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Insights
Winning Ways

New Look for the BPO Outsourcing Journal

Case Studies
Emerald Isle Solution

First Aid for HR

Collective Behavior

Flooded with Possibilities

February is the month when we publish our annual Outsourcing Center awards. All year we solicit nominations from the outsourcing world so we can ferret out the finest outsourcing relationships. Here at the OutsourcingCenter we believe everyone can learn by studying the best.

Only relationships that hold tremendous value receive a nomination. This year we had 80 nominations; we researched every nomination to reduce the list to 40. We studied these outsourcing relationships in depth to select our eight winners. We tell their stories in the February issue of the Outsourcing Journal. Take a look; the tales are illustrative, providing a veritable blueprint for outsourcing success. Many are in the BPO field.

Selecting just eight winners was a task fit for King Solomon. In this issue of the BPO Journal we focus on four outstanding BPO candidates who have crafted relationships that are worthy of recognition. What impressed me about these four stories is the mutual commitment both sides have to creating value through the relationship. Both buyer and vendor treat their outsourcing contract as a relationship rather than just the sale of goods and services.

Each partner is willing to build its success on the other partner's strengths. This healthy attitude brings out the best in both organizations and creates a synergistic working environment. In each of these cases, 2 plus 2 does equal 5.

One of the recurring themes is the willingness of the supplier to invest capital and expertise in its buyer's business. Remedy Corporation, a US software developer, was looking for a supplier in Europe. But this supplier also had to have a U.S. distribution point, preferably on the west coast. The buyer was shocked when Compaq responded, "We'll build you a U.S. distribution point," which it did. The center has grown, benefiting both parties.

In addition, Compaq owns all of Remedy's inventory, tying up a "tremendous amount" of its own money for its customer.

The Need for Frank and Open Discussions

Another constant theme is the high level of frankness and the open discussions, especially when the going gets tough. For example, health care giant Johnson & Johnson outsourced its human resources (HR) function to Hewitt Associates. The software system was not ready by the targeted date, then there wasn't enough prep time for the first annual enrollment after the transition. But both parties worked together and reverted to an agreed upon contingency plan. The successful solution to the problem was a joint effort.

Superior suppliers include value added services in addition to the services agreed upon in the outsourcing contract. In one story, Microsoft's European entity, based in Ireland, outsourced its collections to French & Associates, an Irish vendor. The value the French team provides goes beyond its collection skills, which now allows Microsoft to have its accounts receivables total 96 percent a month. For example, French brought in Irish employees with language skills in Hebrew and Greek that would be difficult for Microsoft to find.

In the same vein, Allstate Insurance hired EDS to process its flood insurance. Now EDS is supplying ideas for new projects too. One EDS suggestion was to put helpful tips in the background instead of music when an Allstate agent calls and is put on hold. The buyer discovered this one tip improved agent satisfaction and aided policy retention.

The lesson here is clear. Buyers must allow their vendors to make a profitable sale. Knowledgeable buyers are an advantage to any outsourcing relationship.

This is how outsourcing generates value. Vendors profit, but so do buyers, who receive better service and a faster cycle time at a lower cost. These results demonstrate what can be achieved by an enlightened buyer and supplier. And this can happen with every outsourcing relationship, not just occasionally. Outsourcing has matured; it is long past the stage where failure rates were consistently high. With the right motivation, buyers and vendors can craft successful relationships every time.

Lessons from the Outsourcing Primer:

• Each partner is willing to build its success on the other partner's strengths.
• Successful partnerships depend on compromise, open and frank discussions, and rapid response times. Both parties must be willing to do what it takes to meet the buyer's needs.
• Buyers must let their vendors earn a profit.
• Suppliers can enhance an outsourcing relationship with value added services.
• Successful outsourcing partnerships are repeatable.

Publish Date: February 2001

Copyright © 2001 - Everest Partners, L.P.

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