Four Pitfalls of BPO
Editor's note: this post was published in 2014. Be sure to also check out our 2021 blog post How BPO Leaders Can Use Automation to Improve Market Share.
Though the practice stretches back at least to the Industrial Revolution, outsourcing was formally identified as a business strategy in 1989. That year, Eastman Kodak chose to outsource the information technology functions of his company—a radical move, given that these processes provided the foundation of his business. Soon, however, it became obvious that Kodak was on to something. Rather than undermining his company's core competencies, outsourcing actually promoted growth.
Now business process outsourcing (BPO) has become a staple in the corporate world. As reliance on this strategy grows, effectively managing BPO partnerships grows more intricate and complex; while outsourcing once meant labor arbitrage, now companies are using BPO for a host of more sophisticated functions. But the approach isn't without potential drawbacks:
Lack of strategic alignment: It's crucial to select a BPO partner that fully understands and appreciates your company's mission and goals. That might seem unnecessarily lofty, but your company vision factors into every in-house decision you make, from the way you treat customers on the phone, to the people you choose to hire. If you're trusting vital business functions to an outside company, then that company's employees are, by extension, your employees. This is an especially important consideration when customer-facing functions are outsourced; with call center management, for instance. If the front-line employees of your BPO provider don't share your company vision, your customer service quality could suffer.
Financial instability: It's quite common that the BPO buyer is actually much larger than the BPO provider, especially when the provider is located overseas. Thus the need to thoroughly research the provider's financial stability is quite real; you'll want to find a partner who has an excellent track record and has the financial stability to offer a stable long-term relationship. Without conducting your due diligence, you could end up hiring a fly-by-night operation that won't fulfill its obligations, leaving you with the dubious recourse of international litigation.
Difficulty of scaling or adapting: Your business is constantly evolving. Meanwhile, it's also subject to market conditions and a host of other external factors. Thus your needs may change over time; you may shift your focus in a new direction or find that it's time to scale certain business functions up or down. Unless you've considered every contingency and built it into your contract, you may face challenges with scaling your BPO functions (especially if it's time to scale down).
Additional layers of communication: Even within your organization, you have multiple "layers" of employees: the C-suite, management (which may comprise multiple layers on its own), and your front-line employees who interact with clients and customers. That doesn't even include all the members of your team who perform back-office functions. In large companies, communication already takes considerable effort. Partnering with a BPO provider adds another dimension to this whole scheme; now, you must communicate not only with your team, but also with your BPO liaison. Then you must trust your liaison to accurately convey not only the letter, but also the spirit, of your message to the BPO provider's team.
Robotic process automation (RPA) has emerged as a clear favorite alternative to working with a BPO provider. RPA refers to the use of a computer program to manipulate and interpret other computer applications. For example, a company might use RPA to manage CRMs, ERPs, the help desk, or claim applications. RPA can be done completely in-house, eliminating some of the pitfalls of BPO:
Complete control: Because your organization drives and delivers your automation, there's no chance for an outside party to lose sight of your company's goals and vision.
Low cost: The cost associated with designing and implementing RPA generally costs a fraction of the typical BPO contract.
Versatility and scalability: A wide variety of business processes can be completed through RPA, and it's easy to scale up or down--without ever leaving the office.
Simplified communication: Your robot requires training only once. After that, every transaction is recorded in a detailed log, so you can easily access all data at any time.
As more businesses search for desirable alternatives to the traditional BPO partnership, RPA will undoubtedly gain wider attention in the enterprise community.
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