NMIMS

MANAGING BUSINESS PROCESS OUTSOURCING

APPLICABLE FOR JUNE 2022 EAXAMINATIONS

1. Many companies have considered outsourcing a broad range of business processes,

including IT services, to achieve critical cost savings. Although this kind of agreementcan
be structured in many ways, a thoughtful contractual arrangement, with appropriatecost
sharing, pass-through mechanisms and pricing adjustments, allows the parties toshare
certain risks and at the same time establish a productive and profitable
relationship.Explain BPO contract negotiation and monitoring and their risk impact?

Answer:

The successful execution of an outsourcing process depends on scope of the process to be

outsourced, developing the process diagram, choosing the provider, building the scorecard,
contracting and pricing. A successful outsourcing contract also depends on how the
outsourcing organisation manages the project in its initial days. The outsourcing
organisation should structure the interfaces using the process diagram and the scorecard.
The operational functions between the organisation and provider need to be defined in
detail; for example, the interface between people and system, the data flows, the reporting
capabilities and how these things will happen. These interfaces must be put to test in order
to determine whether they can handle different production needs.

Negotiation
Negotiation is considered as the best methodology for constituting the best business deal. It
also helps in minimising risks that both parties may face in the outsourcing process. Pricing,
contracting and negotiating involves establishing a working framework for an efficient
business relation. Every company is different and every outsourcing deal in a company is
different. There are standards for defining outsourcing contract’s terms and pricing but they
vary from one company to another. There are no standards for defining the outsourcing
contract’s terms and pricing. However, there are some popular contract structures, certain
commercial terms always addressed in the contracts. Some consultants and lawyers also
have certain modular contract structures.

Challenges in BPO contract negotiation

Timelines: Contract negotiation is a process which should complete on time else there will
be unnecessary concessions which will not be feasible for both the parties. Not all
negotiations will be simple or straightforward, but remember that time is money, so
managing the negotiation timeline is critical. The longer both parties spend in negotiations,
the more likely it is that both parties will need to make concessions so timeline is very
important here.

Manage relationships: When you are in a business world, you need to work with various
parties, suppliers, vendors etc. In this scenario, it is very important that you maintain good
and healthy relations with all of them. Negotiations can be conversational or formal. It is
important to find the right attitude to use with each supplier, and the style you choose will
depend on a variety of factors, including type of industry, business differential, past
relationships, and more.

Domination: One of the most common challenges of BPO contract negotiation is

domination where one party dominates the other one and other party finds really difficult
to manage everything and reach to some conclusion. If this is the case, one of the parties
will not be happy with the negotiation.

Required skills: Market intelligence is critical so that you can assess vendors against their
competitors. Know what developments are occurring in the market and understand trends.
When you are armed with information, you can use it to get suppliers to re-evaluate their
pricing if you can demonstrate that their prices are out of line with the rest of the market.
Basically, you need effective skills for the useful negotiation session. If one of the parties is
non skilled or does not have much information then the purpose of the negotiation will not
be solved.

Lack of proper planning: You win half the battle in the preparation stage. Conduct thorough
background research on the product and the supplier, have all important details at your
fingertips including the supplier’s operational facilities, company history, management
profile, their major clients, development plans, and history of performance; and prepare
answers for all hard questions the supplier might have. If the proper planning is not there,
you will not achieve the desired output.

Steps involved in contract negotiation

Define roles and responsibilities: First of all, roles and responsibilities of the service
provider should be defined so that there are no issues at later stages. It should be clearly
written that what is the scope of work, limitations, various activities involved etc. Apart from
this, performance metrics and service standards such as volume, capacity, speed,
performance, quality, documentation, training, time required to repair, schedule and
budget for the project should be provided.

Assessing business risks: Risk is a part and parcel of all our everyday business activities.
Managing a project involves planning a unique set of tasks performed within a set of rules to
meet the project objectives. Accomplishing the defined objectives through successful
completion of these tasks helps to achieve success. The objective of risk management is the
core part of an organisation’s strategic management that intends to reduce the effect of risk
or avoid it to some extent. Possible risks should be identified and proper risk management
plan should be in place and client’s degree of authority should also be finalized.

Negotiating the terms: Finally, you need to negotiating the terms if risks are directly
affecting the client. Basically, at this stage, all the discussed points will be summarized.
Some of the points to summarise are:
Payment terms
Contract volume
When the contract/work will start
Price for the Contract

Risks faced in outsourcing

Strategic risks – Strategic risks mainly include failure to manage future business decisions,
lack of knowledge particularly in the case of protection of intellectual property, cultural
differences and geopolitical risks. In addition, future changes that happen in the business
set-up of the service provider are also included under strategic risks. Future changes in the
service provider’s company would have a direct or indirect impact on the customer
organisation.
Operational risks – Operational risks include the major risks involved while outsourcing the
business processes. Operational risks mainly include, risks related to the effect of
outsourcing on the employees of an organisation. Outsourcing has both positive and
negative impacts on the employees who may be transferred to the service provider and also
to those working in the company. Risks associated with incorporating the service providers’
business processes into customers’ business processes, poor performance of the service
providers or the employees of the outsourced company, and impact of future legislations
come under operational risks.
Result risks – Result risks are the risks involved in the process of outsourcing. Sometimes,
the intended results cannot be achieved by the service providers. In order to avoid result
risks, customers should have the ability to manage the process collaboratively with the
provider, so as to get the intended benefits.
Transactional risks – Transactional risks mainly involve factors like termination clauses,
dispute resolution, liability, warranties, intellectual property ownership, indemnity, etc.

2. Organizations typically undertake periodic process improvement that are focused

onspecificbusiness processes and may or may not align with the business strategy. In
orderto realize all the benefits of sometimes disparate BPM efforts, there need to be
anongoing, organization-wide effort to assess and measure the results and continue to
usethe successful implementations. A process portfolio is widely considered the
answer.What are the benefits of effective process portfolio management?

Answer:

Strategic management is a dynamic process of aligning strategies, performance and business

results; it is all about people, leadership, technology and processes. Effective combination of
these elements will help with strategic direction and successful service delivery. It is
acontinuous activity of setting and maintaining the strategic directionof the organisation
and its business, and making decisions on aday-to-day basis to deal with changing
circumstances and thechallenges of the business environment. As part of your
strategicthinking about advancing the business, you (and your partners) willhave set a
course for a particular direction, but subsequent policydrivers (such as new performance
targets) or business drivers (suchas increased demand for services) could take the
organisation in adifferent direction. There could be implications for accountabilitywhen you
decide whether to take corrective action to get back oncourse or to go with the new
direction.

Outsourcing is a rapidly growing aspect of the world economy of today. It is estimated that
the global spending on outsourcing will cross trillions ofdollars. Usually, companies
outsource for strategic, tactical andtransformational reasons.Strategic reasons include
enhancing business activities, gaining access toworld class technologies and sharing risks.
Managing operating cost is oneof the tactical reasons for outsourcing. The main reasons for
outsourcing areto bring faster solutions to customers and to achieve greater market
sharethan the competitors.

Business portfolio management

Business process portfolio management is another issue that organisationsoften experience

while outsourcing their processes. Efficientbusiness process portfolio management
contributes to the success ofan organisation to a large extent. It not only ensues the
comprehensiveunderstanding of strengths and weaknesses of a business but alsoevaluates
growth opportunities and explores how risks can be minimised.Moreover, effective process
portfolio management helps in ensuringthe right outsourcing decisions. It involves the
evaluation ofwhich processes can be best performed in-house and which can beoutsourced
for optimal results and profit maximisation.

Business Process Portfolio Management (BPPM) is simply a practiceof optimising business

effectiveness and productivity from diverseprocesses, assets and functions of an
organisation. It is all about analysingthe strengths and weaknesses of a business, evaluating
growthopportunities and exploring how risks can be minimised. Based onthis analysis, an
organisation makes its outsourcing decisions. Businessprocess portfolio management
ideologies focus on improving returnsfrom miscellaneous business processes that are
associated withthe value chain of an organisation.

Benefits of effective process portfolio management

Helpful in business requirements: In large organizations, we can find various complex

projects and; in this case, effective portfolio management is required. In the current
business environment, even large companies have limited capital and resources for all the
projects. Effective portfolio management helps the management to align process-oriented
goals with the strategic objectives of an organisation. This, in turn, helps the organisationin
maximising benefits from business investments.

Ideal allocation of resources: It will also help the companies to effectively allocate the
available resources. Moreover, effectiveexecution and administration of robust process
portfolio managementcan only result into optimal outsourcing decisions.

Enhanced visibility to investment made on various projects or processes: With effective

process portfolio management, there is enhanced visibility to all the investment made by
the organization on various projects and processes. When there are complex projects
handled by the organization, it is good to monitor all of them and make the changes as and
when required.
Continual evaluation and monitoring of projects or processes: Success of an organization
depends on the projects it is working on or the processes it handles. In this scenario, it is
very important that there is regular evaluation and monitoring of these projects or
processes so that success of the organization is ensured.

Efficient allocation and management of resources: In every organization, there would be

limited resources and to get the best out of it, it is really important to allocate the available
resources in efficient manner. There could be many important projects so it is quite
important that available resources are allocated among all the projects accordingly so that
those are completed as planned. By considering enterprise resource availability right at the
beginning when choosing projects and then continuing to review them periodically, it
provides the clarity to use resources optimally across projects.

Enhanced cross-functional partnership and collaboration: In large enterprises, different

project groups with different goals can end up functioning as competing units vying for
financial and human resources. For example, one group may focus on research and the
other on execution of on-going projects.Partnership and collaboration could be really useful
in current scenario.

Improved quality and profitability: Project portfolio management emphasizes selecting the
right set of projects according to business goals, risk, resource availability, and other
criteria.Proper portfolio management will also be helpful in improving the quality of work
and profitability as well. Process portfolio management helps put things in perspective and
supports making tough decisions based on the company’s long-term objectives.

Effective decision-making: Senior officials of an organization take various important

decisions on daily basis. It’s important to get this right, as a great decision could serve as an
inflection point in your organization’s history. For example, does this major investment
transform the business or ultimately lead it to a destabilization of the share price?
Groundbreaking decisions can only be made when backed by accurate, objective
data.Portfolio management constantly questions the status quo. It also encourages the use
of data-centric tools, enabling leaders to make the right decisions.

3. For ALPHA CallCenter, a leading healthcare BPO company based out of Gulf approached
MeraBPO with a requirement to improve their BPO process. The customer'sBPO division
handles over a million customer calls every month, but their customersatisfaction levels
were plummeting downwards. Even their CSAT was as low as 47%.Since the customer was
a part of the healthcare industry, it was unacceptable for thecompany to find a low level
of satisfaction from their customers. MeraBPO's role was tonail down the causes for the
low CSAT levels and then to provide a customized BPOsolution that would help the
company's performance to soar.At the onset of the project, the BPO team at MeraBPO
decided to dissect the problem andget to the root cause. Through a detailed analysis, they
identified some of the criticalissues in the process that were affecting the customer's
BPO's performance. Thefollowing were the requirements of the customer:

There was a linguistic and cultural mismatch between the BPO's personnel and the
client'scustomers. The client's customer base was native Arabs while the BPO employees
of thecustomer (5 male agents and 5 female agents) were not native Arabic speakers.
Thislanguage barrier made it difficult for the employees to effectively address the
culturespecificrequirements of the customersThere was a critical need to align the BPO
support team with the standard processes thatgovern BPO functioning. The BPO team
also required intensive training in BPO platformmanagement
The BPO's turnaround time lagged over a period of 7 days in contacting their
customersafter discharge
The support BPO team worked only 5 days a week (Monday to Friday) and only between9
am to 5 pm. This posed a serious limitation for the customers who wanted to contactour
client
The customers wanted to make sure that they were talking to an Arab agent and
wouldask the BPO employees for their last name
Female patients of our client would submit contact numbers of the male members of
theirfamily instead of their own
The customer reach percentage was less than 2%
After identifying the unique problems that were affecting our client's BPO, they
deployedone their best teams to implement a customized BPO platform. MeraBPO's
skilled BPOteam refurbished the entire BPO process of the customer by adopting the
followingmeasures:
1. BPO Service Timings: they increased the support time span by a period of 4 hours.
Next,they made the support center available from 7 AM to 7 PM. To match the working
weekof UAE, they decided to change the work days of the BPO to Sunday to Thursday
insteadof Monday to Friday. Multiple shifts were also introduced to meet the time
demand withWFM.
2. Local BPO Agents: they hired a team of native speaking Arabs to eliminate the
culturalgaps.
3. Support Infrastructure: they enhanced the infrastructure for the customer's BPO
centerand included best-of-breed voice, email and internet facilities. This helped
insubstantially reducing the turnaround time of the BPO team.
4. Value Added Support Services: they also offered a host of value added services, such
asthe following:
they extended the 24-hour call support for excess processing requirements during
peakhours
The BPO agents were given customized 'Last Names' to suit the caller's country
The DID number was masked based on the caller's country
The BPO agents were given 20% hand-outs
Culture specific provisions were specially created to record rebuttals from the
objectionsraised by the male family members of female patients
The BPO process of the customer was continuously improvised and enhanced based on
Lean and Six Sigma methods
The database of the customer was always kept up-to-date
The BPO application was rectified periodically
Within a short time span of just 2 months, they were able to present the following
resultsto our customer. From an unsatisfactory 47% the CSAT galloped to a whopping 85%
-87%.
The turnaround time was improved by 24%.
a. What were the cultural challenges faced by ALPHA call center and how were
thesespecific cultural challenges met by ALPHA call center
b. What are the advantages of outsourcing call center operations of a hospital to a BPO
like ALPHA call center?

Answer:

a)

Culture is an important factor for practising international business. Cultureaffects all the
business functions ranging from accounting to finance andfrom production to service. This
shows a close relation between culture andinternational business.The art and other signs or
demonstrations of human customs, civilisation,and the way of life of a specific society or
group is all included in culture.Culture determines every aspect that is from birth to death
and everything inbetween it. It is the duty of people to respect other cultures too.Research
shows that national ‘cultures’ generally characterise the dominantgroups’ values and
practices in society, and not of the marginalised groups,even though the marginalised
groups represent a majority or a minority inthe society.Culture is very important to
understand international business. Culture is apart of the environment which man has
created.

Cultural challenges faced by ALPHA call center:

There was a linguistic and cultural mismatch between the BPO's personnel and the client's
customers. The client's customer base was native Arabs while the BPO employees of the
customer (5 male agents and 5 female agents) were not native Arabic speakers. This
language barrier made it difficult for the employees to effectively address the culture
specific requirements of the customers. The customers wanted to make sure that they were
talking to an Arab agent and would ask the BPO employees for their last name.

Culture can play a key role in international business as cultural factors can also impact the
buying behavior of the people. To meet these cultural challenges, they hired a team of
native speaking Arabs to eliminate the cultural gaps.This was the issue with lot of customers
so hiring Arab agents could solve the issue to certain extent. Apart from this, all BPO agents
were given customized 'Last Names' to suit the caller's country. Culture specific provisions
were specially created to record rebuttals from the objections raised by the male family
members of female patients.

In the current business environment, you need to work as per the needs of the customers
and make necessary changes in your working style. As mentioned, cultural factors are
impacting the business of ALPHA call centre and customers are not satisfied with it. In this
scenario, it quickly understood the situation and contacted MERABPO to make necessary
changes in its business operations. With all the efforts, ALPHA call centre experienced the
major impact in the satisfaction level of customers which was the ultimate goal.

b)

Core competencies are the areas of the business operations that provide a unique
competitive differentiation. Assume that the core competencies of a company are product
design and engineering. In this case, they can outsource all their non-core competencies
such as product manufacturing and distribution to any of the service providers. This helps
the company to focus more on product design and engineering. Besides, managers get
ample time to focus on the product design and also the team leads can concentrate more
on new engineering and design than manufacturing and distribution.

The level of outsourcing in organisations is constantly increasing. Outsourcing is becoming

crucial to an organisation’s global competitiveness. It is part of an organisation’s overall
business strategy. Hence, organisations need to consider outsourcing as another
management discipline. They need to make the necessary investment in training,
development and management tools required for outsourcing. Organisations that want to
achieve success in outsourcing are identifying the best practices in the industry and
benchmarking successful outsourcing initiatives.

Factors related to the success of outsourcing

Cost effective: Outsourcing some of the business processes and activities can be very cost
effective for the client company. They save on investing in fixed assets and fixed costs. And
they can redirect these funds for their core activities. Firms should outsource the non-core
activities but simultaneously they should also keep in mind the cost factor so that you can
save in terms of cost which was otherwise more, if you would have gone for in house
services.
Speed: One of the biggest advantages of BPOs is that they increase the speed of the
business processes outsourced to them. They have a very good response time and the
clients can focus on the core activities. This fragmentation of activities speeds up the whole
process and is very important in cases like customer service.
Flexibility: Outsourcing non-core activities to a BPO allows a company to be far more
flexible. Firstly, the company does not have to invest in additionally fixed assets and can
convert them to variable costs. It also increases flexibility in resource management of the
client company and helps in adapting to changes in the environment much faster. Flexibility
is very important in any outsourcing decision because you may have many tasks to do on
day to day basis and adopt new practices as per the business environment.
Skilled Manpower: When you outsource one of your business activities to a BPO, you are
insured of exemplary services provided by skilled manpower. So; if you outsource your
supply chain management, rest assured your supply chain will be handled by skilled supply
chain managers who are experts in their field.

Advantages of outsourcing in given case:

 Major change in the work timings to serve the customers in better way.
 Hiring of local agents who are Arab speakers
 They used best-of-breed voice, email and internet facilities. This helped in
substantially reducing the turnaround time of the BPO team.
 Within a short time span of just 2 months, they were able to present the following
results to our customer. From an unsatisfactory 47% the CSAT galloped to a
whopping 85% - 87%.
 The turnaround time was improved by 24%.