Like me I am sure that you have been inundated with ads, articles, white papers and proposals for something called BPM or BPO, Business Process Management, Business Process Outsourcing and Business Process Optimisation.
Do you really understand what it all means?
BPM and BPO certainly aren’t new, there have been many companies offering innovative and often cutting-edge technology solutions for many years. The pioneering days were probably the early 1980’s. One early innovator I can recall (and admired) was Tower Technology because their office was just across from our old offices in Lane Cove.
In the early days BPM was all about imaging and workflow and forms. Vendors like Tower Technology used early version of workflow products like Staffware and a whole assortment of different imaging and forms products to solve customer processing problems. It involved a lot of inventing and a lot of creative genius to make all those disparate products work and actually do what the sales person promised. More often than not the final solution didn’t quite work as promised and it always seemed to cost a lot more than quoted.
Like all new technologies everyone had to go through a learning process and like most new technologies, for many years the promises were far ahead of what was actually delivered.
So, is it any different today? Is BPM a proven, reliable and feature-rich and mature technology?
The answer dear friends is yes and no; just as it was twenty-five or more years ago.
There is a wonderful Latin phrase ‘Caveat Emptor’ which means “Let the buyer beware”. Caveat Emptor applies just as much today as it did in the early days because despite the enormous technological progress we have all witnessed and experienced we are still pushing the envelope. We are still being asked to do things the current software and hardware can’t quite yet handle. The behind the scenes technicians are still trying to make the product do what the sales person promised in good faith (we hope) because he didn’t really understand his product set.
Caveat Emptor means it is up to the buyer to evaluate the offering and decide if it can do the job. Of course, if the vendor lies or makes blatant false claims then Caveat Emptor no longer applies and you can hit them with a lawsuit. However, in reality it is rarely as black and white as that. The technology is complex and the proposals and explanations are full of proprietary terminology, ambiguities, acronyms and weaselly words.
Like most agreements in life you shouldn’t enter into a BPM contract unless you know exactly what you are getting into. This is especially true with BPM or BPO because you are talking about handing over part of your core business processes to someone else to ‘improve’. If you don’t understand what is being proposed then please hire someone who does; I guarantee it will be worth the investment. This is especially true if you are outsourcing customer or supplier facing processes like accounts payable and accounts receivable. Better to spend a little more up front than suffer cost overruns, failed processes and an inbox full of complaints.
My advice is to always begin with some form of a consultancy to ‘examine’ your processes and produce a report containing conclusions and recommendations. The vendor may (should) offer this as part of its sales process and it may be free or it may be chargeable. Personally, I believe in the old adage that you get what you pay for so I would prefer to pay to have a qualified and experienced professional consultant do the study. The advantage of paying for the study is that you then ‘own’ the report and can then legally provide it to other vendors to obtain competitive quotes.
You should also have a pretty good idea of what the current processing is costing you in both direct and indirect costs (e.g., lost sales, dissatisfied customers, unhappy staff, etc.) before beginning the evaluation exercise. Otherwise, how are you going to be able to judge the added value of the vendor’s proposal?
In my experience the most common set of processes to be ‘outsourced’ are those to do with accounts payable processing. This is the automation of all processes beginning with your purchase order (and its line items), the delivery docket (proof of receipt), invoices (and line items) and statements. The automation should reconcile invoices to delivery dockets and purchase orders and should throw up any discrepancies such as items invoiced but not delivered, variations in price, etc. Vendors will usually propose what is commonly called an automatic matching engine; the software that reads all the documents and does its best to make sure you only pay for delivered goods that are exactly as ordered.
If the vendor’s proposal is to be attractive it must replace your manual processing with an automated model that is faster and more accurate. Ideally, it would also be more cost-effective but even if it is more costly than your manual direct cost estimate it should still solve most of your indirect cost problems like unhappy suppliers and late payment fees.
In essence, there is nothing magical about BPM and BPO; it is all about replacing inefficient manual processes with much more efficient automated ones using clever computer software. The magic, if that is the word to use, is about getting it right. You need to know what the current manual processing is costing you. You need to be absolutely sure that you fully understand the vendor’s proposal and you need to build in metrics so you can accurately evaluate the finished product and clearly determine if it is meeting its stated objectives.
Please don’t enter into negotiations thinking that if it doesn’t work you can just blame the vendor. That would be akin to cutting off your nose to spite your face. Remember Caveat Emptor; success or failure really depends upon how well you do your job as the customer.