Successful BPO and offshoring in Pakistan

I wrote this roughly two years ago because I felt that there was a need to proceed not with caution as much as with intelligence if you were a Pakistani company going into BPO and offshoring. Business at any cost may work to get into an account, with subsequent high revenue cycles justifying the action, but BPO and offshoring is a meeting of cultures and as such is more complex, more suspectible to failure and requires more cogitation. These are my seven principles for Pakistani companies thinking of doing BPO and offshoring work. These are very basic and almost infantile for a reason. We still don't do them.

The Principles of successful BPO

Most guides for outsourcing are from the client’s perspective. This guide is written from the perspective of a company in Pakistan who is attempting to be a vendor of Business Process Outsourcing and is raw or new at it. This guide will attempt to outline high level basic principles for ensuring a successful Business Process Outsourcing deal.

In order to outline principles of BPO one needs to clarify its definition. The ‘O’ in Business Process Outsourcing stands for Outsourcing and is the most defining word in the phrase. Outsourcing by its nature is simply: Replacing the client’s Goods, Services & Processes otherwise provided internally for specific advantages especially cost, without compromising and occasionally improving on the original quality of service. BPO’s are often IT intensive. Indeed it is technology’s ability to share large amounts of information quickly globally that was one of the core factors driving BPO adoption.

The opportunity….

BPO in Pakistan is an inevitability. Our structural and socio-economic factors are similar to India’s which is a huge BPO player in the international market. Below graph from McKinsey emphasizes the strategic advantage India has in the BPO market.

(Graph can't be uploaded owing to Worldcall broadband's ideological conflict with giving any sort of upload speed to this particular consumer)

Not to offend your sense of peasent simplicity, all of India’s advantages in Quality, cost, skill set and language are replicated in Pakistan. Pakistan strategically should be a significant player in the BPO market but how big is the opportunity? There is a USD 24 billion opportunity for India by one trusted source for 2004-2008 in India alone. Yet the opportunity cannot be capitalized upon unless Pakistani firms discipline themselves to follow certain principles which will help them avoid being road kill in the road to BPO. Following are a list of Principles we feel can help guide Pakistani firms down this unknown path.

Principle #1: It’s the client’s readiness that defines success not yours

It is imperative while exploring business opportunities that the vendor judge the readiness of the client to begin BPO processes. If your client has not researched intelligently internally what services and processes to outsource and is jumping on the outsourcing bandwagon as a result of urgent executive pressure on cost, chances of a successful BPO deal the client is satisfied with go down. Ask intelligent probing questions during the initial engagement process that reveal the level of due diligence the client has done. Below diagram explains this point:

Basically the deeper the client has probed internally on its need for BPO and identified BPO targets within its organization the higher the chance of a successful deal. The importance of identifying this cannot be over stated. The BPO momentum is not slowing down. Accordingly the choices available to customer are also growing globally. The key to making your mark in BPO market is credibility and nothing erodes credibility faster then a hastily done BPO deal that is ultimately unsuccessful. Learn to walk away from clients that are not ready for BPO. Remember you are not a consultant. It is not your job to scope the internal processes of a company and identify gaps that your outsourcing can fill. As a company embarking on providing BPO services you cannot be expected to be at that stage of outsourcing and consulting sophistication.

The flip side of this principle is to know your own readiness and strength. BPO agreements are results driven. As an outsourcing vendor play to your outsourcing strength not to your weaknesses. If you cannot know how to manage the complexity of a process or network being outsourced to, you walk away from it.

Principle #2: You are not the medicine for a client’s business ills

Proceed very cautiously if a BPO deal seeks to outsource a “problem area” for a client. Unless the vendor has specific specialization in the area and access to best practices from past clients chances for a successful BPO deal will be low. If the client could not clean up their act you will not be able to either. Again during the initial engagement you should be able to clear this point up. There have been instances of failed BPO deals which were motivated purely by a functional head’s desire to outsource a process which was giving him headaches within his resources.

Principle #3: Know your client’s business outlook better then your client

The word “outlook” is the key here. As a part of due diligence after “opportunity identification” stage the vendor absolutely must research market developments related to proposed BPO assignment. One way to do this is to identify key technologies and/or trends that are considered “disruptive”. See if these will have an impact on your BPO assignment. Say you are outsourcing the billing and help desk of a major PC game publisher for a new MMOG (Massively Multiplayer Online Gaming) title due to launch in three months. You calculate that you will have ROI in nine months. However research on market outlook identifies that seven major titles in the same genre have been cancelled in the last three months owing to low revenue forecasts and that only established players with existing franchises are doing well. You may want to re-think this BPO initiative accordingly.

Principle #4: Define the lifecycle – Define your success

Identifying the lifecycle of a deal and preparing strategies against each stage increases the chance of a successful BPO deal. The strategies may differ according to nature of client, nature of decision makers and nature of industry. But it is important to know the components of a lifecycle. Below is a typical BPO deal lifecycle you can use as a basic template. Please note this is for opportunities from an organic sales funnel and not a lifecycle in response to an RFP.

Sales Process ---} Opportunity identification & Scoping ---} Client's executive assessment ---} Formal client intent ---} Creation of client task force ---} Due diligence ---} Contracting ---} Migration ---} Finalize SLA & KPI ---} Lifecycle management

Some comments on the lifecycle:

1. Right after the opportunity identification stage and during the time the client is taking time to evaluate you at the executive level is a very key phase. This is when you yourself should start identifying the following:

1. Who makes the final decision?

2. Who influences the decision?

3. Who are the functional stakeholders? These are critical to identify and manage relations with. These are the stakeholders representing the function from which processes will be outsourced.

4. Who makes up the client team for this agreement? Make sure or insist that functional stakeholders are represented on the team. They will be the most valuable in helping migration happen smoothly. If this does not happen then request a series of sessions with them.

5. Who is in the project management team? This will be the team instilled with the task of meeting migration timeline and will be smaller then the client team.

Ideally you should know point 1 by the ‘executive client assessment’ stage. You should know point 2 by the ‘client taskforce with client executive sponsor’ stage. You should know points 3 & 4 before ‘client taskforce with client executive sponsor’ stage so you can try to influence it if needed. Point 5 you should aim for in the ‘contract’ stage. However the PM team idea should be floated by you in the ‘due diligence’ stage.

2. You will ALWAYS find more about the deal and usually more areas in which the client might want you to add to the original statement of work. Tell the client beforehand that there will be a finalize SLA phase by mutual consultation after migration of services. You can also call this the “Re-assess SLA’s phase. You should always portray this as being something that is in their favor, which it actually is proven to be.

3. The client task force should have an executive sponsor. Insist on it or you risk the project being hijacked by people on lower ranks who may not share the outsourcing vision.

4. The Due Diligence phase is two ways. You should also take this time while client is verifying your capabilities to verify whether information regarding their financials, processes, sub-processes etc is correct. Supplying of this information form their end and from your end regarding specific capability & proposal should happen right after the ‘Opportunity identification’ phase and often starts during it.

5. The SLA’s (Service Level Agreements) should define KPI’s (Key Performance Indicators) that the client will measure the vendor on. These often will and should contain penalty clauses. Exactly for this reason the vendor should make sure that the KPI’s are realistic and that it can manage those. Do not be afraid to point out if SLA’s contain unrealistic KPI’s. Better to be upfront then suffer a year later when KPI’s are not being met.

Principle #5: The Migration IS the deal

That’s right. The migration stage decides how well the deal goes no matter how long the deal is signed for. If you do not build the right foundation for success by a perfect migration you are in trouble. Migration is the stage where processes move to vendor side from client side. This is also usually the stage where you start charging the client. Following are a few tips on migration:

1. Before migration define detailed process flows with current owners and job descriptions. Define detailed process flow with future owners and compare skill sets and competencies. Using this identify the gaps and plug them in so that at migration time things go well.

2. If technology transfer is involved make sure you have the licenses and hardware covered. Many times a client will look at the total reduced cost of ownership and pay for hardware procurement that you use exclusively for them. This is what you should aim for. Failure to clear software cost accountability can erode the entire profit of the deal for many years!

3. Make sure accountability for your readiness rests with the client. Have them perform a ‘readiness audit’ on your processes pre-migration and sign off on acceptability.

4. Project management is key. Make sure that project manager only does project management. Project management is a complex full time job. Plan the migration with timelines and owners in all functional areas like HR/ Finance/ Operations and IT.

5. You have to invest in traveling. You should be able to judge with the experience of people involved and the experience of your company how many people should go and when but a good migration will require several trips to the client for multiple employees.

6. Don’t ignore the ‘people issues’. Always keep a channel open to the executive sponsor of the project. There will inevitably be resistances subtle or obvious to your BPO initiative. Make sure the executive sponsor gets involved where your relationship skills cannot find a way and make that judgment intelligently and quickly. Highlight Human Resource issues as they crop up. The longer you wait on them the worse they will become.

7. Make sure the people in the PM team from your side have authority within your company. Do not hand this task over to people who are just ‘messengers’.

Principle #6: Build a strong relationship bridge

A relationship bridge has a foundation on the vendor side and the other foundation on the client side. This foundation is the Relationship manager. Relationship managers are overall responsible for the deal. These are not account managers or the transitional Project managers for migration. Make sure the client does the same. You cannot compromise on the quality of this person. He has to have decision making, timely escalation, excellent communication and people management skills. A relationship athlete is an ‘A’ player and a star athlete and must always be a senior manager with delegated authority or even more senior. Remember a successful BPO is ALWAYS a complicated partnership never just a business deal governed by SLA’s. A Relationship manager will manage his deal accordingly and will have the ability to manage change preferably in a multi-cultural environment.

Principle #7: Never stop stressing the value proposition

BPO and outsourcing in general continues to divide opinion in the western world. The reason for this is loss of jobs associated with BPO. During the course of your BPO deal many of your employees will come in contact with the client’s employees some of whose job descriptions will change radically because of the deal. Yet on the core issue of the BPO deal in progress they must all unilaterally and without reservation be in alignment. All your people should stress the value proposition at all times and speak with one voice on the subject:

1. With executive sponsor and senior managers who are in favor of the BPO, keep driving the ‘cost’ message home.

2. Strategically you are not doing a BPO deal. That’s a specific. Strategically you are adding value by helping the client focus on their core business.

3. On the Human Resource aspect do not entertain the suggestion that the BPO deal could cause layoffs with your client. That’s not your intention nor your area of authority. Your standard response should always be that you are freeing resources which the client can use to focus on core areas.

In conclusion….

Remember outsourcing is becoming a phenomena that is irreversible. The momentum is on the side of the vendor and especially on the side of a vendor in Pakistan. However as the vendor prepares to navigate the bold new world of international BPO he would do well to remember that a short term approach will seriously hamper any initiative they have. Building credibility and an organization staffed with high quality people to deliver and execute should come first. That takes time and a commitment to excellence and integrity, but the eventual rewards are there.