BPOs – How to Avoid the Most Common Cause of Outsourcing Failure

hudgeon12By Doug Hudgeon

The Cost Reduction Tip

In the Eric Carle children’s story, The Mixed Up Chameleon, a chameleon attempts to become the perfect animal by adopting the best parts of different animals e.g. an elephant’s trunk, a giraffe’s long neck etc. At the end of the book, he’s so mixed up that he cannot catch flies for dinner.

As obvious as it is that an animal has evolved to work well only as a whole, when companies outsource their back office operations, they often try to keep favoured parts of their current operations.

For example, they may outsource payments but keep their approval processes or outsource claims but keep their task management system. This inevitably increases costs and regularly leads to the failure of the entire outsourcing project. Clients aren’t wholly to blame here.

Often outsourcing vendors, to close a sale, will pander to the requests of their clients to create a mixed-up chameleon and not properly recommend that they implement the complete chameleon.

If you are going to outsource a function at the lowest cost with the least change management then you need to find a vendor with a process that you can adopt completely.

Don’t select a vendor based on some other criteria (e.g. they are the market-leader) and ask them to implement only parts of their process.

If you cannot find a vendor whose process you can adopt completely then don’t outsource the function.

Doug Hudgeon who is lawyer and vendor management professional who has branched into finance and accounting shared services management.

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  • Collin ballerina says:

    Hiring the wrong contractor or setting unrealistic goals to inadequate contract details or inflexible contracts, can ruin the relationship between the contractor and the manager and lead to outsourcing failure? is it?

    • John Chaw says:

      the top three relationship factors to be bid shopping, project manager relationship, and superintendent capability, respectively.

      • SCM Manager says:

        Hey Folks!

        bid shopping is a serious betrayal of trust with 75% of respondents indicating that they have ended a relationship after having a bid shopped. The project manager and superintendent have key roles in maintaining the subcontractor relationship; honesty, fairness, and capability were determined to be their most important traits.

  • J R Robinson says:

    Great Tips to become successful in outsourcing.
    A question:
    is there only one way to succeed in outsourcing to reduce cost? no other factors?

    • Vivek Sood says:

      Outsourcing is a very complex, and very emotional subjects for most people. The best rendering of your point is given in the book outsourcing 3.0 (outsourcing3.com ). You can download first 3 chapters of the book free over there. In those chapters you will see frameworks and conceptual diagrams to cover a gamut of factors related to your question. OUTSOURCING 3.0

      • Sambada says:

        My small query for Outsourcing: HOW CAN I TRUST THE PERSON/COMPANY I’M OUTSOURCING TO?

      • J R Robinson says:

        Thanks for the Suggestion, Mr. Sood. I’ll take free chapters for reading but I think it’s not enough to know outsourcing 3.0 so I would prefer to buy a book.

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