What is in this article?:
- Changing BPO Value Proposition through Technology, Part 2: Evaluating Labor vs. Technology Models
- Business Case
The increasing availability of BPO vendor options creates an exciting yet confusing opportunity for more impactful optimization through outsourcing and automation.
This is the second in a series of three articles. Read Part 1 here.
It’s never been easy to select the best business process outsourcing (BPO) provider—even the biggest BPO success stories have asterisks based on transition challenges or lengthy “burn-in” periods during which the buyer and outsourcer gradually adjust to the outsourced scope as well as each other’s style, capabilities and culture. With the emergence of more providers and technology-enabled alternatives to the traditional labor-based approach to BPO, the landscape is becoming even more complicated. Buyers of outsourced services today must figure out who is the best provider as well as navigate a confusing, multi-variable decision process that includes choices about approach (e.g., automation vs. labor-based outsourcing) and phasing.
The good news is that this evolution of outsourcing options provides buyers with more ways to reduce cost, improve service quality and generate value. While the Business Process as a Service (BPaaS) marketplace continues to mature, it is beginning to provide very viable solutions to either augment the traditional labor-based service model or replace labor altogether for certain activities. This innovation allows providers to deliver differentiated solutions that appeal to a broad array of clients and to remain profitable despite increasing offshore wages and additional competition.
When determining whether to select more traditional labor-based outsourcing vs. a technology-based outsourced solution, it’s important to understand that the two aren’t mutually exclusive. There are a number of similarities between the two approaches, and there may not be a wrong answer, just different flavors of “right.” The approach to selecting both is broadly the same, and both types of scenarios can be evaluated and accomplished through the same competitive sourcing process. As buyers begin to evaluate the available options, there are a number of considerations to bear in mind.
Throughout this article, accounts payable (AP) examples will be used to illustrate points, given the broad applicability of AP and the maturity of AP outsourcing and technology solutions.
Scope and Scale
A key consideration that will heavily dictate approach is whether optimization is desired as a “point solution” or as a component to a broader transformation and outsourcing initiative. If the nature of the required optimization is very specific and there is a technology solution available to automate that particular activity—such as an intelligent data capture solution for invoice data entry—the approach may become much more straightforward since BPO providers with broad, multi-tower capabilities will likely not be interested or fail to provide a competitive solution unless there is a critical mass of resources currently providing those services (e.g., dozens of invoice processors).
One Relationship vs. Many
For many enterprise-level outsourcing decisions, however, the opportunity to truly automate activities applies only to a portion of the potential scope considered for outsourcing. This requires a decision, therefore, to either (1) engage multiple services providers for the full scope of work, (2) engage a single provider to perform the full scope of services and rely upon that provider’s technology solutions, or (3) require that the traditional BPO provider partners with a BPaaS provider to deliver a comprehensive solution. This decision can be made as the result of a structured competitive selection process, where a modular request for proposal (RFP) allows providers to respond to one or more of the scenarios presented above.