Critical Considerations for your BPO Contract

SSON: JH having worked in the shared services and outsourcing space for a number of years; what are major changes you have seen in outsourcing?

John Hall:
The expectations of people. When organisations began outsourcing, it was like stepping out into the wilderness, but today everybody has actually heard of the word outsourcing, but some still don’t know what it really means and especially get confused versus off-shoring.. This is the most obvious change for me - there’s an expectation that it is a good thing.

SSON: In the panel session that you just participated in, you mentioned that you referred to your outsourcing contract on a regular basis, while other organisations mentioned they don’t. What are the most important parts for you?

: You take months and months of working on this thing, and then to put it into the cupboard to forget it, I don’t see that as a good option. The governance piece of it… you do have to remind people sometimes of what’s needed, and you also have to change it. To change it you have to understand it, you have to use it; it’s not a standard contract like one you sign when buying a house. You know exactly what you are going to get and how you are going to get it. At the beginning, you should be somewhere close to that but after twenty minutes it can change.

SSON: So do you think it is possible to set out a five to seven year plan in an initial contract with a partner?

It is possible, but I wouldn’t do it.

SSON: So what happens when you need to make changes - say after a year or two you try to bring in more transformation, do you go back and change the contract?

: Well yes, quite often you would go back and talk about it again. Each side has got to know what they are going to get. How much it is going to cost, and there is a business case per side, so why not contract it?

SSON: What for you are the most important points within your contract ?

: The governance model and really the fact that it can actually bring to the table a new ways of doing things. Whether they do is a different discussion, but those are the two key things. I expect them to be like one of my employees, and come up and say ‘hey why wouldn’t you do this?’ For instance we have had conversations about Optical Character Recognition (OCR), and our partner,  who are accused of being a technology company sometimes,   those guys actually came to us and said don’t do OCR, it doesn’t make sense.Because the quality is not as good as actually having two people look at it, so why don’t you just capture your key data field for two people. Which in the modern world from a technology company, is not something easy to sell internally, because internally people are going to think I have heard about this thing called OCR, and I want OCR. But give is the best way to do it, don’t just give us what you think we want to hear, please tell us the truth.

SSON: Philip Whelan, Managing Director at BP Business Service Center stated in an earlier session that a BPO is not just a partner but more of a designer - is that something that you would you agree with?

: Actually what we hope to do at DSM, is exactly that. So we are in the process of buying a bundle of market leading tools to help us enable processes. DSM is an extremely complex company; it has got fifty one different finance systems and twelve real operating divisions which are all different. We make everything from fertiliser to drugs, so it is a large range including melamine and paint and the possibility to combine material and life sciences in the middle. And each business unit and department operates differently. But actually trying to get all of that into a shared services environment - the benefits would be high, so what we are actually doing is taking these tools so that we can run in one process, and then we are integrating the tools in one direction through the financial systems. And then, back upwards into organisation and process. We are actually in the process of looking for somebody to do the integration systems work and it will be an integrator who has done this before several times. So they basically deliver us a working package job description and training, the developmental stuff for the people and we’re looking at it and saying to the - go away and innovate it because to be honest if we do it internally it will take us much longer, and cost more.

SSON: For you - what qualities does the perfect partner have?

Well as I said it is about relationship for me, it is about values, so what are you trying to do? How are you trying to do it? What does that mean? For instance,  I have come across culturally different understandings of the word integrity, but it means totally different things to different people  - so don’t assume.

SSON: Which is a good point that you made, obviously dealing with different countries from China to the US. What do you think the main reasons are for  contracts going wrong?

Over-commitment by the sales guys at the front. I had one in my life and I won’t mention the vendor because it is not fair, but they returned the RFP and put their sales blurb into the RFP as a response. We used that against them all through the negotiation, which in retrospect was a bad thing to do. But, if you are going to make those statements – you need to stand up to them. And they should be made to pay for statements like that. If you get it wrong at the beginning you are going to be living with it for five or seven years, getting rid of one of these things is very difficult.

SSON: And what have the key contract successes and learning’s been for you?

: I think that one of the things that has developed over the years has been instead of the KPI’s being - ‘I will process this information in 48 hours,’ - the emphasis is now on  outcomes. I think that is one of the major bits for me. So it is 99.95% right the first time, at the point that we want to make the payment. So its way better, it’s more measurable, you don’t end up with so many things going wrong, and people worrying about 2%. When you are transacting a million transactions a year, and you get 2% wrong, it’s not very good. It’s nowhere near six sigma etc. And the 2% will always cause massive noise in the organisation, because people don’t want to do this, it is fairly fundamental that people are losing jobs. And I have been quoted saying that my job is to take jobs from Western Europe and the US, and to put it into Eastern Europe, Asia or South America. But that is a good summary of what I do for a living. It is pretty emotive when you put it like that, and you affect people’s lives and most organisations retain people and those people have got a vested interest in actually highlighting everything going wrong. It is like a shark waiting for a speck of blood. Therefore for some years you still have people better internally than the people externally, because you are replacing a thousand years worth of experience with a few weeks.