Business process outsourcing (BPO) is a huge industry, with nearly any function imaginable able to be fulfilled by a supplier. And document-intensive applications are obvious candidates for process outsourcing. We have clients that use suppliers for very simple tasks, such as scanning and indexing, while others ask suppliers to take on more complex processes, such as the processing of invoices or insurance claims.
Consider the benefits:
- No capital investment. Outsourcers have existing infrastructure and applications available to service their customers, so there’s no need on the customer’s side to acquire software licenses or perform extensive development. (Note, however, that there’s always a reasonable amount in start-up costs to address data access security and connectivity requirements.)
- Variable costs. A very important benefit of using a third-party process provider is “pay-by-the- drink” pricing. This is particularly critical for operations that have volume variability – whether weekly (e.g. Monday’s mail drop is typically twice that of Friday’s), quarter-end, or year-end spikes. No longer is there a need to retain a full staff to meet the peak processing periods. In addition, for organizations making the transition to entirely digital processes that expect their paper ingestion needs to decline over time, a BPO provider enables costs to slowly decline as the volume of documents declines.
- Access to operations that have scale and continuity. For many organizations, their document volumes are insufficient to provide opportunities for scale – whether it be equipment or staffing. Process outsource providers with document specialties are able to co-mingle the volume of many clients and reduce each client’s costs, while at the same time improving their profit margins.
But there are also some lingering challenges:
- Incumbent and protectionist existing operations. Any time we’re consulting with clients and asking them to consider the outsourcing option, it never fails that the biggest challenge we see is internal resistance. Let’s be frank; jobs are on the line. These same challenges exist whether the firm is considering IT outsourcing, or HR outsourcing, etc. The perception is that document-intensive processes require specialized skill, which may be true – but they are skills that can be replicated and oftentimes improved.
- Switching costs. Many of our clients are apprehensive of becoming captive to an outsource service supplier. Once you eliminate an internal operation, your only means to keep your supplier from getting greedy is to introduce competition. Yet switching costs and change management are significant; in fact, the premium of moving to an alternative supplier is often 20 to 25 percent, from our experience.
- Tight integration that provides a seamless customer experience. Finally, the single most concerning challenge organizations tend to raise concerning BPO is the degree of integration between the two firms and its potential impact on the organization’s customers. Ideally, these customers don’t experience any change in their level of service. But to achieve this state takes considerable planning and a very thoughtful implementation plan.
In light of both the pros and cons of process outsourcing, we expect a greater number of organizations to consider their document-intensive processes as viable candidates for outsourcing. The benefits are compelling and the risks can be managed by working in close conjunction with the supplier.