Where do you start with outsourcing?

23 May 2012
So you think that business process outsourcing (BPO) is the next step in your firm’s evolution. But where do you start? Most companies set out to implement BPO effectively, but many end up failing to deliver this. All too often I hear of lost bargaining power, ill-conceived short-term contracts and weakened commercial terms with suppliers. A commercial strategy aims to help a company define and achieve its business objectives for BPO. It also helps to deliver value for money by ensuring the right financial deal and by creating the right commercial construct that will work operationally over the contract’s lifecycle. A commercial strategy includes, but is not limited to:
  • Business objectives for BPO
  • Details on the procurement approach and contracting phases
  • Evaluation criteria and tools to compare and contrast bidders’ solutions and financial proposals
  • Commercial contracting principles including negotiation points and boundaries
  • Contracting formalities and legal considerations.
A BPO arrangement is not entered into lightly, so time invested upfront in your commercial strategy is vital for ensuring the right long-term contractual foundation is established for your outsourced operations. A good commercial strategy sets clear milestones for decisions along the journey. Before issuing a request for proposal:
  • Be clear internally on priority objectives for BPO and ‘minimum bar’
  • Ensure internal alignment on weighted evaluation criteria.
Before supplier selection:
  • Exploit the opportunity to fully test the market via the multiple initial BPO Bids.
Before final selection:
  • Test relationships with the bidders via solution dialogue - do they demonstrate good collaboration?
Before signature:
  • Retain commercial tension into the late stages – for example, keep a backup horse in the race.
Take time to define your commercial strategy upfront. It will help you de-risk your BPO journey and manage the variables along the way, so you can make your final selection decision with confidence. ☛ Paul Bakstad is advisory director at Ernst & Young
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