Divide and Conquer: How to Decide on Centralization, Standardization and Outsourcing
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Divide and Conquer: How to Decide on Centralization, Standardization and Outsourcing
By: Christian Baader, Gianni Giacomelli & Yvette Cameron, SAP AG
PART 1- THE STRATEGY
The Roman Empire was based on a very simple and extraordinarily successful concept: Do not ram into people who are bigger than you. Romans were very ambitious folks, and they made sure that the bigger guys would be cut down to size before facing them. Romans then used their much disciplined war techniques on targets they knew they could take down.
Large-scale BPO can learn from this. Large deals sometimes brought way too much front line to inexperienced provider and client teams. You see, taking up a lot of processes is not bad per se. If the client and the provider have the capacity to handle the complexity and the processes are suitable, the buyer can transfer large chunks to the provider, offshore some services, and save some money. However, this “your-mess-for-less” approach alone has proven unsustainable. Providers, therefore, turned toward getting that mess in order and leveraging their scale advantage—via reengineering—but often were not able to overcome clients’ resistance.
Like the Romans, you, too, have to pick your battles carefully, which in BPO means scope choices—which processes should be outsourced and which kept in-house, which should be standardized and automated and which ones left alone. Picking processes means figuring out which processes matter in terms of cost, which processes scale and can be optimized, which processes will benefit from the provider’s scale and performance, and which processes will not generate an uproar when changed. We have empirical evidence that many HR processes have a clear and steep economy-of-scale behavior, but in the end whether you can leverage this to your benefit is situational; it depends on the client and the provider and what the BPO provider is able to do.
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