HP, BPO, Operations, Excellence

Achieving Operational Excellence Through Business Process Outsourcing

16 Jul 2008 | (Thinking Point)

Beyond Labor Arbitrage: Achieving Operational Excellence Through Business Process Outsourcing

By HP

Executive summary
While cost pressures continue to drive business process outsourcing (BPO) decisions, companies increasingly seek improvement in business outcomes and “transformative” advantages when outsourcing finance and accounting, human resources, procurement, and other business processes.

The advantages to be gained by leveraging the “operational excellence” of partners—including better business outcomes and results, process innovation, efficiency, standardization, improved quality, data privacy, security, continuity, and compliance—can be as important as the traditional outsourcing benefits of lower labor costs and asset transfer.

This paper examines the opportunities for leveraging a BPO partner’s operational excellence for improving business outcomes. It examines the potential impact of the BPO provider’s operational practices on delivery, cost, quality, risk, compliance, agility, and ongoing optimization. Finally, it describes the need for an integrated, end-to-end, multi-disciplinary, and lifecycle approach to operational excellence—as well as the importance of both innovative and industry-standard methodologies, documentation, tools, and infrastructure when selecting a strategic partner.

Introduction
Accelerating business performance improvement by leveraging a BPO partner’s operational expertise, capabilities, and assets is a strategy that is gaining attention among organizations that outsource business processes. Business functions such as finance and accounting, human resources, and procurement, traditionally viewed as support functions, are now seen as areas of opportunity—where a strategic partner’s ability to improve process quality, speed, security, continuity, and compliance can deliver significant additional cost savings, reduce risk, and enhance competitive advantage. As such, “operational excellence” is fast becoming a critical factor when selecting a BPO provider.

“Cost savings, significantly through labor arbitrage, was the driving force for most of the early BPO relationships,” says Bob Cecil, Executive Director of Global Operations and Business & Financial Advisory Services for EquaTerra. “However, with inflation and exchange rates dampening the labor arbitrage benefit, both buyers and providers of BPO services are increasingly looking to enhanced operational capability and improved business outcomes as the more sustainable benefits of an outsourcing relationship. It is now common to see these business outcome benefits, such as improved cash flow through working capital management or integrated business intelligence far exceeding simple operational cost savings.”

Streamlining and automating Accounts Receivable (AR) processes, for example, can significantly reduce a company’s Days Sales Outstanding (DSO), removing millions of dollars of debt from the corporate balance sheet, decreasing working capital levels, and freeing up cash for investment or debt reduction. Automating and improving the Procure to Pay (P2P) function can maximize Days Payables Outstanding (DPO), optimize cash management, and increase discounts taken—resulting in an improved cash position, lower Cost of Good Sold (COGS), and additional cash freed up for investment and debt reduction.

Click here to download the HP white paper.

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