Lesson 5: BPO Engagement PDF

Lesson 5: BPO Engagement At the end of the lesson, you should be able to: 1. Differentiate the client company from the vendor 2. Identify the elements of a BPO contract 3. Explain the services provided by BPO companies In Business Process Outsourcin...

Lesson 5: BPO Engagement At the end of the lesson, you should be able to: 1. Differentiate the client company from the vendor 2. Identify the elements of a BPO contract 3. Explain the services provided by BPO companies In Business Process Outsourcing, a client seeks the services of the service provider to do certain tasks of some of its business functions. In this lesson we will be introduced to the client – service provider relationship, the contract that binds them, and the transfer of the process from one unit to another. Lesson 5.1 The BPO Contract In outsourcing, two parties agree to do business and each is a partner to the other. The parties involved are the client, and the service provider. This partnership is bound by trust and strengthened by a legal document which is the BPO contract. This is a mutually beneficial relationship. The table below presents the basic differences between the client and the service provider. Client or the Client Company Service Provider Company  Is the one who seeks the service/s of a  Can also be called “vendor” or “vendor service provider company”  Is concerned with the quality transition of  Is concerned with meeting the scope of processes and the efficient operation of the service and performance measures business functions that were once handled  Benchmarks to ensure objective standards in-house in assessing work quality  Is the “customer”  Usually handles and interacts with the “customer’s” customers. Sample scenario: Company A, an Australian based telco outsources its customer services to CBATech, a known call center company in the Philippines. From the scenario above, can you identify which are the client company and the service provider, and what process was outsourced, from where? Therefore, as a result of these client and vendor relationship attributes, the BPO contract is a unique, “tailor-fit” agreement captured in a document that resembles a performance contract. Just like any other business contract, the BPO contract holds the agreement between the two parties, the client and the service provider. This formal agreement expresses how the service provider will take over the “portion” of the client’s business operations. This portion is further documented in the BPO contract as the SOW or Scope of Work. The BPO contract, with all its attachments, assumptions, and documented agreements, is referred to as the master services agreement or MSA. The MSA is a covering agreement that summarizes terms applicable to every job- order with the service provider. Its core elements are the Scope of Work (SOW), Performance Standards, Timeline, Costs, and other Specific Operational Requirements. The Scope of Work (SOW) describes the specific work to be delivered, by when, at what cost. Akin to a “job order” the SOW tells what specific services are to be provided or rendered. The SOW may also express that in case of terms service variabilities, inconsistencies, or confusion, the SOW or MSA supersedes. Cornell Law School (1997), defines a performance standard as “a management-approved expression of the performance threshold/s, requirement/s, or expectation/s that must be met to be appraised at a particular level of performance and it expresses the expectations from the service provider.” These standards can be found in the Service Level Agreement (SLA) and Key Performance Indicators (KPI). The SLA is a commitment between a service provider and a client while the KPI is a type of performance measurement or metric. The timeline of the contract contains the start date and the duration. It contains the detailed schedule of when will the transition start, for how long the contract will be in effect and when will the service provider assume control of the contracted processes, or the “go live” date. Costs to the client refers to the payment made by the client to the service provider for honoring contractual arrangements. This is usually structured as fixed price or time and material pricing, the commonly used pricing models in outsourcing contracts. In practice, pricing is often a mix of these two models. 1. Fixed price model Also called a Lump Sum model, this pricing model is easier to plan compare to time and material model and is more predictable. Fixed price means that the price is final, and once decided and settled upon by parties involved, is not subject to bargaining. It is an ideal pricing mechanism for projects with a clear scope, established project management methodologies, and a stable set of requirements (Sridharan et al., 2017). In this pricing model, the service provider must ensure that all costs have been covered and profit will be made from the entire transaction. Project risks are carried entirely by the service provider so this pricing model may require greater professionalism 2. Time and Material (T&M) model This contract type requires the service providers to bid for the project based on client project requirements, depth of scope, amount of work and degree of coverage (Sridharan et al., 2017). The service provider and the client organization may agree upon an hourly, daily, weekly or monthly rate for the project resources (Sridharan et al., 2017). Unlike the fixed price model, the T&M model is applicable for projects where services that are not flexible are required and time and materials needed cannot be predicted. To control costs, both parties negotiate on a maximum price of service to ensure a safety level on costs. The contract may include other specific requirements such as; who will provide the services, qualifications of personnel, location of operations, etc. These very specific contractual details may protect both the client and service from ambiguity. Execise 5.1 Direction: We discussed about Key Performance Indicators or KPI. Do a simple research and find out the KPIs and performance metrics used by BPO and/or call center companies. Describe each. You may provide examples for better description.  Lesson 5.2 Transition Management Transition is defined as a change from one form or type to another, or the process by which this happens, or a movement, development, or evolution from one form, stage, or style to another. In business, transition and transition management are common attributes of change management. In business process outsourcing, transition management is the set of activities that transpire after the contract has been signed. This is the implementation or execution of the detailed movement or transfer of processes from the client to the service provider. This is overseen by a transition manager. The transition manager has the responsibility for the migration or relocation of the functions or the processes from the client organization, service provider or outsourcing organization (Transition Management in BPO Tutorial, 2017). Hence, the transition manager needs to possess the following skills and characteristics:  Communication skills to handle extensive interaction with clients, mostly foreign;  Competent project management skills to carry out migrations process tasks  Ability to work in a cross-cultural environment since most often the client teams are based overseas or in a foreign location  Must have an in-depth knowledge on current business and legal processes and emerging technologies The success or failure of a transition project is fundamentally measured in two aspects – technology and manpower readiness, while transition effectiveness can be measured through financial benefits and performance of the team.  Generally, there are two common strategies followed in migrating a function, these are Lift and Shift, and Re-engineer and Migrate.  Lift and Shift Gyarmathy (2020) describes it as “rehosting” or the “forklift approach” and is the strategy of removing workloads and tasks from one storage location and placing them in another, usually cloud-based, location. Lift and Shift is the most common methodology used and is utilized when the process to be migrated is mature. Sometimes characterized as “cutting and pasting,” this process requires more planning, documentation, and precaution to make sure the transition process goes smoothly and processes will operate effectively.  Re-engineer and Migrate. This involves a fundamental rethinking and radically redesigning of the business process so as achieve dramatic improvements in critical measures of performance such as cost, service, and speed (Hammer, 2014). When the process to be migrated is either broken, in need of fixing, or is due to be modified significantly in the near future, re-engineer and migrate will be more useful. The expertise which has been built over the years of the existing may be used to drive change before the process is handled by the new team. Realistically though, the majority of business owners and executive committees would much rather undertake a reengineering as opposed to exposing their businesses to the whole lot of adverse effects brought about by not changing. The few that do not proactively and strategically change will become obsolete and irrelevant to the market. Prior to the service provider doing the required task independently, they normally undergo a period of training that deploys observation as the primary approach, and, that this training may either happen on-site at the client’s facilities or off-site at the service provider’s facilities. The following relate to process transition: 1. Work Shadowing This is the term used for ‘learn-by-doing” activity of service provider personnel, generally done at the same locations as current company performer. Sometimes called job shadowing, this involves observing a professional in their job to gain a better understanding of the role. Shadowing usually only lasts a couple of days, is generally considered as informal and usually unpaid. Gaining insight is the purpose of shadowing rather than to gaining hands-on or practical experience. 2. Hand-Offs These are transfers of the output to a different performer, an approver, for further action prior to continuation. The responsibility of one person to towards a certain task is passed on to the other person during this moment. This is done for the following reasons:  Data Enrichment - The other performer adds data to transaction  Quality Assurance - The second performer is a checker  Control - A separate person approves the materiality and substance  Execise 5.2 Direction: In your own words, provide an example of any of the following concepts discussed in this topic: 1. Transition and Migration 2. Lift and Shift 3. Re-engineer and Migrate 4. Work Shadowing and Hand –Offs ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ _______________________________________________________________  SUMMARY  The BPO contract is also referred to as the master services agreement or MSA.’.  Similar to a “job order”, the Scope of Work or SOW describes the specific work to be delivered, by when, at what cost.  In BPO, performance standards can be found in the Service Level Agreement (SLA) and Key Performance Indicators (KPI).  Transition management is the set of activities that transpire after a BPO contract is signed which implements or executes the detailed movement or transfer of processes from the client to the service provider.  Lift and Shift is the most common methodology used in migration. The Re-engineer and Migrate approach is useful when the process to be migrated is either broken and requires fixing, or is due to undergo significant change in the near future. Learning Activity In connection with your last learning activity, this time, pretend you are the service provider. What services will you be offering and at what cost? More information will be discussed by the professor.