Many companies do not ask the right questions when evaluating BPO Partners before an RFP. Are you asking the right ones? With this special report by Spend Matters PRO, readers can scrutinize their evaluation process and get better results. By evaluating BPO partners on metrics such as category expertise and their ability to deliver savings, CFOs and CPOs can create a procurement outsourcing partnership that will be long lasting and mutually beneficial.
Yesterday I had the chance to connect with HfS Research’s Tony Filippone, a former procurement executive who has spent his share of time not only around complex categories and stakeholder (not to mention demand) management as a practitioner throughout almost all of his career, but is also an expert in the business process outsourcing (BPO) market, owing to his firm’s focus on it. In the discussion, we chatted about numerous things procurement, including the transformation of the procurement BPO market from one of fewer, larger deals to numerous, smaller transactions (at least to kick off relationships).
Upon reflecting on the conversation, I came to realize we might not be asking enough questions of potential outsourcing partners in the procurement area. In many ways, the worst possible situation is to have a BPO provider deliver a free or low-cost benchmarking project or diagnosis and then show how an organization is not up to a certain level in an area (i.e., an opportunity for engagement). This changes the basis of evaluation from one of examining objective and subjective criteria around the potential cultural and realized capability fit of a BPO firm with something as inconclusive — and potentially biased — as the identified savings from a strategic sourcing exercise that goes unimplemented.
Granted, there is absolutely a place for diagnostics. But we believe they’re better delivered by an objective third-party rather than a potential BPO partner for a number of reasons, including limited sample sizes, potential bias, and lack of benchmarking expertise (e.g., surveys/KPIs developed originally by a third-party rather than the firm itself). Given these limitations, we do not recommend companies move to a potential diagnostic or benchmarking exercise outside of basic savings identification until a relationship has already started (and ideally at that point, our recommendation is to work with a firm that is expert in the area).
Having put the diagnostic question to rest, the more important matter for this analysis is how executives should begin to vet potential BPO partners even before a formal RFP process (if a BPO sourcing process even leverages one at all, given how they are becoming less frequent, especially those run by an external third-party). We believe that the following questions can be a useful starting point to help identify the ideal BPO partner from a range of perspectives including the ability to deliver savings while not creating unnecessary disruption in the business and ideally improving supplier relationships in the process:
None of these questions are substitutes for those that typically appear on RFPs or more informally during a less structured and rigorous evaluation. But these queries and ones like them can serve as a useful means to understanding the true DNA of a potential BPO partner.
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