Benchmarking Key to Outsourcing Success

Mats Rennstam looks at the value of measuring the impact of outsourcing.

Very few outsourcing clients are able to quantify the benefits their outsourcing arrangements give them, and only a small proportion of companies use independent benchmarking to measure the success of their outsourcing contracts.

A KPMG report on the value of outsourcing reported that of the 659 companies that took part in their survey only 47% felt their outsourcing arrangements contributed positively to their business. Nonetheless, 89% suggested they will either maintain or increase their current outsourcing contracts.

What’s more, 42% of outsourcing arrangements are not supported by a formal strategic measurement framework. Almost two thirds of the respondents either tracked benefits at an elementary level or did not track benefits at all. 72% of the customers reported that they do not have a benchmark for measuring the success or failure of their sourcing arrangements.

It seems the need for companies to adopt coherent benchmarking measures of strategic success has never been more important!

So why should outsourcers get ahead of the curve and embrace benchmarking? It is not uncommon for an outsourcer to be apprehensive when a client expresses a desire to conduct some form of assessment. Fear of showing full transparency, disagreements around which metrics should be included in SLAs, and a general anxiety that the benchmarking will not compare apples with apples are all understandable concerns.

But, if the assessment has a robust and credible approach, the results can provide both outsourcer and client with insight not only to strengthen the relationship but also to help the outsourcer stay competitive.

Typical outsourcer benefits include increased sales, longer client contracts and more involved/engaged clients. Outsourcers will also find that proposals which include independent benchmarking in the SLAs will provide prospective clients with an enhanced service offering.

Robust benchmarking will also allow you to show the client that you are outperforming in-house centres on costs (most are) yet doing well on metrics like FCR, NPS and C-SAT – which is often a client’s biggest concern.

It is worth remembering that when making comparisons (for example cost per call) it is important that the benchmarking supplier knows what they are doing and compares like with like. An outsourcer’s fee includes everything, but most in-house centres do not factor in things like finance, utilities, IT costs or even telephony, because these are paid for centrally.

The value to the business outsourcing

If companies are really going to reap the benefits of their outsourcing contracts, they owe it to themselves to make sure they are properly benchmarked. Opportunities exist for organisations to capitalise on the strategic value of outsourcing; they just need to know where they are and what to focus on. A framework to measure success is imperative for the long-term and sustained success of an outsourced partnership, as simply going on a ‘gut feel’ or anecdotal evidence is no longer enough.

The technology solutions available today will let you have access to all of the key three performance management areas (productivity, employee engagement and customer satisfaction) in real time, even if you are not on site. This enables you to track performance levels from afar.

In addition, Bright recommends that you conduct an annual benchmark of the 20-30 most important metrics, for validation that you’re getting value for your money, but also that the development of your outsourced operations is focusing on the right things at the right times. It is a great exercise to build your partnership around.

Regardless of whether you are a client or supplier, many of the best-functioning business process outsourcing (BPO) relationships show that benchmarking plays a key part in their success, so, hopefully, more companies will start embracing the true value independent benchmarking has to offer.

With thanks to Mats Rennstam at Bright UK