Wald W3D1 6635

Managing business processes through outsourcing: a strategic

partnering perspective K.B.C. Saxena and Sangeeta S. Bharadwaj Management Development Institute, Gurgaon, India

Abstract

Purpose – The purpose of this paper is to discuss business processes as building-blocks of organisational capabilities and outsourcing of business processes as a viable management approach to building strategic organisational capabilities.

Design/methodology/approach – The paper develops a conceptual framework based on “strategic partnering” to successfully implement “global sourcing” of organisational capabilities and validates this framework using multiple case studies research.

Findings – The paper identifies business process management, relationship management and the outsourcing value propositions as the key dimensions for business process outsourcing (BPO) success.

Research limitations/implications – The paper is based on case studies of seven European clients and ten Indian service providers of BPO services. A larger survey of BPO clients and service providers may further strengthen the proposed framework and make the findings more conclusive.

Practical implications – The proposed framework helps both the BPO client and the service provider organisations in understanding the critical role of relationship management in realising the intended BPO service outcomes. It also helps the BPO clients and the service providers to understand the risk and business value implications of BPO value proposition.

Originality/value – The paper addresses a dearth of literature on BPO service provision and establishes the need for dyadic study of BPO services from both the client and the service provider perspective simultaneously for understanding the dynamics of this emerging service sector.

Keywords Process management, Outsourcing, Strategic alignment, Partnership

Paper type Research paper

1. Outsourcing of business processes for enhanced competitiveness For a long time business processes were considered as the means through which organisations carry out their work, and improving the performance of business processes would improve the productivity and quality of the organisations, thereby making them more competitive (Harrington, 1991). However, with the emergence of the business process reengineering movement, many organisations have successfully been able to compete on the basis of organisational capabilities, which are largely made instrumental through the organisation’s business processes (Stalk et al., 1992; Garvin, 1995). According to this view, the building blocks of corporate strategy are not the products and markets but business processes, and competitive success depends on transforming an organisation’s core processes into strategic capabilities that

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1463-7154.htm

The research reported in this paper is funded by the European Union under EU-India Small Project Facility (SPF) programme for the project “Business Process Outsourcing (BPO) as Strategic Partnering: Building Win-Win Relationship between European Customers and Indian Service Providers” (Contract No. IND SPF/191002/965/95-830).

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Business Process Management Journal

Vol. 15 No. 5, 2009 pp. 687-715

q Emerald Group Publishing Limited 1463-7154

DOI 10.1108/14637150910987919

consistently provide superior value to the customer (Stalk et al., 1992). With this strategic focus on business processes, outsourcing of business processes is emerging as a viable approach to acquire strategic capabilities for enhanced competitiveness.

Business process outsourcing (BPO) in simple terms is defined as the movement of business processes from inside the organisation to external service providers (Click and Duening, 2005). According to Gartner Group (2004), BPO is the delegation of a business process to an external service provider who owns, administers and manages it, according to a defined set of metrics. Specifically, BPO involves contracting with one or more BPO service providers (vendors) for the provision of execution of business process operations as per the client organisation’s requirements (Linder, 2004; Kshetri, 2007; Youngdahl et al., 2008).

In the initial stages of BPO, organisations outsourced only their non-core peripheral processes primarily to reduce their costs and improve their performance. Though this type of outsourcing delivered benefits to the organisation and impacted directly upon the bottom line; it did not help them in impacting their competitive position. However, lately with the emerging strategic focus on the business processes, BPO is extended to non-core yet mission critical processes such as finance and accounting, human resources and customer support (Linder, 2004). For instance, British Petroleum’s outsourcing of finance and accounting to Accenture has helped it to speed up its post-merger integration of Amoco and Arco (Tan and Sia, 2006). Many organisations such as United Parcel Service, Solectron and Hewitt Associates have transformed their core business processes into entirely new industries (Gottfredson et al., 2005). Thus, BPO is evolving into a strategic process for organising and fine-tuning the value chain. For many of the forward-thinking organisations – the question is no longer whether to outsource a “process” (embodiment of an organisational capability) to a service provider (who is more capable in that process) but rather how to outsource every single process in the value chain! This would be possible only when for every process to be outsourced, it is possible to find a “capable” service provider. This newly emerging philosophy of process outsourcing is being called as “global capability sourcing” (Gottfredson et al., 2005) or strategic sourcing (Holcomb and Hitt, 2007). Greater focus on capability sourcing can improve an organisation’s strategic position by reducing costs, streamlining the organisation and improving quality, and can help them in exploiting their business processes for strategic advantage. In the global capability sourcing, the role of service provider is no more limited to the traditional role of an “agent” who is delegated the responsibility of business process operations for gaining cost efficiencies. Rather the role changes to a “partnering” role, where the service provider ensures competency-based service delivery to the client to help them improve their strategic position (Lacity et al., 2004; Kedia and Lahiri, 2007). This “partnering” process is also mutual in the sense that the service provider may also plan to succeed in knowledge-based branding and long-term customer retention (Figure 1).

Furthermore, “global capability sourcing” makes it clear that it is a form of inter-organisational relationship, in that it involves two separate and distinct organisations – the BPO client and the BPO service provider – in a contractual arrangement characterised by a series of interrelated and ongoing exchanges. Inter-organisational relationships have been studied from several different perspectives such as organisation theory (Oliver, 1990), marketing (Anderson and Narus, 1990) and information systems (Henderson, 1990). A common theme in all these

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perspectives has been that relationships are characterised by a series of ongoing linkages and transactions that make the relationship participants interdependent, and thus require coordinated action and cooperation in order to achieve mutual benefits (Goles and Chin, 2005). We call such a BPO relationship as “win-win relationship” or partnership (Klepper, 1995; Ploetner and Ehret, 2006), which can be defined as: an ongoing linkage between a BPO service provider and client arising from a contractual agreement to provide execution of operations of the specified business process as per the contract, with the understanding that the benefits attained by each organisation are at least in part dependent on the other. This partnership is called “strategic partnership” if the partnering process results into:

[. . .] successful, long-term, strategic relationship (in the sense that it is critical to the well-being of both the partners because of its high degree of interdependence) and is based on mutual trust and sustainable competitive advantage for both the partners (Lendrum, 2003).

In spite of the highly promising potential of “strategic partnering” approach to global capability sourcing, there are very few published case studies of successful BPO strategic partnering (Lacity et al., 2004; Gottfredson et al., 2005). There is, therefore, an urgent need to explore in detail the BPO strategic partnering approach and develop a conceptual framework which may help in mitigating the risks associated with this approach and encourage more organisations to adopt this approach.

Oddly enough, in spite of the increasing importance of BPO service provider in the success of BPO initiatives, historically research on BPO has largely focused on the BPO client side – either on the sourcing decision itself, or on choice of location or choice of processes to be outsourced, etc. (Aron et al., 2008; Balakrishnan et al., 2008; Ellram et al., 2008; Graf and Mudambi, 2005; Stratman, 2008; Tan and Sia, 2006; Youngdahl et al., 2008), but rarely on the BPO service provider, and never on the dyadic of BPO client and the service provider. This paper describes such a dyadic study of BPO clients and service providers using multiple case studies, and proposes

Figure 1. BPO as strategic

partnering

Capability sourcing

Competency-based service delivery

Business process outsourcing

Improved strategic positioning

Knowledge-based branding + long-term

customer retention

Strategic partnering

Client Service provider

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a conceptual framework for strategic partnering in BPO initiatives. The paper is organised as follows. Section 2 describes the theoretical background using which a conceptual framework for strategic partnering can be developed. Section 3 of the paper develops such a conceptual framework, identifying its various components in different sub-sections. Section 4 describes a multiple case study based validation of the proposed framework, which is followed by the conclusion.

2. Theoretical background Characterising BPO as a form of inter-organisational relationship, various theories of inter-organisational relationship can be utilised from organisational economics, organisational theory and relationship marketing literature. In this section, some of the major theories – agency theory, transaction cost theory, resource-based theory and relationship theories are briefly reviewed to understand BPO from an inter-organisational relationship perspective.

2.1 Agency theory According to this theory, an agency relationship is present whenever one party (the principal and the BPO client) depends on another part (the agent and the BPO service provider). This theory is concerned with resolving two problems that can occur in agency relationships (Eisenhardt, 1985). The first arises when the goals of the BPO client and the service provider conflict, and it is difficult or expensive for the client to verify what the service provider is actually doing. An example could be that the client organisation wants to reduce the process operating costs but the service provider wants to maximise its profits. The second is the problem of risk sharing that arises when the client and the service provider have different risk preferences. This problem may arise in BPO because of the different attitudes of client and service provider towards the use of new (improved during transition) process design using new technologies. The agency theory assumes that goals, self interest and risk preferences diverge between the BPO client and the service provider (Eisenhardt, 1989a), but it gives little attention to the cooperative aspects of social life. It is criticised because it assumes social life is a series of contracts and ignores the existence of social and authority relationships in economic transactions. However, in BPO most contracts happen to be somewhat incomplete and social relationships form a major strategy for mitigating the risks in BPO (Spencer, 2005). Thus, agency theory is not considered a strong theory for developing a conceptual framework for BPO.

2.2 Transaction cost theory According to this theory, the properties of a transaction determine what constitutes the efficient governance structure – market, hierarchy, or alliance (Coase, 1937; Williamson, 1975, 1979). In selecting a governance mode, organisations attempt to minimise transaction costs. A market governance mode is preferred when transactions costs are low and internal governance mode is preferred when transaction costs are high. This is because in this theory the market is always considered the lowest cost producer of good or service due to economies of scale and scope. Similarly, the production cost advantage of the market is overwhelmed by the high transaction costs.

Though this theory provides a sound theoretical basis for understanding market versus hierarchical governance mechanisms for determining the boundary of the firm,

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it is limited because it focuses on single transactions as the unit of analysis (Doz and Prahalad, 1991). In BPO, the underlying concept is the acquisition of “process execution” services through continuous interaction between the client and the service provider to the agreement. However, transaction cost theory at its core views the two parties as not interacting with each other but directly with the market. Furthermore, transaction cost theory fails to recognise the role of complex and collaborative relationships that involve high levels of asset specificity as well as uncertainty and opportunism, as in BPO. Relational mechanisms such as trust are regarded as substitute for complex, explicit contracts and hierarchical governance in such situations (Adler, 2001). For explaining the BPO relationships, we need more than purely an economic view as we need to understand the ongoing episodes of exchanges from an individual’s stand point, which is guided by the contract and lapses into voluntary exchanges (Håkansson, 1982).

2.3 Resource-based theory Prahalad and Hamel (1990) article has generated substantial interest in the notion of core competencies and capabilities and has helped popularise a new school of thought called the resource-based view of the firm. This theory emphasises that resources internal to the firm are the principal driver of a firm’s profitability and strategic advantage (Barney, 1991; Wernerfelt, 1984). It rejects traditional economic assumptions that resources are homogeneous and perfectly mobile. Instead, it argues that resources are heterogeneously distributed across firms and are imperfectly transferred between firms (Barney, 1991). Barney (1991) categorised resources into three groups: physical resources such as plant, equipment, location and assets; human resources such as management team, knowledge and skills; and organisational resources such as culture and reputation. Resources enable a firm to conceive of and implement strategies to improve its efficiency and effectiveness (Daft, 1983). Organisations can obtain above-normal returns if they can use their existing resources to sustain competitive advantage by exploiting opportunities in the market or neutralising threats from competitors’ strategic resources. Therefore, organisations retain strategic resources internally that enable them to sustain competitive advantage (Mahoney and Pandian, 1992). Strategic resources enable organisations to sustain competitive advantage, if the resources are valuable, rare, imperfectly imitable and non-substitutable. Resources might be imperfectly imitable if they involve unique history, causal ambiguity, or social complexity (Barney, 1991). Similarly, resources are non-substitutable if another organisation is not able to implement the same strategies by using alternative resources.

The capabilities sourcing approach and its relationship with BPO have evolved from the resource-based view of the firm. Organisational capabilities and competencies are important to the study of BPO, as it proposes the internal competences of the firm as the potential for competitive advantage. However, Prahalad and Hamel (1990) have used the concept of capability, competence and core competence as synonymous. Stalk et al. (1992) attempted to differentiate between core competencies and capabilities, but they could not provide a meaningful and useful operational definition of these important concepts. Therefore, for the purpose of this paper, we subscribe to the definition of Amit and Schoemaker (1993) because it is precise and fits with the distinction between the concepts of resource, competence and capability. They define

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resources as “stocks of available factors that are owned or controlled by the firm”. In the context of BPO, the information technology (IT) infrastructure is an important resource but resources like knowledge and skills residing in the employees are even more critical.

Central to the Resource Based Theory is the fact that resources, per se, do not create value (Bowman and Ambrosini, 2000; Porter, 1991); value is created by an organisation’s ability (or competence) to utilise and mobilise those resources. However, there are many definitions of competence used by various authors on the subject. According to Amit and Schoemaker (1993), competence refers to “a firm’s capacity to deploy resources, usually in combination, using organisational processes, to effect a desired end” and thus represent “[. . .] a bundle of skills and technologies rather than a single, discrete skill or technology” (Hamel and Prahalad, 1994). Competence can therefore be portrayed as the ability to deploy combinations of firm specific resources to accomplish a given task (McGrath et al., 1995). Finally, organisational capability refers to the strategic application of competencies, i.e. their use and deployment to accomplish given organisational goals (McGrath et al., 1995). Within this context, defining and creating the desired organisational capability would be determined by its future goals; which in turn establishes the need for improving or developing specific competencies.

2.4 Relationship theories These theories propose that inter-organisational relationships are a means of understanding how firms can gain and sustain competitive advantage. For example, Dyer and Singh (1998) argue that it is possible for organisations to combine resources in unique ways across organisational boundaries to obtain an advantage over their competitors. They define relation rent as:

[. . .] a supernormal profit jointly generated in an exchange relationship that cannot be generated by either firm in isolation and can only be created through the joint idiosyncratic contributions of the specific alliance partners.

Relational rents are possible when the alliance partners combine, exchange, or invest in idiosyncratic assets, knowledge and resources/capabilities. The relational view argues that the firm can develop valuable resources by carefully managing relationships with external entities including suppliers, customers, government agencies and universities. Therefore, a firm can gain and sustain competitive advantage by accessing its key resources in a way that spans the boundaries of the firm. Competitive advantage can be embedded in a set of relationships across the boundaries of the firms, rather than residing inside an individual firm.

Relational theories are important for the study of BPO, as the clients and the service providers that make relation-specific investments and are able to combine resources in unique ways to generate relational rents, can gain competitive advantage over the BPO clients and service providers that are unable to do so.

3. Developing a conceptual model of BPO strategic partnering Any BPO initiative starts with the BPO client expecting a value delivery in the process operations (such as cost reduction, process performance improvement, etc.) as proposed by the service provider as well as the service provider also expecting

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a business value addition (such as business growth, longer client retention, etc.) (Saxena and Bharadwaj, 2007). However, the BPO project may provide the expected outcome only to the client, or only to the service provider, or to none of the two. In such a case the BPO project is considered as failed. However, if both the client and the service provider are able to realise the BPO outcome as expected, the project is considered successful and may lead to a “strategic partnership” between the client and the service provider. Our objective here is to develop a conceptual model of the strategic partnering process. The theoretical foundation for model development is from the resource-based and the relational views, as described before. Building on the resource-based view, the model takes into account the competencies required in the client and the service provider organisations for BPO success. Building on the relational view, the model takes into account the relationship maturity required between the client and the service provider for BPO success. Finally, being a dyadic perspective, the model takes into account the outsourced process characteristics (Niranjan et al., 2007) and the value propositions from the outsourcing initiative, which are likely to determine the competency levels and relationship maturity required for successful BPO outcome.

3.1 Outsourced process characteristics In order to understand the management implications of the present enhanced BPO complexity, it is desirable to develop a classification of business processes as viewed by both the client and the service providers. There have been a number of classifications of business processes but all of them have been either from the client perspective or from the service provider perspective. For instance, from the clients perspective, processes have been classified as traditional, peripheral, critical and strategic (Jenster et al., 2005); as core, critical but non-core and non-core non-critical (Dole and Switser, 1998); critical, key and support (Click and Duening, 2005). Similarly, from the service providers perspective, processes have been classified by NASSCOM, India as IT-enabled services, BPO; and knowledge process outsourcing (KPO); functionally classified as finance and accounting, customer interaction services, human resource management, etc.; industry verticals such as banking financial services and insurance; legal process outsourcing, engineering process outsourcing, etc. Thus, there is an acute need for developing a business process classification from an outsourcing perspective which is easily understood by both the BPO client and the service provider.

An organisation has a number of processes, and theoretically all of them could be outsourced. However, some of these processes may be more important to the organisation in the sense that operation failure of such a process may have a higher business risk. Similarly, some business processes may be easier to understand by the service provider and therefore easy to migrate to the service provider’s site. We call these two dimensions of a business process as the criticality and complexity dimensions (Niranjan et al., 2007). Some authors such as Mani et al. (2006) have classified processes on its strategic dimension. However, strategic importance of a business process becomes a somewhat nebulous concept from the service provider’s perspective, and is not considered a useful basis for a dyadic study of BPO. In this context, criticality of a process refers to its degree of essentiality without which the very existence of the client organisation as a functioning business would immediately cease. Criticality includes the strategic importance of the process as well as its

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importance in the context of all the business processes in general (Pandey and Bansal, 2004). Critical processes are not necessarily a source of competitive advantage (Hinks, 2002), and when outsourced, it is often only to achieve cost savings rather than for strategic reasons. An example of a critical process from the manufacturing sector, which is the process of power supply maintenance for the manufacturing plant. Failure of power supply will cause an immediate, severe and certain damage to the client, though it may not have any strategic significance. Thus, the measures of the criticality of a process are the quickness, magnitude and certainty of the adverse impact on the client’s business when the service provider fails to deliver the process operations.

Complexity of a business process has been excessively studied by researchers in organisation design/theory (Niranjan et al., 2007). Woodard (1958) defined technical complexity of a process as the extent to which it can be programmed so that it can be controlled and made predictable. Perrow (1970) introduced two dimensions of complexity: task variability, i.e. the number of exceptions encountered; and task analysability, i.e. the degree to which search activity is needed while performing the task. Thus, a complex outsourced process is one characterised by low technical complexity, high task variability and high task analysability. Such tasks depend primarily on humans and their skills, knowledge and judgment and not on task automation. Complex processes are frequently, but not necessarily, a source of competitive advantage, or critical in the sense used above. An example of a complex process from the manufacturing sector, which is also a source of competitive advantage, is the process of engine design. A contrasting example of a complex process is the process of budgeting in an automobile-manufacturing organisation, which is seldom a source of competitive advantage to the manufacturer. Neither of these two complex processes is very critical in the sense defined above. Thus, the dimensions of criticality and complexity of a business process are orthogonal, i.e. an increase along one dimension is not necessarily associated with an increase in the other dimension.

3.2 Value proposition Value is a useful basis for determining the importance level of business processes. A useful approach for understanding value is the “perceived use value” approach, which defines the value of a product or service as the perceptions that a customer has of the usefulness of the product or service (McIvor, 2005; Bowman, 1998). According to Walters and Lancaster (1999), value is determined by the utility combination of benefits delivered to the customer less the total costs of acquiring the delivered benefits. For the supplier, value addition will mean that the cost of providing the customer benefits is less than the price charged, as well as the supplier perceiving other business value additions such as business growth, improved business relationships, etc.

A value proposition in the context of a win-win relationship is a statement of how value is to be delivered to the customer and also how the supplier perceives value addition for its own business. Internally, it defines the “value drivers” the supplier is offering to a target customer group along with the activities involved in producing the value, along with other perceived value addition for supplier’s business, together with the cost drivers involved in the value-producing activities. Externally, it is the means by which the organisation positions itself in the minds of its customers. The contribution of value proposition in promoting a win-win relationship is catalytic if:

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. value proposition as understood by the client in terms of proposed value addition through outsourcing is the same as understood by the service provider in terms of proposed value delivery; and

. the service provider also perceives some value addition to its own business in some form, such as profits, business growth, brand building, longer customer retention, etc.

Table I shows a categorisation of value propositions which we have found common in BPO sector.

This categorisation of value proposition has implicit in it an increasing level of realisation difficulty from transactional to strategic levels. That is to say, transactional level of value proposition is relatively easy to deliver by a service provider compared to strategic level of value proposition, which may be very difficult (if not impossible) to deliver! Often the failure in reaching a win-win relationship could be because of the failure in aligning the value propositions as understood by the client and the service provider. Therefore, an important requirement of a win-win relationship is the congruence in understanding the value proposition by both the client and the service provider.

Another implication of value proposition categorisation is its perceived attractiveness in the context of a particular candidate process for outsourcing. For a non-critical non-core process, a transactional value proposition may be adequate and a transformational or a strategic value proposition may not be feasible because of high resource requirements and more intense change management requirements. However, for a core as well as critical business process, a transactional value proposition may not be very attractive, and any thing less than a transformational or a strategic value proposition may not be even worth considering for outsourcing.

3.3 Management competencies Shi (2007) states that a BPO service provider’s competence in managing business process, BPO project and technology bears direct impact on the success or failure of a BPO project. Thus, management competencies form another important variable which determines the success or failure of the BPO project (or the BPO outcome). Consequently, even though the BPO service providers still focus on the level of their products (service), the BPO clients are getting more interested in service providers’ competencies, such as the “availability” of the service provider, the efficient delivery of

Client’s value proposition and service provider’s value delivery Service provider’s value addition

Transactional. Cost and process throughput Business growth. Opportunity to increase sales; opportunity to get outsourcing of other processes

Transformational. New business competencies through process transformation

Longer customer retention. Opportunities for longer term customer tie in; new business opportunities

Strategic. Opportunity for business transformation through strategic alliance

New value adding services. Creating new services from newly developed core competencies; very long-term relationship with clients

Table I. Categorisation of BPO

value propositions

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the service provider’s solution and the service provider’s expertise in the client’s own business (Golfetto and Gibbert, 2006; Möller, 2006). This market-based competences view requires the service provider to develop a clear understanding of its own competencies, not so much in “internal terms”, but in terms of client benefits (Golfetto, 2003). In a BPO initiative two competencies are a must in both the client and the service provider – process management competency, and outsourcing management competency. These competencies are described below.

3.3.1 Business process management competencies. Business process management (BPM) competencies are at the heart of the BPO service provision, though it is also of major concern for the client organisation. For the client organisation, BPM competencies in their increasing order of criticality are:

. Process knowledge. It is a well-known fact that when a process is in operation internally for a long time and is not being formally managed, the very knowledge about how the process actually operates is scanty and distributed across the entire set of process operators (Bitici and Muir, 1997; Harmon, 2003). Obviously such an unmanaged process if outsourced, is unlikely to deliver any of the benefits of outsourcing let alone building a win-win relationship. Therefore, when a process is considered as candidate for outsourcing, the first thing which needs to be acquired by the client is the knowledge about the process in insourced form.

. Process measurement and monitoring. It is also well-known that in an unmanaged or informally managed process environment, even if process knowledge is available, performance measurement (such as process cost, process cycle time, etc.) is also either missing or informal (Valiris and Glykas, 2004). This means that either the performance data are not collected, or if collected, process performance indicators are not calculated, or even if they are calculated, they are not monitored to see if the performance is at an acceptable level. Thus, the next critical requirement for process outsourcing is that the client must have a process performance measurement system in place so that it could ensure that the process performance standards defined in the service level agreements (SLAs) indeed provide performance benefits of an acceptable degree to the client organisation.

. Process performance exploitation. The last and most critical competency for the client is the capability to exploit a process operating at the desired level of performance to deliver the business benefits it was intended to give (Malone et al., 2003). If that does not happen, it is very unlikely that the client will get the intended business benefits when the process is outsourced and operating at a much higher performance level (Power et al., 2006).

In short, the candidate process must be formally managed to yield its intended business impacts, before it is outsourced for providing enhanced business benefits. Next, for the service provider, the process management competencies play even more critical role as they form the very basis of service provision. According to our research, the following BPM competencies are considered most critical for the service provider:

(1) Process transition. Process transition or migration refers to moving the insourced version of the candidate process from the client site to the service

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provider site in an (improved) mutually agreed upon outsourced form, and to demonstrate it to perform at the agreed upon performance level. This seemingly simple process migration is in fact very complicated, and even some of the very experienced service providers often seem to make mistakes in it, at least initially. Its complexity comes out of the following implicit activities, which are also very error-prone: . acquiring the process knowledge, if the candidate process is unmanaged at

the client organisation; . improving the candidate process so as to bring its performance at the agreed

upon level; and . to implement this improved version of the process at the service provider’s

site in an error-proof manner so that it can pass the demonstration test.

(2) Process performance management. This competence refers to the capability of improving the operations of the outsourced process to the agreed upon level or even better. The performance measures which need to be managed fall in three categories: . process cost performance, which is required to ensure that process operation

cost leaves the expected level of profitability for the service provider; . process output performance, which is often specified in the form of key

performance indicators (KPIs) in the SLAs of the contract; and . process outcome performance, which refers to the effectiveness of the

process in meeting the intangible business impacts, which were intended through the outsourcing of the process.

3.3.2 Outsourcing management competencies. Many executives and managers believe BPO to be a technical innovation best left to the technology administrators. This belief results from the IT origins of BPO, when the outsourcing adopters used outsourcing for software development or to staff help-desks and call centres. BPO has evolved far from IT-specific roots and now encompasses nearly every business process. Though the implementation of a BPO initiative will always involve a technology component, but for that matter so does implementation of an accounting system at a super market chain. That is to say, nearly every modern business innovation comprises both a technical and a social component, involving human interfacing with technical systems. Likewise, BPO is also a socio-technical business innovation that provides a rich new source of competitive advantage. That is, BPO requires skilful management of both people and technology (Click and Duening, 2005), and therefore management of BPO requires a diverse set of skills in order to be successful.

For the client organisation, outsourcing management competencies identified in our research are:

. Vendor due diligence, which refers to assessment of service provider in terms of their capability in the process domain, past experience, successful track record, etc. The success of strategic partnering depends on the fact that the service provider has the capability and the history of delivering the proposed value additions in the outsourced process; and any mistakes in service provider selection could be very expensive for the client organisation.

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. Outsourcing management structure, which refers to the existence of a formal structure to manage outsourcing.

. Contract facilitation and monitoring, which is required in case of multiple service providers for coordination and synchronisation of various services, resolving conflicts between various users and service providers in a collaborated manner, and managing both excessive user demands and cost overruns by service providers.

. Performance monitoring and control, which refers to monitoring and controlling performance of every individual process outsourced.

. Vendor development, which is required when the client organisation is looking beyond existing contractual arrangements to explore the long-term potential for service providers to create win-win relationships.

For the service provider, the outsourcing management competencies required are: . process due diligence, which refers to assessment of the candidate process by the

service provider from the perspective of inhouse capability to deliver the services demanded as well as its profitability;

. contract negotiation and monitoring; and

. performance monitoring and control, which is the same as in the case of client organisations.

3.4 Relationship management BPO client and service provider relationship becomes a critical factor for BPO success when the process to be outsourced is both complex and critical, and it is not possible to envisage all possible scenarios in the service contract (Webb and Laborde, 2005; Shi, 2007; Niranjan et al., 2007). Relationship management thus becomes important in outsourcing when it is no longer an incremental activity, and presents challenges to both the BPO client and the service provider. Unlike the traditional buyer-supplier relationship, the BPO relationship must be meticulously planned and managed from the beginning of the project with a strategic intent. Very often BPO agreements focus on the contractual structure used to formalise the BPO relationship. However, as BPO becomes a strategic way of capability sourcing and spans across regional borders, the contractual structure may not sufficiently align incentives across the firms nor effectively coordinate their activities. BPO relationship management involves four fundamental characteristics:

(1) Depth of relationship. The closer the outsourced process impacts upon client’s business success, the greater the strategic importance of the business process being outsourced, and therefore, the higher is the client’s risk in outsourcing. Hence, the more strategic the outsourced process for the client, the greater the depth required in the BPO relationship. Based on this criticality, the depth of BPO relationship can be categorised as follows: . arm’s length relationship, which is largely driven by the outsourcing cost

and the SLAs in the contract; . cooperative, which necessarily involves intense dialogue between the client

and the service provider; and

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. extension of client’s organisation, where the client service provider relationship has a high level of dependency and commitments from each other.

(2) Scope of the relationship. This is defined by the number of service providers working with the BPO client in the outsourcing of different business processes. Multiple service providers give more and diversified opportunities for knowledge sharing between the client and the service providers.

(3) Choice of assets to use. BPO requires handing over the control and maintenance of the outsourced process. Therefore, it raises the issue of whose assets (especially people, physical infrastructure and technological assets) to be used by the service provider.

(4) Choice of business culture to adopt. This issue becomes important when the process is outsourced offshore, and therefore, the business culture in the two countries, such as business regulatory environment and business practices may be different.

Relationships have a number of perceptive and measurable outcomes that indicate the relative success to both the clients and the service providers. It will, therefore, be helpful to develop a BPO relationship maturity model which can be used to describe an evolutionary improvement path that guides an organisation in terms of how to manage its maturity growth from the initial level to the highest maturity level (Harmon, 2003; Gottschalk and Solli-Saether, 2006). The maturity model adopted in this research identifies the following four maturity levels of BPO relationships:

(1) supplier relationship;

(2) extended supplier relationship;

(3) partner relationship; and

(4) strategic partner relationship (Lendrum, 2003).

Supplier relationship is largely characterised by the service provider having a cost-plus strategy and mentality, delivering services on thin margins with little or nothing differentiating them in a positive way from their competitors. The extended supplier relationship, the level (2) of BPO maturity, is characterised by delivery services in full, on-time and to the specifications. It involves meeting and servicing process outsourcing requirements via cost reduction and value adding initiatives such as service enhancements, maximising responsiveness, etc. Partner relationship is characterised by high client’s reliance on the quality, consistency, reliability and dependability of external skills and services to ensure that client meets their own business requirements. Lastly, strategic partner relationship, which is the highest level of relationship maturity, is characterised by all the “win-win” partnering relationship as well as shared visions, strategies and a wealth information sharing among the client and the service provider.

4. Validation of the BPO strategic partnering model through case studies Case study research is particularly well suited to new research areas or research areas for which existing theory seems inadequate (Eisenhardt, 1989b). It is also a method of choice when the phenomenon under study is not readily distinguishable from its

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context, and when a how or why question is being asked about a phenomenon over which the researcher has no control. Since, BPO is a new research area where existing theories may not be adequate, case study is used in this research. The research questions on which the case study research is focused, are:

RQ1. Whether “strategic partnering” leads to BPO success?

RQ2. If yes, what are the factors which lead to successful “strategic partnering”?

4.1 Selection of case studies Selection of cases is an important aspect of building theory from case studies (Eisenhardt, 1989b), as an appropriate selection of case studies controls extraneous variation and helps define the limits for generalising the research findings. However, since the purpose of these case studies was to validate a theory (conceptual model) of BPO, the choice of cases was based on theoretical sampling rather than statistical sampling (i.e. cases are chosen for theoretical rather than statistical reasons) (Glaser and Strauss, 1967). The goal of theoretical sampling is to choose cases such as extreme situations and polar types in which the process of interest is “transparently observable” (Pettigrew, 1988). As this research is about the win-win relationship among European BPO clients and Indian service providers, case studies were selected using the following criteria:

. BPO clients. Dutch or British organisations that have outsourced at least one business process to an Indian service provider or have a BPO captive centre in India.

. BPO service providers. BPO service providers who have major operations in India and have at least one Dutch or British organisation as their client.

A total of seven client and ten service provider organisations were studies. The list is given in Table II.

The selection was made on the basis of sub-classification within both the client and the service provider categories, as explained below. The sub-classification was based on organisational attributes of interest, such as size, process management style, BPO or KPO, etc. These sub-classifications are described below:

(1) Sub-categories of BPO clients: . small versus large organisations, in order to see if organisation size makes

any difference in strategic partnering;

BPO client organisations BPO service provider organisations

Cendant Corporation/eBookers, UK Technovate eSolutions, Delhi InDraft Solutions, UK COMAT, Bangalore and The Netherlands Thames Waters, UK Xansa, NOIDA Elsevier Publishers, The Netherlands Thomson Digital, NOIDA NedTech, The Netherlands CADSE, Bangalore Barclays Bank, UK Tata Consultancy Services, The Netherlands ABN-AMRO Bank, The Netherlands Logica CMG, Bangalore, UK and The Netherlands

Exëvo, Delhi Ram Tech, Delhi ZenSaar, Bangalore

Table II. BPO client and service provider organisations

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. outsourcing for processes versus process portfolio management, in order to see the difference in outsourcing management approaches and their impact on strategic partnering; and

. BPO versus KPO, in order to see how knowledge intensity in a process impacts strategic partnering.

(2) Sub-categories of BPO service providers: . captive centres versus third-party service providers, in order to see if the

governance structure plays a role in strategic partnering; . BPO and IT outsourcing versus pure BPO, in order to see how outsourcing

service provision of both IT and business processes impacts strategic partnering; and

. service providers of BPO versus KPO, in order to see how knowledge intensity in a process impacts strategic partnering.

4.2 Development of case study protocol The general way to achieve reliability in case study research is to conduct the research so that another researcher could repeat the procedures and arrive at the same conclusions. One prerequisite for allowing other researchers to repeat an earlier case study is the need to document the procedures followed in the earlier case. Yin (2003) proposes to create a case study protocol to increase reliability. A case study protocol is a document which contains an overview of the project (objectives, issues and topics being investigated), field procedures, interview guides and/or survey questions (instrument) as well as a guide for case study report (Paré, 2004). Consequently, separate protocols were made one for the client organisations and the other for the service provider organisations, which were based on the conceptual model of BPO strategic partnering given above.

Unfortunately, operationalising the protocol, especially the interview instrument, posed many problems. First was the confidentiality issue. The service providers showed their inability to provide details related to clients identification as well as to provide financial figures related to business performance (except for those who were listed on the stock exchange and their financial information was publicly available). The second major problem was the number of people who could be interviewed, and the details they provided in response to our questions. Some organisations (both clients and service providers) allowed us to visit multiple offices and interviewing two to three persons of senior management cadre, whereas many others gave access to only one person and whatever details that person could provide in response to the interview questions, was the only information available for research. As for secondary information available from business magazines and web sites, it varied from one organisation to others. Generally, not much information was available from secondary sources for the small organisations (whether clients or service providers), and whatever information was available, it was generally financial or marketing-oriented in nature, and therefore not of much use to the context of our study.

In view of this limitation, there emerged an acute need for revising the protocols. Since, the main thrust of this research is on “win-win relationship” or strategic partnering, it was decided to retain the dyadic nature (both clients and service providers together) of the case study research and limiting its scope on the basis of

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available common information (which could be obtained through the interviews) for all the client and service provider organisations. These revised protocols are given in the Appendix.

4.3 Analysis of case studies Since, a detailed analysis of all the cases cannot be included here, only an indicative analysis of the case studies is given below.

4.3.1 BPO client organisations. Reasons for outsourcing. Most client organisations had outsourced more than one processes except NedTech who had outsourced only one process, which is “product design”. In fact, many clients such as Cendant Corporation/eBookers, Barclays Bank, Elsevier, etc. were of the view that they could outsource any of their processes if they could find a competent service provider.

In terms of types of the processes outsourced, most outsourced processes were of “support” or non-critical type, but some client organisations such as Cendant Corporation/eBookers, Thames Waters, Elsevier and Barclays Bank have also outsourced processes which fall in the “non-core but critical” category. There was one client organisation – NedTech, who had outsourced the product design process, which for them was a “core as-well-as critical” process.

As for reason for outsourcing, it was cost reduction for all the processes, but for non-core but critical processes, it was also process performance improvement in addition to the cost reduction. However, in case of NedTech who had outsourced a core as-well-as critical process (product design), their expectation was that they would be able to enhance their business through outsourcing as NedTech is a medium-size company and they themselves were not able to do all the product design work which they could have got from their customer (which was a major aeroplane manufacturer in Europe).

The outsourcing process is generally taken through a service provider due diligence process. Many client organisations who have outsourced a larger number of their business processes, had a separate organisational function for managing the BPO function. For instance, in Cendant Corporation, it was the operations department; in ABN-AMRO, it was the strategic sourcing department, and so on.

BPO outcome. All the client organisations were able to realise the intended benefits of BPO. Many clients who had outsourced a large number of processes, had access to many service providers. These organisations followed a “process portfolio” approach and were continuously monitoring the performance of all their processes. Whenever they found that a particular service provider is not able to provide the desired level of process performance, they decided to bring the process back in-house or to outsource it to some other vendor working with them.

BPM competency. Whereas all the clients stated that they use a structured due diligence process for evaluation and selection of service providers, most of them were either not able to provide the details of the process or refused to reveal the details saying the process is internal and confidential. However, the client organisations who had outsourced a large number of processes and followed a process portfolio approach for managing the outsourced approach, had a specific department or group of people for the process management function. For example, Cedant Corporation allocated this job to their global operations department; ABN-AMRO had a separate strategic sourcing department and a vendor selection group for process outsourcing and

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management; Barclays Bank also had their global operations department looking after it, and so did Elsevier Publishers.

Outsourcing management competency. The contracts with the service providers were negotiated through the legal or contracts department, but the monitoring of the contract was done by the department/person responsible for monitoring the outsourcing process.

As for the expectations of additional service provision, the clients who outsourced only one or two processes and/or worked with only one service provider had this expectation. Examples of such clients were InDraft Solutions and Thames Waters.

Relationship management. As the scope and nature of BPO has expanded from its focus on cost and process efficiency to encompass BPO as a means of improving the client organisation’s overall business performance and furthering its strategic goals, there has been a growing realisation that the relationship between the client and the service provider organisation plays a critical role in the success or failure of the BPO arrangement (Quinn, 1999; Kern, 1997). Thus, relationship management is a very critical success as well as failure factor for win-win relationship.

Relationship has a formal dimension, which is contractual in nature. In other words, what type of governance structure is there between the client and the service provider organisation? However, it has been seen that proper contractual or governance structure is only a necessary condition but not a sufficient one for win-win relationship. There is also an informal dimension of BPO relationship which is characterised by a series of ongoing linkages and transactions that make the client and the service provider organisations interdependent, and thus require coordinated action and cooperation in order to achieve mutual benefits (Goles and Chin, 2005).

Consequently, relationship management in the client cases was evaluated by: . how the relationship with the service provider was monitored; . what type of governance structure was in place with the service provider; and . what type of processes, if any, were in place for relationship management/

knowledge sharing.

The monitoring of relationship was mostly informal and subjectively judged by the person in charge of process management and outsourcing. Generally, the quality of relationship was judged by the formal meetings taking place with the service providers, as well as the speed of response from the service provider in case of a special request conveyed to them. Some clients like Thames Waters stated that the service providers think good relationship is social relationship with the client organisations, whereas what they need is good business relationship with them and their (Thames Waters) clients.

The governance structure was contractual for all clients except one – Cendant Corporation, who had Technovate as their captive centre. None of the clients had a joint venture type of governance structure, even when the process outsourced was of the type “core as-well-as critical”, as in the case of NedTech. NedTech also had relationship problems with their service provider, which according to them were caused by poor coordination with their service provider. On the other hand, their service provider felt that their service given to NedTech was of high quality, but there were some communication gaps with the client which were causing coordination problems.

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None of the clients studied had any specific processes for relationship management/knowledge sharing. These aspects were covered within the overall process of performance monitoring.

4.3.2 BPO service provider organisations. Win-win relationship. It was evaluated by business growth and virtual teaming level. Business growth, again was measured in two ways. One in terms of the revenue growth either through more business from the same clients (often called farming) or business from new clients (often called hunting), or both. All the ten service providers studied had good business growth in the last three to five years, and many of the large service providers told that their business growth was 100 per cent year-to-year. In terms of business growth strategy, both hunting and farming strategies were used by all the service providers, though farming strategy was claimed to be more successful by most of them.

The other way business growth was measured was through extension of the duration of existing contracts. The normal duration for which service contracts were signed was considered as two years, and if the contract was extended to three to five years, it was considered as a sign of customer satisfaction and therefore, win-win relationship. In terms of this measure, no precise answers were given by any service providers, but all of them admitted that they had many clients who have renewed or extended their existing contracts. Reservation in terms of giving number of clients extending the contracts can be understood by the BPO industry-wide fact that most service providers have only few clients from whom their all the BPO business comes, and many of the small service providers have only one BPO client. But the service providers do not want to admit or to reveal this fact, and therefore they do not want to give the exact number of their clients in any direct or indirect manner. However, by admitting the fact that the existing contracts have been extended to longer periods, all service providers admitted that they had at least some clients with whom they had win-win relationship.

Virtual teaming, the other indicator of win-win relationship, meant the extent to which the service provider and the client perceive as well as behave as part of the same (virtual) process operation team in terms of their commitment. There were no direct answers available for this. Exëvo stated that they had a “process-based engagement model” (which offers flexibility of dedicated teams with enhanced control and is used for long-term projects) for managing win-win relationship with the clients. COMAT informed that they had open-ended contracts with clients, some with Joint Venture mode, which ensured win-win relationship. Many large service providers said that they had a client manager (or account manager) posted at the customer site to manage win-win relationship. However, none of the service provider could convincingly give evidence of having virtual teaming with their client organisations in practice.

BPM competency. BPM competency was measured largely by two indicators – process transition/migration approach, and method to find out process performance indicators (KPIs). As for process transition/migration approach is concerned, all service providers have very formal approaches for this, may be because in the BPO sector it is the foundation competency. Exëvo have two approaches to process transition, which they call “project-based engagement” and “process-based engagement” models, respectively. RamTech, COMAT, CADES also have formal approaches but do not have specific methodologies for process transition/migration. However, larger service provider organisations, such as Logica CMG, ZenSaar, Xansa,

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Technovate, etc. all used a formal process transition methodology, which varied from one organisation to the other. Many service providers also admitted that they did have process-transition failures in the past, which also shows the complexity of process transition.

As for KPIs are concerned, they were fixed after negotiations with the client organisations. Generally, process defects and schedules were used as the main criteria for developing KPIs. In some cases, such as ZenSar, KPIs were developed after process migration and executing the migrated process for two to three months and measuring it in order to understand its critical performance indicators before deciding which of these should be considered as KPIs for that process.

Outsourcing management competency. It was measured by business development strategies used, development of SLA, monitoring of contract compliance and handling of enhanced business opportunities in the existing contracts.

In terms of the business development strategies, all the service providers depended largely on existing clients and to some extent on the new clients. Business development from the existing clients was called “farming”, and the one from the new clients was called “hunting”. Farming in many organisations, such as COMAT, was handled by customer relationship management (CRM) teams. ZenSar has further divided these services into two types called “exploitation” and “exploration”. Exploitation are the services in which ZenSar is best at, and uses them to grow more and acquire new clients. Exploration are the services based on new market trends/new opportunities, which may attract existing clients.

Another business development strategy, called “packaging”, was used by organisations who were both IT and BPO service providers. In simple terms, it involved extending the existing BPO service contracts to include IT service contracts for those processes; and to extend the existing IT service contracts to include the related BPO service contracts. This definitely gave an advantage to those BPO service providers compared to those who were pure BPO service providers.

Logica CMG uses a unique business development strategy called “Global service delivery”, in which various inputs and outputs involved in a service contract can be collected and/or delivered to any of the 44 countries where Logica CMG has its offices. This is a unique strategy Logica could have because of the large number of countries it has its offices, and this is in addition to their packaging strategy, as Logica is also an IT service provider.

SLAs were often developed with the help of process transition team after the migrated process went live. Some organisations such as ZenSar and Xansa, waited for a few months to get first-hand experience of the migrated process before finalising the SLAs.

Contract compliance was in all cases was monitored by account management or client management personnel.

As for enhancement opportunities in the existing service provision contracts, most of the service providers said that they will let the client know about the service enhancement opportunity. If the client itself has asked for some service enhancement and it is possible to provide without much additional resources, some service providers said that they will provide the enhanced service on an exceptional basis. All service providers expected enhanced fee for enhanced services. None of the service providers

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considered enhanced services as a good business development or relationship building practice.

Relationship management. In case of service providers, the relationship management was evaluated largely by the conscious efforts the service provider makes for managing relationship, and the informal linkages established by the service provider with the client for building trust through commitment, and thus building a cooperative business relationship.

The first aspect of relationship management referred to was the mechanism the service providers used to manage relationship with clients. Whereas all the service providers said that they had mechanisms for building customer relationships (such as formal meetings, client managers, etc.), some of them gave specific details. Xansa has client directors or client managers who are all predominantly at the client site, and client delivery managers having all the accountability of all the services delivered. COMAT and Thomson Digital said that they had CRM teams to look after the relationship aspect with the client. Thomson Digital also had another critical department called the customer quality and systems, which continuous looks at and audits the process operations from the client perspectives and gives the audit report to the business head (and not to operations or production). This department acts like client representatives within Thomson Digital. Logica CMG also has CRM team, which works in conjunction with the client account management and global service delivery teams to manage client relationship issues.

The second aspect of relationship management focused on willingness to extend additional service to the client if client ran into some problem. This additional service may be only on additional price, or within the existing fee for building better relationship. The general answer from the service providers was that they will provide the additional service, if required by the client, but whether they will charge for it or not, will depend on the resources required to deliver the additional service.

The third part of relationship management focused on the perception of service provider organisation in terms of their commitment to service deliver quality only, or extending it to strategic partnership. The general feeling was that it is limited to their role as operations managers, as they do not know what type of business impact or strategic benefit the client organisation wants through their service. However, CADES said that they perceive their clients as partners and not merely operations managers. This may also because CADES is involved deeply into KPO projects, which require partnership type of relationship rather than simple client-service provider relationship.

In terms of learning opportunities from major clients, many of the service providers accepted that such opportunities do come in their service-delivery operations and that they take advantage of such opportunities.

In terms of collaboration with the client organisations for learning, only Thomson Digital said that they have such opportunities. For example, they had collaborative copy-editing with a UK client.

4.4 Developing the conceptual model for strategic partnering from case study research As most of the client organisations have been able to realise the intended benefits of BPO, it is obvious that the BPO initiatives of most of the clients have been successful. Similarly, from the responses of the service providers it was clear that there has been business growth for most of the service providers – both in terms of revenue growth as

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well as in terms of enhancement of contractual relationship with the existing clients. This shows that most of the service providers have been able to realise win-win relationship with their clients. Therefore, it may be asserted with reasonably accurately that:

Win – win relationship ! BPO success

Since BPO success is defined as the realisation of intended benefits, and intended benefits are stated as BPO “value proposition”, BPO success will depend on BPO value proposition. Thus, BPO success is realised when the clients has transactional, transformational or strategic value propositions, and the same are the outcome of BPO, obtained with the help of BPO service provider. Since, this is also a condition for the win-win relationship, the above conceptual model can be extended as follows:

BPO value proposition ! win – win relationship ! BPO success

Now an important issue arises relating to the value proposition: what could be the basis for the client to make a “value proposition” for a given process. From the value proposition categorisation given above, it can be seen that out of the three categories, the transactional value proposition is the easiest to realise but lowest in value compared to the strategic value proposition, which is the most difficult value proposition to realise and highest in value. Consequently, business processes which are core (i.e. core as well as critical) to the business are more likely to provide opportunity for “strategic value proposition”, key processes (i.e. processes which are critical to the business but not part of core business) may provide better opportunity for transformational value proposition, and processes which are support only (neither core nor key) may only be able to provide opportunity for transactional value proposition. Thus, in order to reach a win-win relationship, the client should be able to assign a value proposition which is aligned with its type – core as-well-as critical, non-core but critical and support; and likewise the service provider be competent enough to provide necessary management competencies required to realise that category of value proposition for that type of process. Thus, process type is another critical factor affecting the successful realisation of win-win relationship. This leads to the following extension of conceptual model:

Outsourced process type #

BPO value proposition ! win – win relationship ! BPO success

Now from the client case studies it is seen that most of the processes outsourced by most of the clients are of support or non-core but critical type, and in all these cases the BPO initiative has been successful. However, there is one case – that of NedTech and CADES, where the outsourced process “product design” is a core (i.e. core as-well-as critical) for NedTech and the BPO outcome is not very successful. The two also have relationship problems, though they also have a contractual governance structure. In other cases, where the outsourced processes are either support type or non-core but critical type, the relationship governance is contractual in nature, but they do not have relationship problems with each other. It, therefore, seems that for core as-well-as critical processes, a contractual governance structure may not be appropriate, and a

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more collaborative governance structure (such as a Joint Venture) may be appropriate. Thus, from this we can infer that relationship management is another critical factor affecting realisation of win-win relationship. As the case of NedTech and CADES shows, the relationship management quality required for win-win relationship is guided by the outsourced process type and the BPO value proposition. Therefore, by adding relationship management to the conceptual model the conceptual model gets extended as follows:

Outsourced process type #

BPO value proposition ! relationship management ! win – win relationship #

BPO success

Another factor which appears to be critical is the BPM competency. It is seen from the cases that clients who are largely successful in their BPO initiatives such as Barclay Bank, ABN-AMRO Bank, Cendant Corporation, Elsevier, all of them use a “process portfolio” approach for managing their business processes, which also allows them to move their processes from one service provider to another if the intended value proposition does not seem to be realised. This is one of the key BPM competency required in BPO client organisations. Similarly, it is also seen from the service provider organisations that all of them have very strong formal process transition/migration methodologies which enables them to migrate most of the processes outsourced to them successfully. Thus, process transition/migration competency is one of the critical BPM competency required in BPO service provider organisations. The adequacy of this competency can be judged after the outsourced process type and the BPO value propositions have been specified. Thus, if we also add BPM Competency as one of the critical factors for realising win-win relationship, the conceptual model gets extended as follows:

Outsourced process type #

BPO value proposition ! relationship management ! win – win relationship " #

BPM competency BPO success

The outsourcing management competency also appears to be a critical factor, as client organisations like Barclay Bank, ABN-AMRO Bank, etc. have set up a separate department for this purpose. However, outsourcing seems to be very critical for outsourcing any type of business process and any type of value proposition. Therefore, it has not been shown explicitly, but shown in the conceptual framework as an environmental variable. Thus, the conceptual framework emerging from the case studies is as been shown in Figure 2.

5. Conclusion This paper proposes BPO as a viable approach for realisation of a competitive strategy based on organisational capabilities and sourcing those capabilities globally. Further, it introduces the concept of “strategic partnering” for successful “global capability

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sourcing” and proposes a conceptual framework for strategic partnering, and validates it on the basis of 17 case studies, seven of European client organisations and ten of Indian service providers. This conceptual framework of BPO strategic partnering can be used by both the BPO clients and service providers for successfully achieving the intended business outcomes as well as for enhancing their competitiveness. It is hoped that the conceptual model proposed here will be increasingly adopted in forthcoming BPO initiatives and will be found helpful in making those initiatives successful.

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Appendix Revised protocol for BPO client organisations Reason for outsourcing:

. How many processes have been outsourced? One or more, or most of them?

. Process types outsourced: support, “non-core but critical” and “core as-well-as critical”.

. Reason for BPO: cost reduction, process performance improvement, or business performance improvement.

. How the decision to outsource process(es) is taken?

BPO outcome: . Whether the intended benefits of BPO were realised? . If not, what do you think were the reasons for failure?

BPM competency: . How was the vendor due diligence carried out? . How are/were the vendors evaluated? . What is the process management approach? Individual processes or as process-portfolio?

Outsourcing management competency: . How is the contract negotiated and monitored? . Are there expectations of additional service provision if needed? Why?

Relationship management: . Do you monitor relationship with your service provider? How? . What type of governance structure you have with the service provider? Ownership (if a

captive centre); contractual (if third-party), or a joint venture (if a strategic alliance)? . What processes have you in place, if any, for relationship management/knowledge

sharing with the service provider?

Revised protocol for BPO service provider organisations

Win-win relationship: . How has been the business growth during the last three to five years?

– in terms of financial results (percentage growth year-to-year); and

– in terms of number of clients. . What has been normally the duration of contract with your clients? Are there one or more

clients who have significantly increased (say five years or more) this duration lately? . Do you in some way work cooperatively with these clients in an effort to achieve mutually

compatible goals that they could not have achieved alone? How? . To what extent do you perceive that the goal of your service delivery to the clients is only

to meet (or even go beyond) the SLAs?

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. To what extant you think you are committed to the realisation of benefits the client expects to get from outsourcing (irrespective of meeting SLAs)? How do you meet this commitment?

BPM competency: . How do you go for process transition/migration? Is there a special methodology of your

own? Describe, if possible. . Have there been any process transition/migration failures in the past? How many times?

Did it result in business loss? . How do you arrive at the process performance indicators (KPIs) for measuring

performance in SLAs? . How do you control the operating cost of the outsourced process?

Outsourcing management competency: . What is your business development strategy? Please explain. . How SLAs are determined for a new contract? . Whether contract compliance is monitored only at the process level or at the clients’ level

(for all the contracts they have with you)? . In case of a perceived opportunity for improving service quality/delivery for the client, do

you inform the client about it and facilitate its exploitation by the client within the existing pricing structure? Only with additional fee from the client?

Relationship management: . How do you manage your relationship with your existing clients? Who is responsible for

it? . If any one of your existing clients runs into a problem with one of the outsourced

processes and needs some additional service from you, how do you handle it:

– do it only for additional price;

– do it for the sake of better relationship with the client; or

– deny it, as it is not part of the contract? . How do you perceive your responsibility role with the existing clients in relation to their

outsourced processes:

– operations manager for its outsourced processes, responsible for complying with the contract (including the SLAs);

– operational as well as business impact manager, responsible for complying with the contract but also going beyond it to have the business impact the client wanted to have, due to the expertise/resources available with you; or

– a strategic partner of the client, who is responsible for sharing the overall risk of process outsourcing and realising the business benefits intended?

. Do you collaborate with your major clients to come to an agreement about specific and measurable goals and objectives of outsourcing, and the extent to which they are being met currently?

. Do you get any opportunities, formal or informal, to learn from your major clients? Do you think you need this opportunity? Why or why not?

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About the authors K.B.C. Saxena is a Professor of Information Management, Management Development Institute, Gurgaon, India. His current interests are in the areas of BPM and outsourcing, e-government and knowledge management. He has consulted for a large number of organisations in Hong Kong, The Netherlands and India, and undertaken internationally sponsored research projects in these areas. He has published numerous articles in journals like Long Range Planning, Information & Management, IJIM, IJPSM, etc.

Sangeeta S. Bharadwaj is an Associate Professor of Information Management at Management Development Institute, Gurgaon, India. She is working in the area of BPO and IT outsourcing. Her interests are knowledge management in global software teams and managing IT projects. Sangeeta S. Bharadwaj is the corresponding author and can be contacted at: [email protected]

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