The Governance Challenge in BPO

Phil Searle

Phil Searle: Sameer, you've successfully steered Orange Business Services through what is arguably one of today's most challenging business strategies: transitioning to an offshore outsourcing model. Share with us a brief background of your journey.

Sameer Jalundhwala: Phil, yes, the past few years have been exciting and a challenge, indeed. We had a great starting point though, in terms of having a single instance of Oracle 11i and F&A global processes delivered through four regional SSCs. The offshore (from Warsaw and Chennai) outsourcing model, through outsourcing, has brought great value to our business in terms of lower costs as well as improved quality: several SLA items are already showing better performance than we had before.

Phil Searle: What are the guiding principles for the service provider engagement model? Do you see this as breaking the shackles of the classic customer-vendor relationship?

Sameer Jalundhwala: It's important that the guiding principles of the engagement are discussed and agreed upon up front and also laid out in the contract. Outsourcing of services over a long term contract period is very different from classic sourcing and a classic customer-supplier relationship. It is, indeed, difficult to break these shackles, but both parties would get most out of the relationship by truly agreeing to a fair and collaborative partnership over the years and - a bit (!) more challenging, this part - actually seeing this through in practice.

Phil Searle: How important is good relationship management as part of a robust governance model?

Sameer Jalundhwala: I liken a good contract to the foundation of a house, good ongoing relationship management to the walls, and the rest of the structure as accommodating a happy family, including both the customer and service provider. As with all relationships, this does need to be worked upon: a touch point of even a couple of hours a month, at senior level and on both sides, throughout the life of the contract, would make a difference. On-going relationship management in a BPO contract is far more important and challenging than if one were just buying widgets!

Phil Searle: How do you get the balance right between the retained organization and the outsourced function?

Sameer Jalundhwala: I would draw a distinction between the retained organization and the governance organization within the customer's organization. The retained organization is the structure left behind, or not outsourced, to cover the retained part of the work. For example, if scanning of invoices is not outsourced but the rest of invoice processing is, one would plan for a retained organization incorporating headcount just for the scanning of invoices. But what could quite easily be missed out is planning an organization for the governance of the outsourced processes. A governance organization of Global Process Owners (GPOs) should be built in, and should incorporate the following responsibilities: SLA management, resolution of complex process issues (working with the provider), continuous process improvement, handling high level escalations, working on upstream process issues, overseeing audits on processes, executing SoX monitoring controls, etc. I would strongly recommend that the GPO organization be put into place right at the beginning of (or even before) your outsourcing journey begins; its services will be very productively used in building the SLA framework and writing/ improving process documentation. The GPO organization should be mirrored in the service provider's organization in order to provide a good partnership approach.

Phil Searle: Can you give examples of some important governance processes?

Sameer Jalundhwala: Some important examples are: service performance management, contract change management, program management and benchmarking. We prepared process documentation on 14 such governance processes, with flow charts and swim-lane diagrams on the more important ones.

Phil Searle: What exactly are "task force committees" and what role do they play?

Sameer Jalundhwala: A committee structure is extremely valuable and needs to be clearly defined: detailing purpose, attendees, frequency and agenda. The structure is bound to evolve as you progress through your outsourcing life-cycle. Here are some suggestions:

Steering Committee - a monthly meeting during the transition phase (less frequently later) and incorporating key stakeholders. This committee provides key oversight of the outsourcing project and relationship

Business Unit Governance Board - this committee meets monthly (quarterly later) and provides business unit input into service delivery performance, business requirements/changes at the strategic level and updates on any key business changes

Monthly Service Review and pre-service reviews by process - extremely important for ongoing SLA management. Highlights and lowlights for the previous months are discussed, together with planned areas of focus for the next month.

I also found it extremely useful to have a monthly strategic meeting with the service provider, with very limited attendees (two from each side). This operates as a working meeting and is used for thrashing through issues.