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Take careful stock of your processes before you decide to implement BPO.

The classic paradox of outsourcing is that businesses are often told not to outsource their problems. But if a process is running smoothly, then why outsource it? Bill Martorelli, a principal analyst with Forrester Research Inc., says, "You can't outsource something you don't understand, otherwise you'll never understand what the outsourcer is doing on your behalf." Martorelli says that, many times, the better a process works internally, the more money you are likely to save by outsourcing it, because the transition will be simpler, allowing the outsourcer to focus more on optimization.

So how do you decide which processes are best suited for BPO now? It depends on two factors: deciding which ones have the least strategic value to your company, and then evaluating which of those processes are in the best shape.

Kevin Colangelo, a technology attorney with New York City-based Kramer Levin Naftalis & Frankel LLP, advises companies to formally consider their in-house capabilities before signing a BPO contract. "Make your internal group respond to the RFP as well," he says. "A lot of times that works very well because now they have to compete with a potential outsourcer." This will create one of two outcomes: Either the internal department will get its act together and prove a BPO deal is unnecessary, or it will ease the transition to the BPO vendor. This process will also create a baseline assessment of the processes in question before you send them to a third party, thus enabling your company to measure an outsourcer's effectiveness over time.

To truly transform, it's not enough to streamline processes, as many BPO vendors promise. "It's not just about doing it faster, quicker and cheaper," says Colangelo, "but integrating those systems with other technologies." For example, he says, imagine contracting an HR BPO vendor not just to take over and optimize the employee benefits process, but also to create a portal that lets employees submit and track their claims in real time. It can take several years before the BPO vendor reaches what Colangelo calls the "steady state"—the point when the BPO provider has a good enough grasp on your processes to attempt transforming them. In the early stages of a BPO deal, the focus will be on reducing costs and streamlining operations.

This article was originally published on 03-25-2005
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