Does it make sense to outsource entire business processes to third-party companies, for example, because the relevant competences are lacking or in order to keep a company’s structures lean? For me, this is a classic “yes, but” question that is crying out for an independent view from the outside. The fact is: there is no general answer to this question. After all, business process outsourcing (BPO) is a strategic and multi-layered corporate decision.
What should be considered in BPO?
The reasons for outsourcing business processes can be manifold: Some companies are attracted by the economically more favourable conditions and the possibility of outsourcing risks to the contracted service provider. Some companies lack the specialised knowledge required for certain business processes within their own company. Or they are in a growth phase but not yet big enough to provide this knowledge in-house. The biggest crux, however, in my experience, is an astonishing uncertainty as to which business processes should be outsourced at all.
No outsourcing without a comprehensive analysis of the company’s processes
Companies thinking about business process outsourcing first need to know their core business. Surprisingly, more companies find this more difficult than they thought.
A few years ago, I took on a mandate for a company. The plan was to outsource a comprehensive business process to a large IT service provider, while keeping the core business and related competencies in-house. During the analysis it became clear that the core competences of the company were not reflected enough. And the outsourcing of classic support processes to cheaper foreign countries also turned out to be more complex than expected. By the time I resigned my mandate, the number of processes that could be considered for BPO had already decreased significantly, but the uncertainty about which path to take had increased.
Important questions in business process outsourcing
Business process outsourcing requires a comprehensive analysis of the key competences that are actually needed and those that actually exist in the company. Only with this knowledge is it possible to redefine or adapt processes. Perhaps it makes sense in one case or another to hire additional specialists for the core business and to broaden the internal know-how – even if this can become critical in an increasingly demand-based labour market. And perhaps it makes just as much sense to use external know-how for standard processes – as long as it is ensured that the associated risks, such as reduced flexibility, remain manageable.
Business process outsourcing as part of the digital transformation
Today, business process outsourcing is an important part of the digital transformation, as not only the business processes but also the IT infrastructure required for them are transferred to third-party companies. Whereas a few years ago it was mainly accounting and payroll that was outsourced to third-party companies, now purchasing, HR, logistics, marketing and other corporate departments are also possible candidates for BPO. But what sounds seductive (“leaner structures”, “more efficiency”, “lower risks”) often has a downside. This makes it all the more important to make such far-reaching strategic decisions only after a differentiated analysis and reflection.
Are you dealing with business process outsourcing and need a critical view from the outside? I would be happy to support you with my expertise.