Do What You Do Best, and Outsource the Rest

Posted by Steve Rosvold on .

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Business process outsourcing – You are doing it already.

Don’t be intimidated when you hear the term BPO, or business process outsourcing, bantered about at your next business meeting. You are doing it already. If you have an accountant do your taxes, an attorney help with documents or an advisor for your benefits plan, you are already using BPO services.

The recent push into BPO is an outgrowth of the “core” business management philosophy of the past decade. If it’s not core to your business, turn it over to experts that make it core to their business – specialists whose livelihood depends on delivering the service flawlessly and at a reasonable cost. Two of the key issues facing business leaders today are where to focus their business and how to channel their resources.  Time spent reviewing wrong financial figures, correcting paychecks, revising erroneous sales quotes or adjusting incorrect sales invoices take time, consume resources and reduce profits.  Unfortunately, the business leaders of many mid sized companies frequently spend a wasteful amount of time managing internal work groups that will never be positioned for “success”. These are BPO candidates.

Paul Winters, President of Winters and Associates, a Vancouver based management accounting outsourcing firm, identifies three conditions that should be present when considering a process for BPO; 1) senior management is disinterested or uninformed about a necessary activity their business must perform 2) the activity is technical or complex 3) the activity is cyclical or part time in nature.  Mr. Winters’ biggest challenge is helping companies recognize the latent need, the unknown or unrealized potential benefit, for his outsourcing service. Business owners and senior managers rarely take the time to properly analyze the benefits of potential BPO opportunities.

What can you do to make certain you are not missing BPO opportunities?

First, it is critical to have a clear idea what activities are core to your business. Do you have a unique product, manufacturing process, marketing approach or distribution channel?  Do your information and reporting systems or customer service processes give you a competitive advantage? Frequently, the activities you guard and protect the most are core to your business.  However, it is not unusual for companies to protect assets that are not creating value while leaving their most critical assets unsecured or not properly managed. Once you have determined your core activities, all other activities are candidates for BPO.

The second step is to identify the costs of the non core activities. The expense of running an activity is usually easy to assess. The hidden costs of inefficiency, errors and poor decision making are more subjective, but just as important to quantify.

Before going on to step three think about how the tenure of staff and their relationship with the company will impact your decision. Often times a BPO partner can leverage the expertise and company familiarity of your staff and will employ them as part of an outsourcing agreement.

The third step is developing a clear set of requirements for each activity you are considering for outsourcing. Be sure to avoid replicating what you have – design what you need.  With clear requirements potential BPO partners should be prepared to guarantee the service level they will provide to you. A potential BPO partner may help you do this you as part of their sales effort. You should expect to receive a higher quality service at the same or lower cost before outsourcing an activity.

The final step is to find the right BPO partner(s). Local business colleagues or organizations, such as your local Chamber of Commerce or the Association for Corporate Growth in Portland, can provide you with lists of reputable BPO providers.

Bill Roller, President and Chief Investment Officer at BR Capital in Vancouver, uses BPO extensively in his mortgage and fund management business. He approaches BPO like any other business decision, “I look to BPO any necessary activity that requires a high time investment on our part but yields low returns”.

You’re doing it already.

Vancouver Business Journal – Friday, March 11, 2005

Steve Rosvold – Guest Columnist

Steve Rosvold

Steve Rosvold

As the Founder and CEO of KRM Business Solutions, Steve Rosvold understands that innovative and responsible financial leadership is critical for today’s businesses. Whether the goal is to grow exponentially or achieve stable profitability, this core function needs to be handled with intelligence, skill, and unwavering commitment. With over 30 years of experience in the corporate finance world, Steve Rosvold has honed his ability to drive change, improve profitability, and ensure long-term financial health for businesses. He founded KRM Business Solutions in 2003 to help Southwest Washington/Portland area companies equip themselves with the knowledge, processes, systems, and tools they need for success.

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