Chapter 06
Navigating negotiations
The levels of service and the types of solutions offered by leading BPOs have already evolved significantly in recent years and, through the integration of generative AI, are set to change again. Nevertheless, many organizations continue to approach negotiations with potential partners predominantly focused on price.
Although cost reduction is a crucial motivator for outsourcing, especially for first-timers, and cost and labor arbitrage as a means of lowering the total cost to serve customers is still a central tenet of business process outsourcing, an overemphasis on time and materials can create a false economy and potentially increase vulnerabilities in system and information security.
As the industry has shifted from primarily providing human resources to delivering data and insights-driven end-to-end customer lifecycle management, the capabilities of top BPOs now include consulting, business transformation, AI, automation and advanced reporting. This expansion in capabilities necessitates a move from traditional engagement and pricing models toward partnerships focused on outcomes.
An overemphasis on time and materials can create a false economy and potentially increase vulnerabilities in system and information security.
Focusing on outcomes rather than just initial costs aligns business interests more closely and enhances the freedom to innovate. It allows for the implementation of advanced services, tools and processes that may appear expensive as line items but when integrated as part of a solution become invaluable in providing protection as well as performance.
By adopting pricing models that reflect delivery and outcomes, there is better risk sharing and mitigation, greater protection and, ultimately, a better working relationship.
It’s for these reasons that many of the leading organizations within the BPO space are already moving towards engagements focused on delivering an outcome or are actively integrating certain tools and processes into their standard operating procedure — because they reflect the reality of customer service delivery and can actively minimize certain types of security or cyber risk.
Still, just as with all other aspects of security and protection, organizations can be apprehensive about negotiating this type of contract.
Caution is correct in such circumstances. Therefore, to ensure that you can arrive at an agreement with a potential partner that optimizes the possibility of future success while minimizing security risks, there needs to be absolute clarity around the definition of the solution or desired outcome and, crucially, through which measures or metrics this outcome will be tracked and verified over time.
For the same reason, each party will need to agree on their specific and shared responsibilities during the engagement to remove any complexities from contract design or identifying and establishing service level agreements (SLAs).
This will have the added benefit of establishing how much control your organization will retain and how much freedom or latitude your partner will be awarded in order to achieve objectives.
Establishing the parameters of control and responsibility will ensure focus remains on long-term benefits rather than short-term gains and should also help in alleviating potential cost concerns and bringing a level of financial predictability to the partnership.
Action list
Recognize the evolution of BPO services and recalibrate expectations and potential project scopes accordingly.
Move away from negotiations centered solely on price and towards discussions that emphasize value and ultimate outcomes.
Prioritize engagement models and business relationships that will facilitate risk sharing and mitigation.
Define and agree on the specific and shared roles and responsibilities within the partnership for greater clarity and better risk management.
Maintain control and oversight by establishing project parameters and in doing so, balance innovation with responsibility.
Define clear outcomes and success metrics so that progress and performance can be tracked in real time, mitigation actions can be taken and success can be independently verified.
Regularly review progress and take action when needed as business needs change and as a mechanism for establishing a culture of continuous improvement.