendor lock in and the lack of transparency, among others, and best-of-breed solutions emerge as the better option. However, while a multi-sourcing model may offer benefits such as higher flexibility and less dependency on a single vendor, it can be extremely complex to manage and may require additional management resources that some companies may not have.

Additionally, outsourcing lets organisations convert a fixed cost into a flexible expense, and transfer risk and management to another party

Multi-sourcing allows organisations to employ the best vendor in terms of price and capacity for a particular activity. Multi-sourcing promotes competition among various providers.  Best-of-breed sourcing recognizes that providers have different strengths and weaknesses and carves out work best suited for each of several providers.

It can cut costs related to repetitive service contracts and improve quality. Vendors must bid more frequently because contracts are shorter, suppliers face more competition because smaller-sized deals mean that more vendors qualify to bid, and suppliers need to attract more customers in order to meet growth targets.

Scott Feuless, principal consultant with outsourcing consultancy Information Services Group, recently said, “The number of service providers each company uses will grow dramatically, driven by growing popularity of cloud in general and Software-as-a-Service [SaaS] in particular”.

These multiple companies need to be managed and monitored. The job is made more difficult if they are off shore and hard to travel to.  Governance requirements can greatly magnify in multi-vendor BPO and outsourcing environments.

In multi-provider environments the resources needed to manage outsourcing can cost between 4-15% of total contract value.

Organisations pursuing a multi-sourcing arrangement should craft strong internal governance strategies with regard to vendor relationships and share the details with all of their service providers to promote better cooperation and more seamless delivery of services across organisational lines.

There is more risk in depending on one or two providers as much depends on their capabilities and their financial strength, for example. With multi-sourcing the risks move into other areas, including cracks between service, security issues,  hidden costs with continued monitoring and renewal of contracts, and possible replacement of providers.

Multi-sourcing can limit the scope of innovation you can expect from an outsourcing relationship in regards to a particular business function or IT service. IF there’s a range of vendors who are focused on their small bit of the equation there’s unlikely to be enough incentive for any of them to view what they do from a broader perspective.

Partnering with a single provider who can assist in reshaping an entire business process from end-to-end, will offer greater scope for innovation. Rather than a series of smaller contracts focused on transactions.

Moving from a single provider to a multi-sourcing environment or vice versa requires some considerable adjustment to how you manage your outsourcing relationships. You must change your contract negotiation strategies, procurement practices, and the governance models for you outsourcing contracts.

I recently consulted with a client who had a single vendor for the lion’s share of the work that they outsourced. As additional projects were being outsourced they asked the vendor to become a ‘master’ vendor and manage (for a fee) the other smaller vendors. The problem was that they constructed a complicated and very legalistic contract that was never going to achieve what was intended. They basically set and forget and were relying on a legal document that ended up making the parties adversarial. In the end when it came around to renewal time the whole process broke down with the vendor having to be dragged kicking and screaming to the table to honour a deal that it was getting smashed on. Malicious compliance was the end result and it did not end well.

Multi sourcing provides companies with lower cost options to get their outsourcing service delivered. However multi-sourcing relationships’ must be maintained and closely monitored to deliver the best possible outcome.

Originally Published in the Sauce eNewsletter – theOutsourcing-Guide.com

theOutsourcing-guide.com is the ultimate reference guide for the BPO and outsourcing industries and it will become the most comprehensive resource for organisations looking to engage BPO and outsourcing providers. As well as providing a range of eBooks, articles and whitepapers explaining the various aspects of BPO, theOutsourcing-guide.com provides an online directory of providers segmented by category and location.

theOutsourcing-guide.com is a vehicle for vendors and service providers to showcase their organisations and the outsourcing services they provide. Visit theOutsourcing-guide.com for more information.

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BPO, CallCenter, Contact Centre, News, Offshoring, Outsourcing, theOutsourcing-guide

Are you talking to me?

Despite being the channel customers love to hate IVR (Interactive Voice Response) is still growing and is predicted to be worth $2.78 billion by 2017, according to a 2012 report from Global Industry Analysts (GIA)[i]. The growth is being driven by outbound IVR to deliver important notifications and proactive customer service functions.

IVR has had a mixed history, on one hand reducing call wait times and improving overall efficiencies and service levels, on the other, driving customers to switch to competitors.

We’re all familiar with the experience of having to navigate through a complex and confusing IVR menu to finally be put through to the wrong department or service or for the call to drop out. The experience leaves you frustrated. Badly designed IVR systems may have contributed to bad customer experiences more than any other channel.

Key areas in IVR development in recent years, that are altering the previous negative perceptions of this self-service technology, have been in Outbound IVR and Visual IVR.

Outbound IVR

Outbound IVR allows organisations to proactively and automatically engage customers through a variety of channels such as automated voice calls, SMS messages, email or social media posts with personalised communications. Providing immediate, faster and real-time information and services to customers Calls can range from personalised, event-triggered notifications and two-way interactions to broadcast messages to hundreds or even thousands of customers.

It can be used in a variety of situations including:

  • Sending emergency notifications,
  • Personalised offers and promotions
  • Travel-related notifications
  • Problem reporting
  • Change notifications (account status, billing, rates)
  • Shipping notifications

Visual IVR

Steve Morrell, founder and principal analyst of ContactBabel, an analyst firm for the contact centre industry, highlights how smartphones and tablets can give companies the option of offering visual representations of their IVR menus[ii]. This can enhance the customer experience as most people find it easier to read and select options in text and visual format than to listen to it being spoken.

Visual IVR presents customers with a menu driven interface to the IVR system which is available from a website or mobile app.  Visual IVR can be used to send video or push other content. This content can be educational or for marketing purposes or to assist the customer’s self-service requirement in some way.

Visual IVR allows companies to connect their traditional contact centre channels to new mobile platforms, enhancing their ability to serve customers. Visual IVR can be implemented with existing DMTF technology and IVR systems, requiring few modifications.

Originally Published in the Sauce eNewsletter – theOutsourcing-Guide.com

theOutsourcing-guide.com is the ultimate reference guide for the BPO and outsourcing industries and it will become the most comprehensive resource for organisations looking to engage BPO and outsourcing providers. As well as providing a range of eBooks, articles and whitepapers explaining the various aspects of BPO, theOutsourcing-guide.com provides an online directory of providers segmented by category and location.

theOutsourcing-guide.com is a vehicle for vendors and service providers to showcase their organisations and the outsourcing services they provide. Visit theOutsourcing-guide.com for more information.

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BPO, CallCenter, News, theOutsourcing-guide

Innovate or Die!

By Martin Conboy (theOutsourcing-guide.com)

“If change is happening on the outside faster than on the inside, then the end is in sight” Jack Welch, CEO, G. E. In fact, the world is changing so rapidly that organisations are struggling to keep up.

I always remember my first boss telling me that if you are not going forwards then you are going backwards! For businesses and economies to thrive and adapt to change they must innovate. These days, clients expect their BPO and outsourcing providers to be innovative in adding strategic value to the outsourcing contract. But how does one become innovative? Primarily, it requires a willingness to take risks. There is no guarantee that trying something different is a pathway to success, sometimes it means it just might not work.

In its early years, 3M aka Minnesota Mining and Manufacturing Company, was on the verge of failure. After years of mining losses management came to a crossroads. Close down or do something different. As Albert Einstein said, “If you want different results, do not do the same things.” 3M executives did what most successful executives do when faced with failure. They used it as an opportunity to find a new way forward. Today, the company generates billions in revenue and employs over 80,000 people.

What is the ingredient that brought 3M back from the brink of failure? While there are several candidates, the one that stands out is innovation.

Many organisations place innovation on their list of corporate values. However, much fewer actually have a culture in place that actively encourages it. Some organisations and industries are particularly risk adverse, preferring to rely on practices and traditions that have produced results in the past than invest in new ideas that might not succeed.

According to a recent McKinsey survey, innovation has become one of the top business objectives in organisations that want to grow, out perform their competitors and, indeed, even survive by creating a higher value proposition. More than 70 precent of senior executives said ‘innovation will be at least one of the top three drivers of growth for their companies in the next three to five years.”

Furthermore, leading strategic thinkers are moving beyond product innovations to innovations in business processes, distribution, value chains, business models and even the functions of management.

Another major barrier to innovation are managers and executives who are resistant to new ideas and suggestions from others, particularly from staff and employees. Internal jealousies stemming from turf wars, departmental or staff rivalries can make change very difficult to achieve.

McKinsey again, 65 precent of the study group expressed concern about the ability to stimulate innovation. Saying ‘mountain; and climbing it can be very different things.

Innovation is not about technology

There’s a tendency to think of innovation in terms of technical innovation. Though technology is important, it is only a part of the picture. According to best-selling business author, Scott Berkun, “Innovation is significant positive change”[i]. That change can apply to technology or to products and processes, or it can apply to people.

In terms of an individual business or enterprise, this could mean implementing new ideas, creating dynamic products or improving existing services. Innovation can be a catalyst for growth and success, helping companies and industries to adapt and grow.

Being innovative does not mean inventing. It means creating a culture of innovation and promoting innovative thinking and creative problem solving.

The drive for innovation

Businesses that are innovative create more efficient work processes and have better productivity and performance. Research from the Institute for Corporate Productivity in the US highlights how high-performing organisations are up to three times more likely to implement people practices that drive innovation[ii].

It’s not just individual businesses or industries that need to innovate to survive – it’s entire economies. The 2015 Intergeneration Report produced by the Australian government has highlighted the need for the Australian economy to create new industries and for existing industries to adapt to a changing Asia-centric world.

As a nation Australia needs to be a lot more innovative.

Being innovative

When outsourcing their business processes clients now expect innovation and for providers to add real strategic value. In fact the term innovation is bandied about so often that saying you are innovative is hardly a point of difference. The world has moved on from BPO 1.0 –lift and shift and clients want a value add that goes way beyond price.

Even very risk-adverse organisations will claim to be innovative. But being risk-adverse can be the main stumbling block to innovation. Relying too extensively on tradition and what has worked in the past will inhibit the ability to enact positive change for the future. “That’s the way we have always done it’ or ‘It’s policy” are attitudes that could be the kiss of death.

Developing BPO and outsourcing relationships that are focused mainly on avoiding risk with for the vendor or the client or both, will inhibit innovation and creative problem solving.

Be prepared to take risks

You’ll never be ahead of the pack if you don’t do something different from everybody else. This is not to say you should become reckless and invest in every idea that’s developed. You do need to develop a process for evaluating the risk and benefits of any particular initiative and decide if the potential benefits outweigh the potential risks.

A good example is Apple the most valuable company in the world. Apple has a program called ‘Blue Sky’ that lets a few select team members take a few weeks at a time to work on a favourite project. This frees up brainpower for innovation.

Collaboration and knowledge sharing

Innovation is not delivered by a single visionary within the company. Regardless of how innovative or visionary a CEO or director of the business maybe as an individual, that does not mean the organisation as a whole will be innovative.

Vital to driving innovation is greater collaboration and knowledge sharing, within the organisation and with external stakeholders such as partners and customers. Collaboration encourages discussion, new ideas being put forward, appraisal and revision of those ideas and greater awareness of the problems being faced by the organisation.

Each employee and stakeholder will have a unique perspective on a problem and are capable of developing a possible solution or suggestion to resolve it.

Driven and inspired from the top

It’s the responsibility of senior management and executives to ensure a culture of innovation is promoted, encouraged and supported throughout the entire organisation.

[i] http://scottberkun.com/2013/the-best-definition-of-innovation/

[ii] http://www.i4cp.com/productivity-blog/2013/04/02/i4cp-research-human-capital-practices-drive-organizational-innovation

theOutsourcing-guide.com is the ultimate reference guide for the BPO and outsourcing industries and it will become the most comprehensive resource for organisations looking to engage BPO and outsourcing providers. As well as providing a range of eBooks, articles and whitepapers explaining the various aspects of BPO, theOutsourcing-guide.com provides an online directory of providers segmented by category and location.

theOutsourcing-guide.com is a vehicle for vendors and service providers to showcase their organisations and the outsourcing services they provide. Visit theOutsourcing-guide.com for more information.

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Building Out-Come Based Pricing Models

By Martin Conboy 

pricingThe continuing rise in the number of contracts containing outcome-based pricing models provides obvious rewards and benefits for BPO buyers and vendors. But there are dangers and challenges where the vendor can be expected to take on all the risks.

Traditionally, outsourcing buyers and providers have engaged in sourcing models that were safe but suboptimal. Contracts, arrangements and pricing based on providing staff, materials or fixed capacity service delivery.

In the past, buyers approached sourcing as a way to access the right skills at the right price at the right time, without exploring the full potential of their outsourcing relationships. Meanwhile, providers have tended to play it safe by sticking to time and material manpower-linked growth models that do not necessarily maximise value.

Outcome pricing has accelerated strongly in recent years, across industries, both as a response to rapid commoditization and as a strategy for increasing value capture and margins. Outcome based pricing mechanisms cannot only help to combat commoditization, but to create customer value.

For BPO and outsourcing relationships to help clients innovate and add value to their organisation, the contracts need to contain outcome-based pricing models. Outcomes based pricing means the customer contracts and pays for business results delivered by the provider, rather than for defined activities, tasks or assets. The contract focuses on the desired outcome of the work to be performed rather than how it will be performed.

What is Gainsharing?

Gainsharing is a system that includes (1) a financial measurement and feedback system to monitor company performance and distribute gains in the form of bonuses when appropriate, and (2) a focused involvement system to eliminate barriers to improved company performance. Gainsharing systems vary widely in terms of their design and the degree to which they are integrated into the regular operating systems of the company. Of course, the more they are integrated into the day-to-day operational systems, the more commitment there is to the Gainsharing system. And, the more commitment there is to achieving overall business goals (including the Gainsharing goals) the better the resulting performance is.

Shifting control and risk to the provider

This shifts control and risk to the service provider. But it also means that if the provider builds a more efficient way of delivering the same results, it will be financially rewarded for its innovation. Traditional input based pricing is safer and easier to manage and understand from the vendor point of view.

If the contract states that 50 FTEs will be provided for 40 hours a week for 12 months, to manage all inbound customer service calls, there is no incentive for the provider to innovate and provide better service with fewer staff. The model is built around a fixed cost per agent per hour with all of the know costs factored into that hourly rate. Thus rightly or wrongly KPIs like average handling time (AHT) become the main measure for success and efficiency.

The client doesn’t want 50 people answering phones as such, they actually want their customers to have their issues resolved quickly and efficiently,( First Call Resolution) but they do not have all of the necessary resources, skills and capacity to allow that to happen. It follows that if AHT is a key performance indicator many clients are going to not have their issues resolved to their satisfaction and consequence may have to call back to get more assistance, thus driving costs up as the BPO has to handle additional calls.

Leaving it up to the provider to decide how it will deliver on the customer requirements and being rewarded for innovation, means it has the incentive to develop and improve how the service is delivered.

With outcomes based pricing, however, the service provider must assume a great deal of risk since it does not have influence over all aspects that impact its ability to achieve the outcome. And the amount of risk increases significantly when the outcome is higher up on the value chain. In the above example the provider does not have control over every channel or interaction with the end consumers. Something the client does, or something generally in the market, or anything beyond the control of the provider could impact the delivery of the service.

A true partnership is required

For a pricing model to be successful, it should strike the right balance between the customer’s expectations of quality, timeliness and price, and the service provider’s cost and operational efficiency. Customer engagements may not be successful with one type of pricing model every time. it’s a journey for both the parties to explore based on best fit for the scoped services and engagement models

For outcomes based pricing to work the two different organisations need to know more about each other and trust each other as partners. The vendor needs greater understanding of the industry and markets the client operates in, as the vendor is now potentially exposed to the threats and challenges of the clients business.

A deeper partnership approach to outsourcing relationships is required. Outcome based sourcing engenders a greater level of dependency on the service provider. The buyer needs to understand the level of risk that the provider must accept to help the customer achieve the desired business outcome.

Buyer and provider need to work closer together in a partner relationship where there is strong governance and relationship management. This will entail greater collaboration and longer contracts that can change and adapt over time. Both organizations must work towards a position of Interoperability and have the ability of making systems and organizations work together.

The days of a client simply throwing their BPO challenge over the fence and making their problem someone else problem for a cheaper price are well and truly over.

Originally Published in the Sauce eNewsletter – theOutsourcing-Guide.com

theOutsourcing-guide.com is the ultimate reference guide for the BPO and outsourcing industries and it will become the most comprehensive resource for organisations looking to engage BPO and outsourcing providers. As well as providing a range of eBooks, articles and whitepapers explaining the various aspects of BPO, theOutsourcing-guide.com provides an online directory of providers segmented by category and location.

theOutsourcing-guide.com is a vehicle for vendors and service providers to showcase their organisations and the outsourcing services they provide. Visit theOutsourcing-guide.com for more information.

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