CIO Today: Study reveals how to get outsourcing relationships right – by Jeffrey Puritt, President
Posted April 26, 2016 – Jeffrey Puritt, President, TELUS International
This is now more important than ever with the US$150 billion global BPO industry trending towards fewer but more meaningful buyer-supplier relationships. In fact, a new study by Everest Group, with support from TELUS International, found that less than 50 percent of end-of-term contact center outsourcing contracts were renewed between 2013 and 2014. The question is why? What’s separating the critical relationships from the dispensable ones?
The non-renewal rate underscores the need for both buyers and suppliers to re-evaluate their approach to outsourcing relationships. It’s when service providers go above and beyond to deliver innovation, and when buyers bring more attention to the relationship, that contract renewals are most likely. In short, it all starts with buyer-supplier engagement.
Success factors for better BPO partnerships
Just as companies focus on employee engagement to attract, motivate and retain the best people, buyer-supplier engagement should be viewed as equally critical to achieving value-driven and differentiated services. As outlined in the study, there are several factors impacting outsourcing relationship value and partnership engagement. These can be grouped into three areas of focus: connectivity, knowledge, and innovation.
Focus area 1: Create connectivity
Engagement starts with making connections at all levels of the partnership. At the executive level, senior leaders must be present throughout the relationship and not just when the deal is signed. Executive presence on both sides indicates investment in the partnership. As part of the governance model, consider including an executive steering committee to support the working partnership.
At the employee level, engagement is absolutely crucial. Highly tenured agents who feel valued and engaged bring passion and commitment to their roles. They take ownership of customer service issues and strive for better customer experience outcomes. But engagement is hard work — on both sides. Often going beyond salary, engagement programs look at what truly matters to employees on a personal and professional level. From extended health care benefits and onsite university programs to leadership development and community giving, a vested interest in engagement programs can drive BPO success.
Focus area 2: Deepen mutual business knowledge
As an outsourcer, you’re tasked with working directly with a client’s most valuable asset — their customers. You need to be a true extension of their brand. Yet the number one complaint from BPO buyers is a lack of communication with their vendors. More frequent, constructive and frank discussion is helpful, and formalizing a communication strategy is even better. This means establishing regular health checks, pulse checks, or business reviews to ensure that communication flows on a regular basis.
Once everyone is talking, it’s time to align on business objectives. Service providers must support the day-to-day operations while making an effort to understand the buyer’s overall business direction. Additionally, buyers need to take the time to educate their providers on their objectives, including expansion plans, process refinement and areas of continuous improvement.
Focus area 3: Drive innovation and quality
The most successful companies don’t just sit back and hope innovation happens to them; they work to make innovation a repeatable process. In more engaged relationships, service providers have been known to deliver innovation when it comes to recruitment, training, business process improvement, and engagement models. Planning for innovation by building appropriate metrics, even incentives, into the initial contract, and including it as a standing agenda item in status meetings, ensures prioritization and accountability.
When it comes to quality, all outsourcing relationships experience some level of stress, especially at the start. However, ongoing quality issues are often a sign of focusing on the wrong things like cost and efficiencies at the expense of customer experience. Providers must remain committed to Quality of Service measures that drive insight and relevancy into the business. And while efficiency and effectiveness measures remain relevant, business outcome measures like Net Promoter Score and Customer Effort Score should become more important and serve as a sign of a more invested, customer-focused partnership.
The bottom line
Engaged outsourcing relationships don’t just happen — they are envisioned, intentionally nurtured, and diligently built. Buyers look to their service provider to deliver the resources and know-how to better meet the needs of their customers, while service providers look to the buyer for the knowledge and direction to achieve better business results.
It’s a symbiotic relationship that requires extensive collaboration, effort and planning to reach mutually beneficial outcomes. In the end, the outsourcing partnerships that stick are the ones where both parties are committed to achieving a value-driven service model beyond cost savings.
Related research and articles:
– Achieving Maximum BPO Value: How Smart Buyers Structure Contact Center Outsourcing Relationships – study by Everest Group with support from TELUS International
– Study reveals how to get outsourcing relationships right – CIO Today article, PDF
In January the leading global management consulting firm A.T. Kearney issued the seventh edition of the Service Location Index. The Index draws a global outsourcing landscape based on metrics in three major criteria: financial attractiveness, people skills and availability, and business environment, measured for each of the 55 countries included in the research.
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