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Making the Case - Page 1

Oct 12, 2006
By

Mark Cioni






Organizations too often fail to develop a solid business case for BPO initiatives, instead focusing on shorter-term cost reductions that are seemingly easy to achieve.

This approach, while pragmatic, ignores the larger context of investment decisions and decreases the chances of realizing the full range of business benefits from BPO. A solid business case need not be onerous or time consuming, but it must be rigorous enough to help the organization make an informed decision about candidate BPO initiatives relative to other potential investments.

That means the business case must, minimally encompass:


Results - Outcomes, measures and value define the results and benefits an organization wants to achieve, while key performance indicators reflect business effectiveness and health. The business case must show whether the anticipated results from a BPO initiative will affect performance in a meaningful way.

Look for opportunities to cascade value. For example, outsourcing to a blended contact center offering voice, email and instant chat channels can reduce the cost-per-contact as well as provide a 24x7 service profile for customers.

Remember that results can contain both quantitative as well as subjective value, which, although difficult to pin down, can be just as important to the business case as hard numbers; especially when marketing and selling the case internally.

By all means, get candidate BPO providers to help identify potential value, just ensure that the business case reflects alignment with business objectives.

Constraints - The boundaries within which the organization must operate are important inputs to the business case. Organizations generally must observe broad constraints, such as regulatory compliance or reporting requirements, as well as those specific to industry, location and other situational parameters.

The business case for BPO must identify these constraints, and incorporate their impact into the results, costs, time and risk elements of the case.

A simple example could be a utility whose rate-case is contingent upon reducing outage response and restoration times, which the organization plans to accomplish via outsourcing a portion of their mobile dispatch needs. The business case for BPO might need to consider these metrics as a constraint relative to value (favorable rate case), time (deadline to achieve better performance) and risk (probability and impacts of not achieving better performance within deadline).

Costs - Most organizations can identify and quantify the major costs of a BPO initiative—be they incurred per-transaction, by service level or via hybrid models—but they often overlook costs that might not be immediately obvious.

Examples I’ve seen in developing BPO business cases include hardware/software acquisition and maintenance, internal training, and customer support spikes due to process or provider changes, to name just a few.

Organizations can also forget the time and resource costs of ensuring BPO success, such as internal and external communication and change management, focused provider management and BPO program management.

Finally, ensure that the right financial principles and methods are applied to assessing cost and payback relative to constraints.

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