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Matthew Banks on January 11th, 2010 at 4:05 pm :
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by Matthew Banks
Boston based consulting firm Vantage Partners has published a White Paper, aimed at law firms, entitled Easy Mistakes to Make When Making Decisions About LPO. The Paper contains several pertinent market observations and useful recommendations for law firms, both at a practical and strategic level. I have selected a handful for comment (text copied from the Paper is in italics):
- In-house law departments are leading the way in the exploration and experimentation with LPO. And even where law firms are getting involved… Most law firm experience is centered around serving a particular client who has insisted in the use of a lower cost resource for some of the work. This is indeed true for most, but not all law firms. We are seeing more law firms folding LPO into their offerings and into their model. Recent examples include the Allen & Overy offshore document review option and the move by Simmons & Simmons to set up a core team in India. Most of this activity is from U.K. based firms. In addition, a number of US AmLaw 200 firms have set up either formal or informal LPO “investigatory committees”, as they conduct a due diligence process aimed at selecting one or more preferred LPO providers.
- The LPO industry is still relatively immature, populated by many small providers who may not have significant staying power and who do not, in fact, offer the usual outsourcing benefits in terms of scale, technology investments, or process expertise. An industry that in its formative years was characterized by the emergence of numerous, boutique providers, is now beginning to scale up and consolidate in order to meet the increasing sophistication of AmLaw 200, U.K. Top 50 and Global 2000 procurement. Although the market is still comparatively nascent, a handful of leading providers has pulled away from the rest of the pack in terms of their experience, scalability and infrastructure. Maturing providers combined with increased market activity and acceptability make now a great time for many law firms, used to following not leading, to examine LPO.
- Lawyers will generally be unable to shed responsibility for the quality of the work carried out by the LPO provider, even when the client has selected the provider and foisted it on the law firm. The structure for contractual relations and liability can vary. In some cases, the client will contract directly with the LPO even where a law firm is involved. In other cases, the law firm will be the aggregator who subcontracts to (partners with) with the LPO. In the latter scenario, the laws firm will have contractual recoverability from the LPO subject to any agreed limits on liability. We find that “risk” (reputational and financial) is a major part of any dialogue with law firms and should not be shied away from, but rather addressed and resolved head on. Quantifying risk (or lack of it) is very important, from the selection of suitable tasks for outsourcing through to transparency into the workflow process and quality regime. A robust documented and defensible process provides visibility into exactly what is being done, how and by whom, which means that the risk can be mitigated and managed. Risk management is something that Vantage has highlighted in their Paper.
The Paper goes on to list typical mistakes that law firms might make when they consider LPO:
- Failing to understand what your clients are really asking for. Be prepared to address a client desire for strategic transformational change. Procurement departments of major corporations and banks are getting involved in purchasing legal services. We see this in more and more RFPs. It’s not just the delivery of services that is changing but the way they are procured.
- Grudgingly accepting LPO when a client forces it upon you. It is easier to obtain quality outputs from an LPO provider if you enter into the relationship in a collaborative fashion rather than as the result of being coerced by your mutual client. It is even easier to do a quality job and get some credit for being responsive and innovative if, when asked by a client about LPO, you can identify some providers with whom you have already established a relationship and perhaps even have run some successful pilots. One hopes that all providers prioritize the best commercial and legal interests of the clients! Fortunately we experience highly collaborative working relationships with law firms. We also ensure that our documented process (which is approved by the client and law firm prior to project start) includes a pre-agreed communication and collaboration regime with outside counsel so this joint effort is not left to chance.
- Thinking you have to “own it”. There are “best friends” relationships or networks that can serve as good alternatives and don’t require a large capital investment. There are providers who can leverage economies of scale and process expertise to deliver a reliable and more flexible managed service and do so under fairly stringent service level agreements. At any scale, there are challenges with the captive model. Ownership and control are not the same thing. The unwinding of captives in the financial services sector is a warning indicator. See blogs at http://www.integreon.com/blog/cat/captive-v-3rd-party.
Filed under Captive v. 3rd Party, Knowledge Outsourcing (KPO), Legal Economics, Legal Outsourcing (LPO), Onshore v. offshore, Outsourcing Tips
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Mark Ross on November 30th, 2009 at 1:20 pm :
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Last week saw the release of the latest ValueNotes report, Legal Process Outsourcing: Crisis Creates New Opportunities for LPOs (November 2009), regarding the state of the LPO industry and representing the analyst firm’s third detailed research publication on this now fast maturing market. Following the predictions and postulations recorded in their prior reports, Offshoring Legal Services to India (2005) and Offshoring Legal Services to India, an Update (2007), what can we glean of Value (pardon the pun), from their most recent biennial LPO coverage? Here is my assessment of the report’s findings.
Impact of the Financial Crisis
The 2009 report’s release, and no doubt the time period during which the research was undertaken, coincides with a period of financial turmoil in both the wider global economic community, and of course the legal profession. When the 2007 report was released, Bear Stearns and Lehman Brothers were apparently in robust financial health, and the term “subprime” was hardly commonplace in day to day business speak. Profits per equity partner were at an all time high, new associate starting salaries at the AmLaw 50 were knocking on the $200,000 door and the concept of deferred start dates was simply unthinkable. How times change.
Without proffering novel information, the initial section of the report succinctly condenses the major changes affecting the global legal marketplace as a direct result of the great recession. Major corporations across a wide variety of industries have seen profit margins decline dramatically which in turn has impacted negatively on the world’s leading law firms. Certain practice areas have been harder hit than others:
“The number of global M&A deals in the first quarter of 2009 witnessed 5,914 transactions valued at $978.9bn, a decline of 41% and 48% respectively for the same period in 2008.” (ValueNotes Legal Process Outsourcing, November 2009).
I recall reading an op-ed piece over a year ago now in TheLawyer.com. In Law firms need to take advantage of tough conditions, Tony Williams, a former Clifford Chance managing partner, highlighted the example of a firm with a 25 percent profit margin with a fee income that fell just 20 percent, entirely plausible in the recent financial climate. This firm would witness its profit fall by 80 percent in the short term as costs simply could not be adjusted quickly enough to offset the revenue reduction. Add into the mix horrendous rises in indemnity insurance premiums and the tightening of credit witnessed over the last 18 months and one didn’t need to be Nostradamus to predict bleak times ahead. ValueNotes comprehensively details along a time continuum, the layoffs of partners, associates and support staff at the largest U.S. and U.K. law firms. In order to survive now, and hopefully thrive in the future, the report comments that law firms are,
“actively re-looking at their business models and developing strategies to remain profitable. Firms are offering alternative billing models, making technological improvements and entering partnerships with local and offshore service providers.”
Slowdown in LPO Revenue and Manpower Growth
In 2007 ValueNotes predicted revenue generated from the LPO industry in India alone to reach $640m by 2010. These estimates have been revised downwards substantially. Revenue is estimated at $320m for 2008, $370m for 2009, and expected to reach $440m by the end of 2010. The report rightly reminds us that these figures and others quoted in the report pertain solely to the Indian LPO industry. Clearly, although India is the dominant offshore destination, others such as The Philippines and South Africa cannot be discounted, and perhaps more importantly, these figures do not reflect the substantial legal outsourcing engagements to onshore destinations both in the U.S. and U.K.
In addition to slower than originally expected revenue growth, the overall manpower employed by the LPO industry (again, only in reference to India) has also witnessed sluggish growth. With the wonderful benefit of hindsight, forecasts a few years ago of 32,000 employees working within the LPO industry by the end of 2010 now appear wildly optimistic. The revised prediction for 2010 stands at 15,400. The LPO and KPO industries have not been immune to the global economic downturn. However, as the global economy continues along the path to recovery, while concurrently LPO becomes both an increasingly desirable strategic option for major corporations and law firms, the report anticipates that the there will be an upswing from the currently plateaued manpower levels towards a more consistent period of stable growth.
The report then proceeds to list each and every vendor (many of whose names my colleagues and I do not recognize) alongside estimates of their current manpower levels. Clearly these figures have been supplied by the vendors themselves and prospective customers would be wise to seek independent corroboration. However, immediately apparent on perusing the list is the wide variance in manpower levels, ranging from several LPOs with ten or fewer employees, to the larger, scale players with headcounts in the several hundred.
Changing vendor landscape
The report comments that for the first time in the lifecycle of the industry a number of service providers have withdrawn from the market and closed shop. The formative years of the industry, from 2005-2007, witnessed aggressive expansion, with numerous start-ups appearing on the scene. ValueNotes comments that in excess of 20% of the total number of service providers have now ceased operating altogether or at a minimum closed down their LPO operations. I was interviewed for this report and, as I state in it:
“The coming 12-24 months could prove to be tough for many of the smaller LPO providers, several of whom may simply give up the chase and withdraw from the market altogether. Others will look for an opportunity to achieve the scale increasingly viewed as a prerequisite by potential clients, by either merging with a competitor, or selling to a larger, more stable provider. This activity, together with consistent growth by the leading, large-scale providers of legal and knowledge process outsourcing services will continue to push the industry as a whole further down the path towards consolidation.”
The report correctly identifies scalability and multiple service capability as a prerequisite for attracting business from major corporations and the U.S. and U.K.’s leading law firms. A rapidly globalizing legal profession has reached a tipping point where legal outsourcing is now recognized as a viable and efficient option for the delivery of certain types of legal services. As major law firm and corporate procurement of legal outsourcing services becomes increasingly the norm, LPOs without the scalability to match both the increased demand and sophistication of the buying community will suffer. Purchasers will be inclined to opt for providers who can offer scalability through a global, multi-shore delivery platform. While there may remain certain niche areas of demand that the boutique, one geographical delivery center providers can satisfy, for larger scale projects or enterprise wide engagements, multiple locations, backed by access to a scalable workforce will become a prerequisite.
In order to achieve both the requisite scale and end to end capability identified as desirable by those procuring LPO services, the report identifies an upswing in M&A and strategic partnership activity within the LPO industry. Integreon’s recent acquisitions of ONSITE3 and Datum Legal are highlighted as activity enabling the provision of an end to end enterprise solution all under one roof.
ValueNotes comments that over the course of the last 3 years several of the largest U.K. law firms have announced outsourcing initiatives. On review of the dates of these public pronouncements, it is readily apparent that the pace of these declarations is picking up. 2009 will be viewed as the tipping point year, when major law firms were let loose from the shackles of reticence and began to acknowledge that their public embracing of outsourcing was clearly viewed by clients as indicative of being forward thinking, innovative law firms of the future. The report references Integreon’s recent deals with Simmons & Simmons and Osborne Clarke, as well as Pinsent Masons’ South African initiative with Exigent and CPA Global’s Rio Tinto engagement.
Key Takeaways
In an economic climate where numerous industries have taken a backward step, the slower than originally expected growth within the LPO industry should not be viewed as disheartening. In the early days of the industry, backed by a vigorous entrepreneurial spirit, the vendor landscape mushroomed dramatically. The last 12 months have witnessed the first signs of contraction. It has taken Integreon over a decade to achieve the scale, infrastructure, and end to end operational capabilities which affords us the position of now being the largest provider of Legal KPO services to major corporations and global law firms. As ValueNotes correctly comments, it will be those LPO companies that are able to acquire scale and provide operations from a multi-shore global base, as well as satisfy the desire of clients by providing a full suite of legal support services, which survive and subsequently thrive. Over the coming 12-24 months many of the smaller players will struggle to remain in the game, as client requirements become ever more sophisticated, and the move from piecemeal, short term projects, towards longer term, multiple FTE contracts, picks up pace.
Filed under Knowledge Outsourcing (KPO), Legal Economics, Legal Outsourcing (LPO), Onshore v. offshore, Outsourcing Industry News
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Liam Brown on November 4th, 2009 at 8:26 pm :
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This headline in the Financial Times grabbed my attention: Lloyds in talks to buy CPA Global for £400m. That’s a lot of money by anyone’s standard and made me think how the KPO market has matured over the last decade.
Many people I talk to are surprised to learn that it’s taken Integreon almost nine years to grow from startup to become a $100m business. Back in 2001, most analysts thought “outsourcing” meant offshore IT or call center services and, in the face of scepticism from the investor community at the time, the Integreon management team scraped together the money to launch a KPO business (before the term “KPO” even existed). We were a pioneer in Document KPO for banks, consulting companies and law firms in those early years. Then we became an early leader in Research KPO for the financial sector.
Over the last few years, we’ve become the largest provider of Legal KPO services to corporations and law firms. Over the decade we have slowly expanded our range of KPO services, built or acquired and integrated operations globally, as well as developed our proprietary automation, collaboration and knowledge management technologies. Along the way we have achieved the scale to generate the internal profitability that supports our ongoing investment in services, products, locations, etc. As we come to the end of 2009, we have become the leading global KPO (perhaps), and I feel fortunate to count many of the world’s leading brands as our customers.
These last twelve months have been tough for smaller, niche KPO providers. I have great sympathy for the entrepreneurs, employees and investors of those companies that have gone out of business or are struggling to stay afloat. I hope that they survive or succeed in selling to a larger, more stable entity.
Some industry analysts have recently commented that we are likely to see the serious entry of the large ITO and BPO players into the KPO market during 2010, through acquisitions. Perhaps. I am not sure how many of those firms have the management bandwidth, strategic inclination or patience to acquire, integrate and grow the available small captive or third party KPO operations to build a KPO business of any reasonable scale, which would be required to move the needle for them. Rather, I expect that the industry consolidators will be the handful of scale KPOs that are focused on growing their consistent cashflow business toward an IPO event.
Filed under Economic Trends, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO)
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Matthew Banks on October 28th, 2009 at 11:45 am :
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The news of Rio Tinto’s Legal Process Outsourcing (LPO) initiative has been widely reported. For a detailed report, I recommend Richard Susskind’s interview with Leah Cooper, the Rio Tinto General Counsel behind the initiative.
The number of major outsourcing arrangements between leading LPOs and blue chip global law firms, banks and corporations has increased but the topic is rarely discussed publicly. The Rio Tinto arrangement is one of the very few widely publicized.
Cooper’s approach to her challenges (as well as her messages to the industry) will resonate with GCs around the globe, who face similar pressures of increased workload but constrained budgets. LPO enables law departments to meet rising workloads whilst reducing costs. It opens up a “new way of working” where quality can be achieved at reasonable cost by reallocating legal tasks to partner providers.
Indeed, as I listened to this interview I kept coming back to Cooper’s notion of “a new way of working”. Whilst I do largely agree with her comments, I have a slightly different take on how GC should think about legal outsourcing.
The “P” in LPO: Process is Not a Dirty Word
Cooper doesn’t like the “P”. She sees her LPO team as a genuine extension of her in house team, contributing to the overall workload and undertaking tasks that a junior lawyer within the in house team might otherwise undertake. She rightly points out that the “P” downplays or downgrades the importance and nature of the work.
I agree that LPO is not about administrative form filling. Nor is it restricted to organizations with massive volumes of standardized documentation. Process, however, is integral to LPO: it is core to the how LPO lawyers perform tasks, even complex ones. Moreover, process should be core to lawyers everywhere but typically is not. The legal market finally seems to be waking up to the importance of this. Law Firms Look at Process Management in The Legal Intelligencer (20 Oct 2009) discusses project management and process, including law firms that are now adopting Six Sigma, a tool some LPOs, Integreon included, have used for some time.
The benefits of process include consistency, predictability, quality, productivity and defensibility – these benefits apply across many legal tasks of varying complexity, not just tasks which by their nature are substantively straightforward, standardized and routine. For example, one of our current projects involves a multi-national corporation with a suite of 20 “medium complexity contracts” used regularly in its business. The company has different attorneys around the world following different processes using different templates in different locations, accepting different edits with different results. The LPO process brings a method which is common, documented, repeatable and scalable. Beyond labor cost savings, working with an LPO helps the company reduce work volume plus improve consistency and therefore decrease risk.
Smart buyers of LPO services are not simply looking for Day 1 cost savings – they demand long term transformation and improvements. A key value add of LPO is creating these longer term productivity and efficiency improvements by combining process expertise with legal know-how. It’s the same core task but delivered in a more modeled and structured fashion. Richard Susskind discusses this in detail in his recent book, The End of Lawyers?
“Process” captures implementation and transition planning, workflow, performance metrics capture and tracking, communication, and reporting. All of these are not ends in themselves – they are genuine tools for improving performance.
So if you don’t like the word “process” then call it “method” or “systemization”. Whatever we call it though, it’s an essential ingredient to delivering and managing legal services – whether from an LPO, law firm, or law department.
The “O” in LPO: “O” Means Outsource, not Offshore
“O” is for Outsourcing, not Offshoring. Outsourcing is about an approach, not a location. The offshore element of the Rio Tinto deal is what grabbed the headlines, but Cooper explains that quite a few projects have actually been performed onshore in the US, and are still achieving cost savings when benchmarked against the cost of the law firm model.
LPO is not exclusive to India, nor those tasks which are suitable for offshoring. The “new way of working” is broader than that. We believe that outsourcing is a global phenomenon and LPO should be no exception. Outsourcing could be onsite at the customer’s office; it could be onshore, multi-shore or offshore.
Offshoring to India is highly successful and can be a great way to reduce cost and create efficiencies, but it’s not the only way. Organizations want the right fit for their requirements, not a one dimensional solution. Different locations offer different attributes and mature LPOs offer law departments and law firms an explanation of the differences and a choice. One size does not fit all; one shore does not fit all.
So What about the “L” You Ask?
The “L” of course is for Legal, which should not be confused with traditional business outsourcing, such as commonly associated with offshore technical support or call centers. Legal outsourcing requires domain expertise. So for example, Integreon’s legal outsourcing services are supported by our staff of full time, licensed lawyers, who can work on-site at client or law firm offices or at any of our secure facilities located onshore, including in such familiar places as midtown Manhattan and London, or in equally secure and lower cost offshore locations.
“Legal Process Outsourcing” therefore implies professional, experienced legal staff delivering quality, cost effective services from the client’s choice of locations.
Filed under Business Process Outsourcing (BPO), Knowledge Outsourcing (KPO), Legal Outsourcing (LPO), Onshore v. offshore, Outsourcing Industry News
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Chris Niccolls on September 11th, 2009 at 9:53 am :
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A recent Reuters article, U.S. banks play catch-up on hiring effort, tells us that Wall Street is ready to hire again, citing a number of high level staff acquisitions and even the return of staff poaching. Well, when the bankers get hired again, the middle office is usually poised for expansion. Anyone who has spent time in investment banking knows that this means everyone’s favorite E-Ticket ride, the Wall Street roller coaster, is getting ready to take on a new crowd of riders! And what a ride it will be, filled with new twists and turns and that oh so dizzying drop at the end… WOW! So, buckle up everyone and let’s see what we can expect this time! |
The drop over the last year was a pretty steep one, so there’s going to be a lot of organizational rebuilding ahead. The problem is that when you’re rebuilding, so is everyone else, which raises costs and extends time lines. It would be nice to bring back all of the good workers who were terminated, but some those have since moved out of the industry while others may now work for your competitors. Eventually, you start to think about poaching staff (it’s not really poaching if they used to work for you), but then other managers start to have pretty much the same thoughts (everyone used to work somewhere).
And where will all of the support staff sit? You may have already reduced your space. So you’re competing with bankers for seating too, which is never a good thing. You’ll also need to consider other support functions that may be spread throughout the firm in IT, HR, Accounting, to say nothing of secretaries, word processors and researchers.
When a decision is made to hire 100 new bankers, are plans made for the 30 or 40 support staff they will need to do their jobs? At least you can avoid a drop off in quality from all of the new staff by getting your dedicated training team to develop a comprehensive training and evaluation program. Hmmm …You do HAVE a dedicated training team, don’t you? Well, if not, then you’d better get cracking because in 30 or 40 months it will be dismantling time again when the roller coaster starts to head downhill once more.
And that’s the ride… over and over again. But for those of you who are not thrill seekers, there are alternatives. Rather than the breakneck ups and downs of the I-Banking cycle, an alternative is to keep a core middle office staff and work with a Knowledge Process Outsourcing (KPO) provider who can smooth out the ups and downs of each cycle.
A good KPO has dedicated trainers and domain experts who can help you plan for upcoming changes and provide the staff you need to execute the plan. Because some banks look at outsourcing strategies as a “temporary” fix that is only applied at one stage of the I-Banking cycle, they have to keep building their services over and over again. And that’s a very expensive way to do business.
A better approach may be to build a balanced blend of in-house, onshore and offshore resources that serves your bank during any part of the I-Banking cycle. The result can be a more efficient organization that delivers greater consistency and responsiveness in support of your bankers, and in turn better service for your clients. Of course, for those adverse to outsourcing strategies, there is always the roller coaster.
Filed under Economic Trends, Knowledge Outsourcing (KPO), Outsourcing Industry News, Outsourcing Tips
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Mark Jewell on September 3rd, 2009 at 11:58 am :
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Earlier this year, FreePint and Integreon partnered to survey business research managers about outsourcing, barriers to its adoption, and the satisfaction level of those currently outsourcing. FreePint recently published the results in a report called VIP Report: Survey on Outsourcing.
Integreon is making available a free copy of the report; click here if you would like to request a copy. To receive the report, you must complete the registration form with the required contact information, including an e-mail address with a business/corporate domain name, and agree to subscribe to the Integreon blog. This offer is valid through Oct. 31, 2009.
Summary and Findings of FreePint Report on Business Research Outsourcing
The survey targeted managers of knowledge and information services but also included managers of document preparation (word processing, etc.), legal support, and pitch support (graphics, presentations, etc.). The majority of respondents were senior-level decision-makers spanning a range of industries, including legal, financial services, management consultancies, and pharmaceuticals. A total of 71 managers responded with nearly 40 percent from corporations with more than 1,000 employees. About one-third were in the US, one-third in the UK, and one-third elsewhere in the EU, Australia, Canada, or other countries.
The findings reveal disparate views about quality and the cost of outsourcing. On the one hand, the 40 percent of organizations that do outsource are satisfied with outsourcing quality and cost effectiveness. On the other hand, the 60 percent not outsourcing cited quality and cost concerns as the most important factors influencing their choice not to outsource.
We can’t explain this seeming contradiction though suspect it says more about outsourcing perception than reality. It may reflect negative perceptions of offshore outsourcing. Some recent surveys (e.g., see our blog post Cost Arbitrage is No Longer Enough (Black Book of Outsourcing Rankings and Findings) suggest that customers look for high cultural compatibility, which typically favors onshore outsourcing. The survey was not designed to tease out differences in onshore and offshore outsourcing. We welcome reader views on other explanations for the seeming inconsistency.
One other result particularly intrigued us: Among those who outsource, the majority of the work continues to be done in-house; respondents who outsource report that over 75 percent of the work remains in-house. This finding supports a key outsourcing benefit, namely, to free high-end professionals for their “highest and best use.” Outsourcing is ideal for handling important but routine tasks that can otherwise overwhelm more valuable strategic work.
Overall, the survey results suggest that organizations considering outsourcing may gain benefit from reviewing the upsides reported by those already engaging in outsourcing. With 2010 budget planning just around the corner, this may be the right time for those organizations to take a fresh look at how outsourcing can facilitate achieving their quality and cost efficiency goals in the new year.
For the report table of contents, click here.
To request a full copy of the report from Integreon, click here.
Filed under Business Process Outsourcing (BPO), Knowledge Outsourcing (KPO), Legal Outsourcing (LPO), Onshore v. offshore, Outsourcing Industry News
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Chris Niccolls on September 1st, 2009 at 11:26 am :
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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:
- Offshore implemented as a platform rather than as the delivery channel,
- Globally syndicated delivery networks,
- Rich user experience: Success as the measure,
- Rich user experience: Relationships, not complex contracts, and
- 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:
- 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.
- 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.
- 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.
Filed under Business Process Outsourcing (BPO), Knowledge Outsourcing (KPO), Legal Outsourcing (LPO), Onshore v. offshore, Outsourcing Tips
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Lokendra Tomar on July 14th, 2009 at 11:37 am :
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Aberdeen Group recently published Partnering for Performance: Knowledge Process Outsourcing. This report explains how companies have improved operations and profits by migrating high-end, knowledge intensive work to the right outsourcing provider. In this post, we summarize key Aberdeen findings and then share our perspective as an integrated KPO provider.
Integreon is making available a free copy of this report; click here if you would like to request a copy. To receive the report, you must complete the registration form with the required contact information, including an e-mail address with a business/corporate domain name, and agree to subscribe to the Integreon blog.
Report Summary
Aberdeen found that companies are outsourcing more complex and high-value processes. More specifically, the following areas are likely to see more outsourcing: market and industry analysis, competitive intelligence, consumer behavior analysis, and regulatory analysis.
The report cites IRI, a consumer data provider and analysis company, to illustrate how a “Best in Class” company can benefit by outsourcing. By outsourcing all processes that did not require routine interaction with its customers, IRI achieved the following benefits:
- Reduced cost by offshoring 35% of workforce
- Improved speed of capturing POS data by 33%
- Accuracy up to 99.6% (three point gain)
- Errors down 80%
More generally, Aberdeen found that “Best in Class” outsourcing consumers improve customer satisfaction by 18%, decrease time to market by 5%, and increase the number of projects meeting QC targets by 24%. Achieving these gains, however, is by no means automatic. Best in Class companies beat the average and lagging companies by a wide margin, as this table illustrates:
| (Percent change) |
Best in Class
(Top 20%) |
Industry Average
(Middle 50%) |
Laggards
(Bottom 30%) |
| Customer Satisfaction |
18
|
7
|
6
|
| Time to market |
(5)
|
7
|
11
|
| Projects meeting QC |
24
|
9
|
1
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The report provides useful guidance on steps Best in Class companies take to achieve the biggest benefits from outsourcing. Companies must choose the right provider, define the work outsourced and monitor it regularly, and govern the relationship effectively. Also, they must work with a provider that can:
- Map processes effectively, pilot test them, then roll them out
- Communicate effectively with the company and address, in advance, how problems will be solved
- Measure and meet the SLAs customers set
- Offer a global delivery platform with on-demand service
Integreon’s Views
Integreon’s experience delivering high-end knowledge services for the last decade supports Aberdeen’s findings. We have always viewed outsourcing as more than just cost savings and have invested significantly in building domain expertise, creating a global delivery platform, fostering a culture of continuous improvement, re-engineering processes, and deploying technology aggressively (even to the extent that it cannibalizes some of our existing business and means additional investment in innovation to keep the business growing).
For each vertical market we serve, our Account, Implementation, and Program Management team, which is a group of domain experts who serve as consultants and relationship managers, work closely with companies to deliver more than just cost savings. They map processes, establish communication plans, and ensure companies choose, capture, and then use metrics. We have also long understood the value of global delivery and now offer on-demand service from the US, UK, India, and the Philippines.
We have many examples of helping our customers define and improve service levels, expand coverage and the range of services for their users, and improve time to market with quick ramp ups. Our belief is that to keep winning business, we have to be significantly better experts than our customers rather than just being a low cost provider.
Filed under Knowledge Outsourcing (KPO)
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Ron Dappen on April 9th, 2009 at 7:23 pm :
Comments 000
In our constant effort to learn more about the market, we’ve just launched a survey co-sponsored by FreePint. In particular, we want to know more about how outsourcing is viewed by those who use or buy any of the following services:
- Research
- Document preparation (word processing, etc.)
- Legal support
- Pitch support (graphics, presentations, etc.)
If you fit the description above, please consider taking this survey. We will share the survey results with all participants.
To receive a copy of the report, just provide your email address at the end of the survey. The survey is completely anonymous. Your email address will not be associated with your responses in any way; it will only be used to send you the survey results.
To link directly to the survey, click here.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends, India Business and Economy, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO)
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Ron Friedmann on December 19th, 2008 at 8:27 pm :
Comments 000
A new Aberdeen report highlights how corporate senior management views knowledge process outsourcing and how their views differ from mid-level management.
CxO’s View Knowledge Services Differently by the Aberdeen Group is an executive summary of research that will be released in January 2009. The report finds that the most senior management in corporations using KPO services focus on augmenting their staff and improving processess. To get this, they focus on KPO provider capability, dedicated resources, and clear communication. In contrast, mid-management focuses more on reducing cost and improving service levels. This is an excellent KPO report for providers, customers, and prospective customers.
In our view, both C-level execs and middle management can get what they want from a KPO if they choose their provider wisely.
Filed under Knowledge Outsourcing (KPO)
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