Outsourcing Models: Key Success Factors

The outsourcing of Financial Processes for large companies has undergone a series of very significant changes in the last 15 years that deserve some consideration before entering further into the keys to the success or failure of this business model.

What changes has Outsourcing suffered?

What was initially understood as the transfer of activities that were not part of the main activity of the organization, considered as repetitive / low added value to a "provider" (and I stress, "provider") with more or less experience in the sector, but with the capacity to carry out the same activities at a lower price, has been changing towards a very different model.
To the transactional activities performed by agents with little experience but high training, in a completely manual way, ingredients were incorporated as a certain degree (although minimal) of automation. At the time it was considered something new that also allowed to extend the arms of these service providers to centers with even lower costs in APAC (India and the Philippines, mainly) or SAM, but really limited to introduce workflow technology, document scanning, automatic e-mailing.

We are going 15 years back, but this "automation" exerted a leverage effect that has allowed taking this model to what we now know as "Business Process Services".

BPS understood at a higher X.0 level, incorporating large doses of Talent, Innovation and high Added Value. We are talking about BPS as generator of Excellence and Transformation, elevating the supplier relationship to the level of "partner" that will take the Client to the desired level of Excellence.

However, not all BPS providers / partners have gone through this path of transformation, nor have all reached level X.0, nor have all had the global vision that includes Talent and Transformation as a key differentiator to their own success and its Clients.
And is that many times the priority has been to reduce costs and short term survival against a vision of growth and long-term survival, eliminating the main differentiators (and I am talking, of course, of Excellence, Talent and Innovation).

Failure Keys

This background will allow us to identify some of the many aspects that have been key to the success or failure of this model.

PEOPLE AND CHANGE MANAGEMENT

First of all, we must bear in mind that the processes, the activities, the management of those processes, have been carried out by PEOPLE.
And when a large multinational makes the decision to outsource part of its activities, it usually does so thinking of a cost reduction strategy, or focus on its core value activities, and although it may have a human resources policy that is very respectful with its employees (relocation measures against outsourcing, etc.) very rarely thinks about the Change management. And precisely this is one of the most important factors that will determine to a large extent the success or failure of this outsourcing strategy.
Many times, organizations (Clients) do not inform their key employees of the scope of the outsourcing strategy, the causes, the agreements, the "why", the objective, and how this strategy will impact the long-term survival of the organization. In short, how the BPS provider / partner will help your company, and at what price.
And in this case, I am putting the weight (not the fault) on the Client who decides to outsource. The reason is that change management will always be easier from within the organization. But the BPS provider should be able to influence in this sense by helping in the change management strategy. And when the situation, the decision and the objective is understood, it will be easier to have employees committed to the strategy.

So, one of the fundamental factors, from my point of view is the definition and implementation (together with the BPS partner) of an effective Change Management strategy according to the characteristics of the Company.

EFFECTIVE ORGANIZATIONAL STRUCTURES
In large Clients, with operations in different regions, initially with a low degree of standardization, a high degree of exceptionality and limited optimization and automation, it is crucial to define the most appropriate organizational structures that integrate the BPS provider / partner.
And in the opposite direction, the BPS supplier / partner must have an infrastructure that replicates to a large extent its Client´s organization.
This is especially relevant in cases in which the activities have been transferred not only to a BPS Service Center (Nearshoring), but also, other Service Centers have been incorporated in various global locations (Offshoring) to perform transactional activities without legal, language, etc. requirements
In these cases, the organizational structure in the Service Provider is complicated, and in the figure of Service Delivery Lead (SDL), with a structure of Managers, Supervisors and Team Leaders that reports directly to him / her, SBU Managers are added (for each additional Center) with its parallel structure in another place / s of the world.
If this structure is often complicated to manage for the BPS partner, the Client will have an added difficulty, often losing control and knowledge about what is being done, where and by whom.
For this reason, we must always have a figure that exercises a relational role with the Client at different levels that allows in any case a more fluid communication and understanding, aligning 100% with the Client.
Many of the Clients have already incorporated transformational and strategic roles in their organizations with a clear focus on Excellence (Global Process Owners, Innovation Officers, etc.).
If the BPS Provider is not able to attract and maintain this Talent in its own organization that plays a role not only relational but also leading Transformation, acting as Partners in the strategy of innovation and Change in Clients, the BPS Provider will be placed light years away from our Client's strategy.

And not being able to cover this Gap is one of the factors that will drive the Client to find another partner that is "at the height" of their requirements.

This is especially critical if we consider the environment in constant change and evolution towards innovative models that incorporate a very high degree of automation and transformation.

We can talk about many other keys to success, but all, absolutely all are focused on the long-term strategic vision, the success of our Client and Excellence.