For the purpose of this blog post –
Clients refer to the main operations; the company that decides to have an external party perform one or more of its business processes
Vendors refer to the service providers assisting the main operations; the company that executes the business process on behalf of the client
Customers refer to the end consumers or buyers of the Clients’ business outcomes/products/services offered
The BPO Client-Vendor Relationship
Over the years BPO was seen primarily as a cost-control strategy with relatively short-term objectives. However, BPO has evolved to a much more involved strategy. Today, clients look to their vendors to also provide other value in addition to cost control. In this week’s blog post, we want to briefly explore client-vendor relationships and share some tips to help drive a successful partnership.
A successful outsourcing relationship is the equilibrium between when the client is fully achieving their vision and the vendor is making a profit. Both sides of this equation are important to success. (West, 2014)
If you don’t pick the right partner, then your customers could question your reputation and competitors could challenge the success of your company. As is often the case in outsourced business relationships, the success of the client-vendor relationship all comes down to expectations. Certainly, much of what a client expects of its vendor is spelled out in its contracts and service-level agreements. However, according to Forbes Insights (2014) nearly 30% of the executives surveyed said their BPO providers’ performance exceeded their expectations and noted that this was because the provider was “more of a partner than expected.” (Forbes Insights, 2014).
A collaborative approach to relationship management can dramatically reduce costs and chance of failure (Karabinos, 2003)
Rather than assuming a rigid client-vendor relationship, view the outsource provider as a partner on this journey – one who can leverage their extensive process and functional expertise in support of a client organisation’s objectives.
This Week’s Quick Tips
1) Don’t choose BPO because it’s “easier”
Outsourcing does offer a certain arm’s length neutrality, but beware of interpreting this mainly as a mean of ‘control’. Your end customer cares first and foremost about seamless delivery and excellence (O’Sullivan, 2013)
2) Set clear service level objectives for both clients and vendors
What do you really need and at what level? Base this on past performance, your competitors’ service levels and your customers’ needs. Then properly define service levels in collaboration with your vendor to ensure that they understand them and are capable of fulfilling them.
In many failed outsourcing arrangements the relationship worsened over time due to inadequate description of service delivery requirements. Even in successful outsourcing arrangements management realises the importance of a clear description of objectives and processes. In a study conducted by Biehl, Halder & Mart (2011) when they asked client managers of failed BPO relationships what they would do different next time, managers mentioned that they would specify more clearly the requirements and scope of the project at the start and have a roadmap of goals for each delivery phase. This was true for clients and vendors alike, as vendors risk not only satisfaction with the failed project but also their reputation. In order for an outside vendor to deliver business value, the vendor needs to have a clear idea of both the client business’ overall business goals and strategy.
3) Relationship management
Managing employees is very different from managing vendors. With the former, you’re focused on coaching a team of people who have the same objectives as you do. With the latter, you need to concentrate on monitoring processes, tracking metrics, capturing results, measuring performance and providing feedback to a team answering to a different agenda than your own. You have less direct control over these workers, so you also need to increase your negotiation influencing and communication skills.
According to Karabinos (2003) a successful relationship has these characteristics:
- The partnership is focused on joint gain and sustaining the relationship
- Problem-solving and decision-making are collaborative
- Metrics are jointly developed and shared
- Negotiations focus on solving problems and setting good precedents
- Surprises are rare, planning is integrated, and communication is frequent and robust
What are your experiences with the BPO Client-Vendor relationships? From either perspective, do you have any basic tips that you think help made a more successful relationship?