6. Challenges, Risks and Failure

Transcription

1 6. Challenges, Risks and Failure Summary Learning Objectives: Challenges in BPO Addressing challenges Infrastructure specific challenges and types Risks in BPO Risk Mitigation Risk Analysis and Management Reasons for failure Do s and Don ts Challenges in BPO: Some challenges specific to the BPO industry can be outlines as follows: 1) Attrition: The attrition rate in a BPO is higher compared to other industries. 2) Training and Development: is a challenge given the cultural and language disparity added with customer specific business and timings. 3) Work Pressure: Night shifts with long hours and stretched targets and deadlines create a lot of work pressure in this industry. a. Physical consequence development of stress related diseases like high blood pressure, diabetes; respiratory problems and other effects such as ulcer, decalcification, fatigue, muscle tension and headaches. b. Emotional consequence leading to depression, demotivation, rigidity, helplessness, lack of self-confidence, anxiety and fearfulness. c. Behavioural consequence resembling addictive behaviours, drugs, alcohol and over-eating. It is important to have proper health management and help employees cope better with stress. Imtiaz Surve 1

2 Addressing Challenges: Understanding the hidden risks have a thorough understanding of all the linkages of outsourcing in the organization to mitigate any hidden risks. Meeting operational performance targets apart from SLA s the operations should also be linked to customer service goals. Achieving end-user satisfaction assess the needs of other key business process stakeholders in trying to achieve end-user satisfaction. Achieving the promised cost savings quantify and communicate the true value generated out of the outsourcing engagement. Infrastructure Specific Challenges and Types: The various infrastructure related challenges are categorised as follows: 1) Hardware infrastructure: Integration and compatibility of both the buyer and vendor systems can pose a huge challenge. The systems infrastructure and architecture is likely to be distinct and needs to be reviewed and managed. 2) Software infrastructure: During operations, service related transactions generate new information and business data. This has to be made available to both the buyer and the vendor through a common database. Data mining can subsequently be used to analyse the same. 3) Knowledge Infrastructure: Knowledge is defined as analyzed and applied information that helps the organization compete and grow. Business critical information is shared with BPO vendors which is not only prime for operations but also of very high importance to competitors. This criticality results in two key areas of concern; a) Maintaining information integrity prevent corruption/reconfiguration. b) Maintaining information security prevent data integrity and leakage. The following on internet security policies points should be considered: Limit access Establish granting privileges Imtiaz Surve 2

3 Streamline hardware and software Develop a password policy Have procedures for data backup and disaster recovery Have procedures for responding to security breaches Have the security policy audited. Backup process are also a key area and Scheduling of backups, Tape rotation and Tape restoration should be considered. The backup can be full, differential or incremental based on a set schedule. 4) Training and Support Infrastructure: Adequate training should be provided to all concerned on the new workflow, systems, procedures set in place and the responsibilities. General guidelines that can be followed are: a) Develop a clear set of standard operating procedures (SOPs) b) The training program should revolve around the SOP c) Conduct multiple training sessions d) Adhere to the training schedule and check progress The training should be modular so as to build in flexibility and depth. Risks in BPO: There are multiple challenges and risks associated in an outsourcing engagement that need to be properly managed. Risks can be classified as: 1) Quantitative risks deal with efficiency and effectiveness. 2) Qualitative risks deal with the quality aspect and may also relate to customer satisfaction issues. Risks can also be specifically categorised as: 1) Financial stability risk covers the vendor s financial stability/performance. 2) Project planning and management risk deals with issues of project management. Usage of tools like PERT, CPM and Gantt charts is advised. 3) Assessment of project risk mitigation requires continuous evaluation of the project in relation to the set goals and objectives. Imtiaz Surve 3

4 4) Service Provider Selection Risk stresses the importance of selection of the right vendor and contractual engagement. 5) Contract and Negotiation Risk - the contract should be legally vetted 6) Transition Risk Budgets and Schedule are key during transition. Insufficient planning and allocation of resources may hamper smooth transition of the process. First time issues may surface during transition. 7) People Risk personnel turnover and employee resistance are key metrics on the people front. Absenteeism, loss in morale and productivity is common during transition of complex processes. 8) Technology Risk interconnectivity with systems at both the vendor and buyer end is essential and hence mitigating technology risk becomes crucial. 9) Performance Standards Risks there should be adequate monitoring and review on the performance metrics defined to avoid any related risks. 10) Service Level Agreement Risk The Service Level Agreement should be properly defined and documented to avoid any misunderstanding. 11) Regulatory Risk BPO s are subject to tax benefits from the government and need to comply with the regulatory requirements. Regulatory requirements may also cover right to privacy, information technology and security requirements. 12) Intellectual Property Risks safeguarding of intellectual property can be done through use of legal indemnification procedures. 13) Hidden Costs there may be costs which are not explicitly defined in the contract and which attribute to hidden costs. 14) Conflicting Objectives Risks these include conditions of demand v/s product design issue, flexibility v/s stability issues etc. BPO is a catalyst of significant changes and the associated risks should be adequately categorised and mitigated. Risks Mitigation: 1) Human Capital Risk Mitigation: Imtiaz Surve 4

5 A good mitigation strategy is through scrutiny of vendor labour practice, HR policies and procedures during selection phase. Minimal acceptable labour standards can be included in the BPO contract. 2) Project Risk Mitigation: Such risk can be mitigated by doing a thorough assessment of the BPO initiative. The assessment may include organizations ability to adapt to change, possible transition challenges, infrastructure and time required. A good technique is also the development of a BPO risk probability matrix. 3) Intellectual Property / Information Security Risks Mitigation: Information security risk can be mitigated by adoption of best practise and standards. 4) Legal Risk Mitigation: A strategy followed is of splitting up contracts for different deliverables. A robust and strong contract with clearly defined SLA also helps in mitigation. 5) Vendor Organizational Risks Mitigation: These can be mitigated through detailed vendor assessment, verifying vendor claims and checking customer references. Vendor country labour laws and practise should also be thoroughly checked. 6) Value Risks Mitigation: Such risks can be mitigated by managing the projected outcomes. A continuous assessment can help in seeking opportunities to leverage the outsourcing relationship. 7) Force Majeure Risk Mitigation: Although difficult to quantify, these can however be mitigated through contingency plans, disaster recovery plans and business continuity plans. Risk Analysis and Management: Outsourcing Risk analysis is generally performed before vendor selection. A risk ranking of the providers is developed by comparing through a set of established risk criteria. Outsourcing Risk Management consists of service provider management, service level agreement and billing accuracy. Imtiaz Surve 5

6 Service provider management tracks statistics of the outsourcing relationship over time. The service level agreement defines the requirements and is updated periodically as defined in the contract. The billing is review continuously to ensure compliance with the terms of the contract. Reasons for Failure: Some reasons for failure of an outsourcing arrangement are: a) Outsourcing a broken function business requirements cannot be adequately communicated for broken processes and it is essential to fix a process before outsourcing. b) Lack of understanding of the total cost structure and savings it is possible that certain assumption on cost valid during engagement may not hold good during operations or there may arise instances of hidden costs. c) Misunderstanding the service levels there is possibility of misunderstanding of the SLA s. d) Contracts/Agreements the understanding, design, negotiation, management and execution terms should be well drafted in the contract. A poorly drafted contract is a common reason for failure. Do s and Don ts: Do s: Be transparent and objective Ensure clarity of scope, boundaries and document included processes Define clear, acceptable and measurable service levels Invest in relationship management and strong governance Ensure corporate commitment Identify multiple suppliers who are historically successful Use supplier competition to get the best Don ts: Focus solely on cost Imtiaz Surve 6

7 Fail to carefully delineate the exact process being outsourced Neglect due diligence on supplier capabilities Ignore external communication Under-estimate the time required for buy-in across the organization Imtiaz Surve 7