Business Process Outsourcing: A Closer Look at Comprehensive BPO
We’ve talked rather extensively as of late about outsourcing benefits administration, payroll, and even 401Ks. But the fact of the matter is that countless organizations are turning away from this singular view of outsourcing and adopting a broader view of how multiple processes can be handled by a third party. This view, known as Comprehensive Business Process Outsourcing (BPO) can cover the full spectrum of HR processes (i.e. recruitment, learning, personnel administration, etc.) but is most often used to handle the more transactional-based elements of payroll and benefits—areas that, when combined, can lead to “a minimum threshold of 10% to 15% cost reduction… [with] 20% or more [being] typically average” according to Gartner research. And this exponential difference in efficiency gains is the main driver for why so many companies are considering this route. Even so, certain questions still loom large, and that’s why we’ve dedicated this article to covering just a few of them.
Comprehensive BPO Question # 1: Is It All or Nothing?
Back in the early and mid-2000s, outsourcing business processes could best be described as a fad; and anything and everything that could be outsourced was. After all, overseas labor was cheap, regulations had been relaxed, and businesses were looking for the best way to put some extra dollars in their pockets by being laser-focused on efficiency. These days however, as Gartner's Robert Brown puts it, “the market is at a crossroads”—meaning fewer companies are seeking this “all-or-nothing” approach. Instead, thanks to an increased demand for easily deployable global payroll solutions; further segmentation of sub-processes; growing customer involvement from the SMB market; and sky-rocketing concerns over newer regulatory stipulations, organizations are looking to be more incremental in their approach. Comprehensive BPO (including HR processes like recruitment) may be the end-goal, but it’s a slow-build that’s more appealing right now for those businesses on the outsourcing track. More specifically, a growing number of companies are choosing to outsource their payroll and benefits administration activities now; gather intelligence; and then build on additional processes for outsourcing down the line.
Comprehensive BPO Question # 2: Are There Risks?
As it is with any new technology venture or business process shift, certain cautions are in order when considering the Comprehensive BPO route. For one thing, if your business is looking to expand beyond simply payroll outsourcing, it should be noted that due diligence needs to be conducted for cost analyses. Will payroll and benefits admin be the best service “bundle” for your company in terms of time and money saved? Or will additional HR functions such as recruiting need to be added in order to net the Return-on-Investment (ROI) needed? For another, regardless of the make-up of your outsourced offerings BPO buyers must be aware that the geographic strategy of the potential provider is critical. Indeed, as Gartner's MarketScope for Comprehensive HR BPO frames it, “not all vendors support or possess the ability to deliver world-wide, regional, or multi-country services; so organizations must be cognizant that piecemeal solutions are possible”.
Comprehensive BPO Question # 3: Are There Different Models?
For the most part, outsourcing (whether limited to a single area or borader in scope) is fairly straightforward. However, as cloud services have begun to take up an increasing part of the market, newer terms and deployment models have started to emerge. In fact, writing for Gartner’s Hype Cycle report, Robert Brown highlighted that, “Despite the relative maturity of [these] services, the market is seemingly unfamiliar with the newness of the cloud-sourced model and the moniker BPU (or its variants, such as Process-as-a-Service)”. What’s interesting though is that these delivery models that run alternative to tradition (i.e. cloud/SaaS) are seeing greater adoption rates. The bottom-line for prospective buyers though is to know going into the evaluation process with a potential provider that these different models can have varying degrees of customer involvement, customization opportunities, scalability, and standardization. As it is with payroll and benefits software, one size does not fit all, and neither will all outsourcing vendors be able to meet your company’s needs in the same way.
Comprehensive BPO: Final Thoughts
If your company is considering moving towards an outsourced model for payroll or benefits administration, then consider this: adopting a comprehensive view can net much more than a single process can in terms of efficiency and cost reductions. Of course, those factors will have to be balanced with what your organization ultimately needs (or what the organizational culture will support), but nevertheless the comprehensive route is one that begs looking into further. Not only that, but vendors such as NorthGateArinso (NGA), Ceridian, IBM, and Aon Hewitt have all been competing in this arena for decades now (and consequently dropping millions into research and development for these offerings)—shoring up doubts that the Comprehensive BPO route for payroll and benefits isn’t mature enough to have ironed out the kinks. And while we’re definitely proponents for this type of outsourced relationship, the key to a successful navigation is to foster a well-developed knowledge of what Comprehensive BPO can (or should) do for your specific business.
This view, known as Comprehensive Business Process Outsourcing (BPO) can cover the full spectrum of HR processes (i.e. recruitment, learning, personnel administration, etc.) but is most often used to handle the more transactional-based elements of payroll and benefits—areas that, when combined, can lead to “a minimum threshold of 10% to 15% cost reduction… [with] 20% or more [being] typically average” according to Gartner research.”