Q : The current economic storm? Ans : In today’s economic climate there is no place to hide whether you are based in Manila or Manchester or Molokai, whether you are in the financial services industry or in the manufacturing industry or whether you are a retailer, whether you are large company or small company, the economic winds of change are affecting all companies equally. The challenges are very great; the knee-jerk reaction of most companies when they are faced with an economic downturn is to quickly reduce staff. But the challenges of reducing staff without looking at a solution that is longer-term are very great. For the most part companies cut staff by numbers game. They estimate how many staff produce X and then they cut regardless of whether they are cutting muscle, bone or fat. Also, production typically declines as the folks who are left behind are very concerned about the morale and the longevity of their own positions. At the end of the day somebody needs to do the work. There is a solution however; it is called business process outsourcing. The movement of jobs to other locations at a lower price point can give companies some of the relief they need in the short term, position a company for longer term growth. Q : Why BPO? Ans : BPO gives companies the opportunity to get cost out fast, often in as much as two or three quarters and at numbers that may approximate as much as 40% on average. Also BPO by its very nature helps companies standardized and consolidate functions across divisions or across the world in one location. BPO actually gives companies the opportunity to reengineer, which they wouldn’t be quite as successful in more beneficial economic times. BPO also positions companies for growth. At the end of this downturn, and there will be an end of the downturn, companies that have the infrastructure in place that are able to move their cost basis from fixed to variable, and companies that have globalized by locating in locations around the world are far better positioned to take advantage of the growth that will eventually come. Q : Benefits beyond cost savings? Ans : Beyond cutting cost and cutting cost rapidly, BPO does offer companies a range of benefits. First, it makes fixed cost variable. This is very important in these economic times when companies really want to understand the cost of production of providing a service. Second, because it does have the opportunity to transform or reengineer a process, companies can truly understand the performance of accounts payable or accounts receivables or the claims management process. Next, it can provide vital information that companies need in order to make decisions based on knowledge rather than intuition. Last but not the least; it can be engineered for financial return. It is possible to engineer the contract terms of a BPO contract in order to push some of the cost towards the end of the contract rather than at the beginning when cash may be strapped. Q : Case Examples ? Ans : BPO has been in the lexicon of corporations for about 10 years now and there are some great examples that illustrate how it can be use to not only reduce cost, but change the landscape of corporate operations. Take the example of a leading leisure services firm. The company needed to take out cost on both its customer care and its finance and accounting operations. Within one quarter of go live and a BPO operation the company was able to save USD 3 million in run rate and within 9 months of operations the company was able to take 30% on a year-on-year basis out of the cost base. Anther good example of the benefits of BPO is changing cost from fixed to variable. Take the example of a North American Airline. The North American Airline needed to implement passenger revenue accounting process very-very quickly in order to reduce cost and increase turnaround time. By moving to a BPO delivery, the company was able to reduce its operating cost on a year-on-year basis by 30% and as importantly, reduced its turnaround time by 40%. Some companies use business processes outsourcing as a way to retool their operations in addition to reducing cost. Take the example of a leading US restaurant chain. The restaurant chain decided that the only two positions that will require to stay in the company were the CFO and the controller by outsourcing finance and accounting processes to WNS. The company was not only able to save 50% in processing cost, but also additional cost in technology and was able to migrate the whole operation to a third party in twelve months. Q : Getting started with business process outsourcing? Ans :How do companies get started? First and foremost, the CEO must take ownership of the outsourcing process. If the CEO does not demonstrate visible leadership to the organization that BPO is indeed a life raft for survival, the divisions and the business lines will not fall in, so it really does start from the top. Second, companies who are looking at BPO for survival have to keep it simple. This is not the time to look at reengineering a range of processes; this is not the time to embark on linking finance and accounting with technology or HR with finance and accounting. It is time to keep it very simple and outsource only those processes, which will deliver quick savings and quick return. The third role is moving fast. In times such as these, there is no change without a sense of urgency. By having a central office that looks at what can be outsourced and managing the implementation, companies are able to move very-very quickly in the outsourcing journey. Sixth rule is a very realistic deployment plan. Companies who have a rational and methodical way of moving processes from internal operations to a third party will do a lot better than companies who are trying to push and spring towards the finish. Number seven, insist on alignment. When companies outsource to third parties there are two cultures involved, so it is very important to select an outsourcing partner who understands your ways of working and is able to fit their ways of working to yours. This is not the time to debate about the ways of working; this is time to just move processes seemingly, offshore to an organization that understands how your enterprise works. And last here is a little hint. Get the budgets in advance by debiting the cost savings in this year’s budgets. Companies are able to get departments or functions or business lines to focus exquisitely on the need to use business process outsourcing as a survival technique. Q : After the storm? Ans : But BPO is not just a life raft to float into a safe harbor. After the storm companies who adopt BPO today would be able to position themselves for growth looking at a world that will probably be more global, require more transparency in operations, and require more commercialism in the way processes are conducted.

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