Informed consent: how to use BPO effectively

Executive summary

In a nutshell

BPO market overview

Defining the IT-led BPO market

A new era in BPO

Understanding BPO, governance and trust

Generating client savings from BPO

How the savings stack up

Labour arbitrage (offshoring) is the low-hanging fruit

Global sourcing: which country to choose?

IT efficiencies not so clear-cut

The BPO business model

Suppliers must have a sustainable model

Simple economies of scale not a main driver

Contracts have to stand on their own feet

Phasing of a BPO contract

Funding ongoing savings from day one

Shorter, simpler transitions boost profit

Smaller deals; phased improvements

Labour versus IT efficiencies

Providers shy away from large-scale IT transformation

Labour arbitrage is preferred for initial savings

IT expertise is important for ongoing savings

Strategic considerations in BPO

Not about core or non-core

The devil is in the detail

Understanding pricing

Understanding a transaction

Unit- and step-pricing

Breaking the link from cost and price

Joint ventures

Sharing risk and reward

Joint ventures are not service providers’ preferred model

Relationship management

Measuring performance: outcomes and SLAs

Focusing on outcomes: balancing control, openness and flexibility

The outcome-based reverse pyramid

Collaborative governance

Strategic relationship through collaborative governance

Identifying and dealing with risks and opportunities

Keep the contract in the drawer, but the relationship fresh

Governance costs, but fosters trust

List of Figures

Figure 1: Potential labour efficiencies versus IT efficiencies in BPO

Figure 2: Typical BPO contract: cost versus price profile

Figure 3: The reverse pyramid in outcome-based BPO