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Demystifying Business Process Outsourcing


Demystifying Business Process Outsourcing

Anna Engstromer explains how to render Business Process Outsourcing (BPO) sourcing less complex, by engaging and participating in the process.

Complex Nature

Outsourcing and Offshoring. Business Process Outsourcing. Managed Services. These terms mean to move service capability out of an organization, relying on it to work and be more effective while done by others, elsewhere. Sourcing of such services is clearly complex: you need to define the right service, process, organization and governance; you want to leverage the vendor to figure it out, but know you need to steer it too; you need to decide who to be part of the project, with which responsibility.

While a strategic sourcing professional should be at the core of any such endeavor, much can be done from the business side as well. It is the owner of a to-be-externalized service that has the most stake in it, so it is smart to not shy away from the task.

Often Done for the First Time

If your organization has dedicated strategic sourcing professionals, it makes a lot of sense to work with them from early on and let them lead the process. They can grasp and standardize your requirements, begin the mapping with existing services on the market, navigate among possible service locations and vendors and advise you along the way. Chances are, if you weren’t already part of sourcing such services, that some significant pieces of business work will be new to you:

Definition of Service. Sure, you did that before. But unless you are already operating a charge-per-unit service based on a published service catalog, the work to get in on paper correctly, completely, consistently and including normal variations is no quick task. You will see.

Process Analysis. This is also something you’ve done, but not in this way. With outsourcing, processes need analysis in terms of dependencies and required care in execution. A vendor will not magically prioritize like you do; you need to make your priorities explicit, and highlight areas where the vendor is free to propose and design processes.

Business Case. The sourcing business case is a little special; every cost in the baseline which is not replicated in the sourcing case is expected to go away when the outsourcing is implemented. This is not a theoretical topic but one that requires up-front verification with budget holders.

Contract Lingo. The type of language that needs to go into the contract is special. A lawyer will lead the contract drafting, but there is a lot you can do to help. The process of finding the right clauses helps both the buying and the selling teams to visualize and prepare for the new service. The quality of contract wording affects the understanding of the contract and future service management and governance. There is no need that business professionals get trained as paralegals but there are certain schedules you want to fully grasp, such as “Service Definition”, “Vendor Obligations”, “Customer Obligations”, “Pricing” and “Escalation Process”.

Compliance. When sourcing for the first time in your organization, you will get impressed by the control function rigor around many topics. Cyber Security is just one example. You will need to learn a little bit about each such topic as you go along.

Governance. The system for tracking and acting on contract performance needs to be built before it can be implemented. Broken down and specific accountability early on in the sourcing process pave the way for productive service design, negotiation, implementation and management.

Who Is Competent to Define Services?

It is good to start looking where the accountability for the service lies, with a process or capability owner, if you have one. Then, find people with interest, broad experience and good process imagination who are effective in interviews and meetings and as problem-solvers, people who document well and communicate clearly. As an accountable person, be clear with the sourcing team what you want and need. Say how you want to work, allowing them space to operate. Exert your accountability while charging them with responsibilities; move accountability to them (specific individuals) where that is possible. In selecting business team members, I generally don’t think experience in outsourcing (or offshoring) is critical – far more I believe that traits matter. 

Make sure that whoever crafts the business of the transaction has autonomy, but is not alone. Review important parts as a group. Check critical elements, such as the business case and service deliverable definitions, with specifically accountable persons. Understand the design. Vendor innovation is great and often a driving reason for outsourcing, but make it a point to always understand processes and information handling, even when they are external.


Key points include:

  • The vendor’s role
  • Defining services
  • Negotiating a deal


Read the full article, Sourcing of BPO Is Complex – What You Can Do on