Business process outsourcing (BPO) is typically implemented by larger companies as a cost-saving mechanism. It involved the contracting of a specific business task out to a third party service provider. An example of this might be using a third party payroll system or accounting firm.
Services are often outsourced when the company requires them, but does not necessarily depend upon them to maintain their position in the marketplace. This means that monitoring contract compliance is important, as the performance of the service provider are significant contributions to the overall health of the company. It also means that managing such contracts can be difficult without an automated cloud-based contract lifecycle management (CLM) system.
Advantages to BPO
The advantages of BPO are centered primarily around efficiency, it takes away the burden of the task that was outsourced, and allows you to focus on something more central to your company’s mission. Whether the outsourced service was a back office outsource (such as billing or purchasing) or front office (such as customer relations and marketing/tech support), you can have reasonable assuarance that the task will be accomplished without your direct oversight.
Doing this has the potential to increase your efficiency as a company. Having less tasks to do means that you have more time to devote to the core activities that your company wishes to focus on, such as production, sales, or marketing. You can also foster more creativity in these areas, bolster collaboration, and increase employee production, because they won’t be stretched quite as thin.
Drawbacks to BPO
Outsourcing can present a potential risk for data security in some cases. Privacy agreements will protect you from intentional information leakages on the part of your outsourcing partner, but any time data needs to be shared with a third party, the risk of privacy breaches naturally increases.
You may also become over-dependent upon a service provider. Rather than using their services to benefit your company while maintaining independence, there is a potential risk that your company may not be able to sever ties with the service provider without sinking entirely. It is always wise to analyze which services can be outsourced to improve efficiency, and which should remain within the company to mitigate this risk.
Another risk is that you have less control over the quality of the services you outsource, and the quality may drop over time, or fail to meet expectations. The service provider may not be capable of giving everything that they promised. In such instances, you may need to withdraw your contract from them and grant it to a more reliable company.
Contract Lifecycle Management Software Can Help
Contract lifecycle management (CLM) software is an essential tool for helping to realize the full range of benefits of outsourcing services, while mitigating risks. ClM software will help you monitor and accurately analyze your business process outsourcing (BPO) contracts. In addition to saving you time in the procurement process, CLM software helps you collaborate and communicate more effectively with the contracted entity, helping to verify that your service provider is meeting expectations. Spend analytics, and other analytic tools offered by CLM software, provide accurate reports regarding the fulfillment of the terms of the contract, progress made by the service provider, and projected future outcomes. You can stay in the loop regarding your contract.
Lastly, contracts stored in the cloud are heavily encrypted to increase security, meaning that the chances of a privacy breach significantly diminish. Contract renewal is quick and easy, and all of these advantages help to streamline the outsourcing process, and transform BPO from a hassle to an advantage for your company.
April 7 2016 | by Benjamin Fleshman