Business Process Outsourcing: The Competitive Advantage

256 Pages·2004·1.49 MB·English

by  Rick L. Click

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Business
Process
outsourcing
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Business
Process
outsourcing
The
Competitive Advantage
RICK L. CLICK
THOMAS N. DUENING
John Wiley & Sons, Inc.
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This book is printed on acid-free paper.
Copyright © 2005 by John Wiley & Sons, Inc., Hoboken, New Jersey. All rights reserved.
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Library of Congress Cataloging-in-Publication Data:
Click, Rick L.
Business process outsourcing : the competitive advantage / Rick L. Click, Thomas N.
Duening.
p. cm.
Includes bibliographical references and index.
ISBN 0-471-65577-5 (cloth)
1. Contracting out. I. Duening, Thomas N. II. Title.
HD2365.C48 2004
658.4’058—dc22
2004008608
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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contents
Foreword vii
Preface ix
Acknowledgments xiii
PART ONE
BPO Overview 1
CHAPTER 1
What Is So Revolutionary about BPO? 3
CHAPTER 2
Who Is Using BPO and How? 27
PART TWO
To BPO or Not to BPO? 45
CHAPTER 3
Identify and Select the BPO Opportunity 47
CHAPTER 4
Identify and Manage the Costs of BPO 70
PART THREE
BPO Vendor Selection 91
CHAPTER 5
Identify and Select a BPO Vendor 93
CHAPTER 6
BPO Contracts 112
v
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vi Contents
PART FOUR
Executing an Outsourcing Project 133
CHAPTER 7
Managing the BPO Transition 135
CHAPTER 8
Managing the Buyer–Vendor Relationship 154
CHAPTER 9
Infrastructure Considerations and Challenges 172
CHAPTER 10
Business Risks and Mitigation Strategies 189
PART FIVE
The Future of BPO 207
CHAPTER 11
Future Potential for BPO 209
Endnotes 223
Index 233
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foreword
T
he topic of business process outsourcing (BPO) has become controversial
and the subject of a great deal of media attention over the past year. As
an executive who has been using outsourcing as a business strategy for more
than a decade, the recent upsurge in interest in the topic was unexpected. Per-
haps the fact that 2004 is an election year has something to do with it. Or
maybe, as the authors point out, the convergence of a number of social and
technological factors has only recently made BPO an option for organizations
of nearly any size.
My experience with BPO ranges over a number of business processes.
Organizations that I manage as Chief Engineer of Occidental Oil & Gas have
taken advantage of specialized labor pools around the world. As a multina-
tional enterprise in a highly competitive industry, Occidental must be aggres-
sive about controlling costs and employing the highest quality labor it can
find. Occidental’s experience with outsourcing has mostly been positive, but
there have been many lessons learned.
From time to time I have considered the prospect of writing about the
lessons I have learned in initiating and managing a BPO project. Time and
business considerations have always intruded into those thoughts and made
them unrealistic. Fortunately, Rick Click and Tom Duening have taken the
time to write this book, which is a fine presentation of how to organize and
manage a BPO initiative.
Click and Duening’s book is a comprehensive guide that managers and
executives in nearly any size organization will find valuable. The mix of insight
and practicality that is evident in the writing will provide most readers with the
confidence to launch into the BPO waters. The tools and tips contained in this
book will make even the most experienced outsourcing manager think again
about the methods he or she uses and whether they can be improved.
Of course, no book is without its drawbacks. At times Click and Duen-
ing take their discussions to levels of detail that are more appropriate for an
academic work. For example, their discussions of change management and
interorganizational relationships are long on detail but a little short on ex-
amples. Still, the book reads very well and most managers and executives can
usefully be reminded of the importance of effective change management to
the success of transformational initiatives such as BPO.
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viii Foreword
Overall, I believe this book will be of tremendous benefit to anyone or
any company currently undertaking or considering undertaking a BPO ini-
tiative. The complexities of working with offshore partners and the potential
risks to the business make the investment in this book well worth the purchase
price.
Leading thinkers in the area of global economics assure us that free trade
is a good thing for people everywhere. It is likely that the world will not re-
verse the course of the past several decades of ever broadening trade relation-
ships among nations. In short, BPO is here to stay and it will be a disruptive
force in many industries. Managers and executives who want to take ad-
vantage of BPO should get this book to help them become successful. Man-
agers and executives who do not want to take advantage of BPO should get
this book so they understand what their competitors are doing. In the end, no
one can ignore BPO since it will surely affect the cost-structure of nearly
every industry. I predict that the hype around BPO will subside quickly, but
the business advantages it will bring to many are here to stay.
ROBERTE. PALMER
Chief Engineer, Worldwide Operations
Occidental Oil & Gas
June 2004
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preface
B
usiness process outsourcing (BPO) has emerged as one of the leading busi-
ness and economic issues of our time. A natural extension of the free-trade
juggernaut that has dominated global economics over the past two decades,
BPO has been met with mixed emotions. Workers whose lives have been dis-
rupted because their jobs have been outsourced to lower-wage workers over-
seas have understandably decried “offshoring” as a threat to their way of life.
Others, especially those in the foreign locations where new jobs are rapidly
being created, are elated about the opportunity to apply their hard-earned
and high-value skills.
Presidential politics have also weighed in on BPO—with both parties ar-
ticulating their positions on the issue. Rarely has there been such high-level
discourse about a legal business activity that, in the long run, promises lower
prices on a wide range of goods and services for U.S. consumers.
In this book, we attempt to examine BPO from the perspective of its ap-
plication and implementation in businesses of all sizes. We do not address the
political or economic controversies swirling around outsourcing. Instead, we
assume that the movement of service work to lowest-cost providers, no mat-
ter where they may reside, will continue in some form. It seems wholly unlikely
that new barriers will be erected that will seriously limit global free trade. With
that in mind, we have developed a rigorous methodology that businesses can
use to analyze the outsourcing opportunity, to make informed decisions about
choosing a vendor, and to manage change and execute an outsourcing project.
The team-based approach to BPO project analysis and implementation is
based on the fact that BPO is a socio-technical phenomenon. That is, a well-
executed outsourcing project must involve both social and technical resources
of the organization. BPO is transformational to the organization and requires
attention to the social and human impacts that accompany business trans-
formation. At the same time, one of the primary enablers of BPO is the set of
technologies that have emerged to connect the world in a global communi-
cations network. As a socio-technical phenomenon, effective BPO manage-
ment requires a diverse skill set that is not likely to be present in any single
individual. Thus, we recommend a team-based approach since the necessary
skills are more likely to be available in a group of people united to achieve
common objectives.
ix