Time For Outsourcing? A Look At BPO That Might Inform LPO

The main opportunity to push for greater innovation and to draw on specialist capabilities obviously comes at contract time, and there is good news here. To keep up with rapidly changing technology requirements, corporate buyers have been trimming the sourcing cycle. The average contract length for IT and BPO deals shrunk from 4.8 years in 2007 to 4.3 years in 2017, according to IDC, and we expect it will settle at slightly more than 4 years.

en flag
nl flag
fr flag
de flag
pt flag
es flag

An extract from an article by Bhanu Singh and Megha Chawla (Bain & Company) published in Business World

Many firms still haven’t fully realized the promise of outsourcing, even after years of experience. The cost benefits have not been as impressive as anticipated, and service levels have remained largely the same despite being handed over to specialists.

A few companies, however, are learning how to turn outsourcing into a stealth weapon, achieving outsize cost and performance improvements. For example, a US-based healthcare provider worked with its vendor on focused automation in the service desk, such as an analytics tool to figure out the root causes of the most severe recurring issues. As a result, the company dramatically reduced service ticket volumes and improved service outcomes. The cost and performance benefits were significantly greater than in traditional outsourcing, where benefits result from arbitrage and basic automation.

Such “transformational sourcing” delivers up to 25% improvement in functional total cost of ownership, over and above the benefits from traditional sourcing. These improvements result from process redesign, digitalization and automation over the course of an outsourcing engagement.

In addition, some companies have adopted more flexible pricing models, where cost depends on consumption and outcomes, thereby turning fixed costs into variable costs, and more important, sharing accountability with vendors for a defined set of operational and business outcomes. At one health insurer, operations outsourcing vendors signed up to spur improvements not only in operational metrics, but also in customer and provider Net Promoter Score® (a key metric of loyalty). Performance improved through work redesign, automation and other technology interventions.

As we look across industries and regions, several common problems hinder sourcing programs from achieving their full potential.

Read the complete article at Time for Outsourcing To Aim Higher On Cost And Performance

Additional Reading

Source: ComplexDiscovery

ComplexDiscovery combines original industry research with curated expert articles to create an informational resource that helps legal, business, and information technology professionals better understand the business and practice of data discovery and legal discovery.

All contributions are invested to support the development and distribution of ComplexDiscovery content. Contributors can make as many article contributions as they like, but will not be asked to register and pay until their contribution reaches $5.