Switching Business Process Management (BPM) suppliers - are you prepared for next generation outsourcing?
Market dynamics have changed in the last few years. First generation outsourcing primarily focused on cost arbitrage and shared services were nascent with fewer suppliers in the market. Currently there are several players offering services at competitive prices and the objective of outsourcing has moved to business value enhancement from cost alone. Some of the next generation outsourcing also involve rebadging / takeover of existing supplier.
Assess the reason for switching suppliers. The reasons could be many, a few of the common ones are listed below:
- Business value
- Quality of service
- Change in business or statutory / fiscal requirements
- Change in customer needs and behavior
- Consolidation of services to bring in efficiencies
- Softer elements viz., relationship maturity, stakeholder engagement, governance and review mechanism, complacency due to longer partnership with primary supplier, etc.
Next generation outsourcing - What to watch for?
While business case drives a lot of outsourcing decisions the next generation outsourcing is at a nascent stage, lot of attention is to be provided to a host of factors that drives the success of the outsourcing project.
1. Contract Management:
a. Contractual obligations are to be carefully examined to ensure there is no conflict of interest between the two suppliers involved.
b. The timing of contract execution with the new supplier should align with the expiry of contract with the existing supplier
c. Legal, statutory and fiscal requirements to be validated prior to execution of the contract.
2. Technology Management:
a. Access of tools and robotics deployed by the incumbent supplier including in house tools / IP / both to be shared with the new supplier.
b. Technology dependencies like network infrastructure, telephony, server and cloud management, etc. to be clearly outlined for the new supplier.
c. Sandbox / test environment to be set-up for new supplier team and required access to the granted
3. Operations Management:
a. Client has to ensure that the new supplier teams are mapped to current organization structure
b. Exit criteria for current supplier to include SLA / key performance metrics delivery until final project closure and smooth handoff to new supplier. Adequate staffing and retention of key resources by the existing supplier during the transition phase is critical to ensure there is minimal end customer impact.
c. New supplier to ensure that they have right skilled and staffed for the engagement at the requisite quality and experience criteria, as mandated by the client stakeholders
d. Phased ramp-up of the new supplier team to align with the corresponding ramp-down of the existing supplier.
e. Stock of backlog / pending and current volume to be obtained at the start of the project. Weekly handover of activities to the new supplier and its impact on overall business to be assessed.
4. Program Management:
a. Identification and alignment of project team - client retained organization to still continue to liaise with both suppliers during the transition phase and continue to support operations. As part of the project, if there are any changes to the existing structure, this has to be jointly agreed with the suppliers.
b. Program / project management needs to be more tightly controlled by the buyer while the new supplier may drive the project.
c. Tri-partite governance - joint review mechanism at the right frequency, clear communication and escalation mechanism in play.
d. Joint milestone review to ascertain smooth handoff of project deliverables at each phase of transition
e. Physical access to current supplier location to be granted to the new supplier. Alternatively, the new supplier may arrange space and technology infrastructure to facilitate knowledge transfer activities.
5. Risk and Change Management:
a. Evaluate risk profile using scoring matrix.
b. Build in enough slack to ensure focus on knowledge transfer related risks.
c. Implement risk mitigation approach essential to manage supplier risks inherent in the transition process.
d. Timely and efficient change communication to relevant stakeholders about the change of supplier and potential impact on performance.
e. Timely initiation of HR activities (in cases of redundancy / realignment) as per business case.
6. Knowledge Management:
a. Facilitate identification and alignment of key resources for knowledge transfer to new supplier team.
b. Existing supplier to ensure all process documentation are up-to date and stored in a central repository. Access to be granted to the new supplier.
c. Certification criteria for the new supplier team to be production ready to be reviewed and approved.
7. People Management:
a. Rebadging (takeover of experienced / critical resources) option may be provisioned in the contract to ensure that critical resources may be taken over by the new supplier from the existing supplier.
b. Clients to facilitate resource takeover.
It would be an understatement to mention that supplier transitions are easier to manage than a new / first time outsourcing project. Supplier transition has its own set of challenges and requires thorough planning and investment. Therefore it would be advisable to factor in the aforesaid requirements to avoid any severe challenge in the migration process. Eventually, the key project elements of cost, time and quality are quintessential to any business or client organization to ensure end customer satisfaction.