Umesh Vyas

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Laws of the BPO Jungle

Sustaining success in the Business Process Outsourcing (BPO) Industry requires a fundamental re-examination of some of its existing assumptions. To aid this process, I present the 3 Immutable Laws of 3rd Party Outsourcing. The laws are counterintuitive. Particularly, the first two are. This is because they address some fundamental questions about why and how to run this business. I have seen them succeed with many clients. These are about 40 companies I have consulted as a part of my work with QAI India Ltd. Consider them. They work.

The 3 Laws are as follows.
First Law: There are no clients
Second Law: You are not offshore
Third Law: What really matters are Values

Let us examine each of them.

The First Law is derived from repeated experiences about how 3rd Party BPO companies ‘blame it on the client’. It sometimes appears that clients are running the companies. And those vendors are simply providing space, infrastructure and ‘bums on seats’. Although client centricity is good, exclusive client obedience can be bad. Remember Anderson and Enron!

There are several reasons for formulating the First Law. The first is that the primary responsibility of the BPO vendors is to end customers and the Law. Contracts and SLAs are for simplification and accountability, not for creating silos that defeat the very purpose of this relationship. The question BPO vendors must ask themselves is ‘Who is supposed to be the expert?’ the specialized vendor or the clients who have extracted their non-core tasks and outsourced them, so that they can concentrate on their core business – Technology, Finance, Insurance, Travel, or whatever else. So if you aspire to be a specialist leader in this field, behave like one. If you were outsourcing a dinner for your daughter’s marriage and the catering vendor asked you how you want the fish to be tested for freshness, what will you do? I will change the vendor; because all I know is that none of guests should fall ill. I am not the expert on Quality Assurance of food. The same needs to be true regarding the relationship with clients.

The scariest part is where some client representatives drive productivity at a cost of the Law. For example, the Collections business has very strict laws in the US. It is horrifying to see vendors being soft on regulatory issues because some client representative said so. Well, if you do not agree with the Law, go to the US Congress and get it changed. Meanwhile, the law is definitely above what a client representative says.

Finally, BPO vendors need to shake off the legacy of ‘we are new to this’. Many vendors, particularly in India, have developed sufficient maturity, particularly in Quality and Process Improvement. They need to assert their strengths.

The Second Law is about cost. Let me relate it to two stories.

Three friends went out for dinner in the US. After dinner, they were arguing about who should pick the tab. The first said, ‘Let me pay. I run my own company. I can spend the money the way I want.’ The second said, ‘No, let me pay. After all it is your money. I work for a large company and have an infinite expense account. It is free for me.’ The third friend won. He said, ‘No, let me pay. I have a ‘cost plus’ project with the Department of Defense. I make 20% on the dinner’.

In 1988, I went to Gorakhpur, a medium sized town in Eastern India. Had to meet my in-laws to get married. I had landed at a non major-metro railway station after a long time. The coolie at the platform was negotiating between Rs. 2 and Rs. 8. I was more used to the economic model in Delhi where the range of negotiation was Rs. 40 to Rs. 200. So what did I do? I said. ‘Take Rs. 10. And two of you can split the load too’. That was Day 1. By Day 3, I was negotiating between Rs. 4 and Rs. 5.

Currently the BPO industry is not sufficiently focused on costs – their or their clients. This is partly due to badly designed contracts suffering from the FTE curse, and partly due to the hangover of labor arbitrage – ‘You can hire a Tech Support agent for $ 200 a month! Give me 50!’. Cheaper resources are no excuse to be inefficient. And contracts designed to encourage inefficiencies are not sustainable. Hence, the correct perspective is to either assume that billing is at local rates or that costs are at Dollar rates. Otherwise, the BPO vendors will suffer the Gorakhpur Dilemma – You have to be very special to remain a collie in Gorakhpur at Rs. 15 a load! You may be cheaper than Delhi, but there are many others who will challenge your competitive position.

The Third Law is not so counterintuitive. Or is it! This Law is about Values. A new Industry is getting born with a massive influx of very young people and the predominant Values that the BPO vendors seem to be focusing on are – fun and money. The World is becoming flat, the global supply chain is getting transformed, offshore locations are taking up and delivering the challenge of better and consistent quality at lower costs, and what are the companies using to motivate the pioneers – money. The foundation of the BPO Industry needs to be built instead on Values – Values of Customer Service, Growth, Quality, Effectiveness, and Efficiency. Values directed towards ‘changing the World’. This requires a transformation right from the very top. For messages and expressions transmit meaning. And that meaning either provides ‘meaning’ or makes people ‘mean’. As long we keep saying that people ‘handle transactions’, that is all they will do. Unless we say that they are ‘solving problems’, they will not. Nobody produces Quality for incentives. They do it because they are able to (competence), want to, and are proud of it. If doctors started ‘handling’ patients rather than curing them, the World will definitely become very unsafe. This lack of focus on Values is probably the biggest challenge the Industry faces.

In summary, the BPO Industry needs to take responsibility for its specialization, confront the cost dynamics beyond ‘exchange rates’ and ‘labor arbitrage’, and build organizations based on intrinsic values rather than extrinsic sops. These are the 3 Immutable Laws of 3rd Party Outsourcing.