Integreon

Arpit Kaushik recently authored an insighful article, Making sense of Offshore Outsourcing 2.0 (published in CIO UK, 28 August 2009; and originally in CIO US, 13 January 2009), identifying five principles for outsourcers who want to move to “Outsourcing 2.0″, which represents next generation outsourcing.

Making a correlation with Web 2.0, Kaushik’s five principles for Outsourcing 2.0 include:

1. Offshore implemented as a platform rather than as the delivery channel,
2. Globally syndicated delivery networks,
3. Rich user experience: Success as the measure,
4. Rich user experience: Relationships, not complex contracts, and
5. Engagement as a conversation: Co-creation, not blame-game.

These principles paint a clear roadmap for Business Process Outsourcing (BPO) companies that want to move to the next stage of outsourcing evolution. Clear as Kaushik’s roadmap is, however, it’s a map for outsourcers, not for business managers.

Kaushik is absolutely correct that for outsourcing to be truly effective it needs to be pervasive and syndicated across the firm as a single, integrated approach rather than a series of disconnected initiatives. To achieve this outcome, the planning and analysis needs to be done at the C-Suite level. The problem is, the C-Suite does not focus on outsourcing; rather, it focuses on core business issues.

This distinction may seem subtle but it’s important. C-Suite executives generally receive staff recommendations tied to specific projects or functions. Whatever they need to move their business forward - building a new building, adopting a new technology, expanding the workforce, or even outsourcing - executives assume that staff have worked out the details reliably. But with the thinning of middle management, not just in this recession but over the last decades, the assumed attention to detail may only hold true with the help of a business partner who can augment these due diligence efforts and then translate them into strategic C-Suite business terms.

Rarely does the C-Suite see their organization as being confronted with an outsourcing problem. Instead they may see unrelated problems to solve or opportunities to pursue, for example, the rise in secretarial costs that needs to be controlled, an unprofitable product that has too many loaded costs, real estate constraints limiting the growth of their workforce, or the need to fix a recurring budget overrun. They do want a solution that works and is complete.

Kaushik ’s last three principles perfectly articulate these needs within the new wave of outsourcing. To be realized, BPOs must first establish a level of trust that quickly goes beyond metrics and penalties and rises to a holistic level that focuses on how the business should work. What this means is moving the conversation away from short term horizons (e.g., did we meet this month’s metrics), to more important business issues (e.g., are we fully supporting the client’s 2010 revenue goals). To achieve this, both outsourcers and customers must work at a higher level than in the past. They need to go beyond a traditional vendor type relationship, often characterized by “hand off” delivery processes, and instead mold a deeper business partnership using integrated, tandem processes.

To achieve such tight integration as well as the full benefit of outsourcing, customers and providers together should begin by considering how an existing or prospective outsourcer performs in three key areas beyond Kaushik ’s five principles:

1. Focus on just a few markets: There are subtle and not-so-subtle differences in how similar services are supported in different industries. A BPO needs expertise in specific industries, otherwise solutions will be crafted that take too long to get “just right” and may miss critical opportunities. So customers need to make sure their provider has the right industry experience and expertise.
2. Provide the services your markets need: No single BPO can perform every task for every client that every market asks for. Some big BPO’s focus on a single service such as Word Processing, or Accounting… which is perfectly fine. But providers who want to offer the synergies that the C-Suite demands need domain expertise across multiple service lines. So customers must make sure they assess the full range of provider capabilities.
3. Support offshore, onshore and onsite strategies: Kaushik is right to say that outsourcing is “not about ‘which’ shore you use”. But if a provider is going to fully provide for the outsourcing needs of a big client, it must have multi-shore capabilities. Clients don’t necessarily come into an engagement knowing that they need support from a variety of geographies. Yet, once the program is underway, details may emerge that the C-Suite did not anticipate, for example, national privacy laws, internal security regulations and the cultural history of a firm all come into play when designing specific programs. A BPO that lacks all of the right locations lacks all of the right tools to fully service the client. So customers must consider the range of geographies and locations, including onsite, over which their provider operates.