Designing the retained organization from a technology perspective Gianni Giacomelli, Head of Strategy and Marketing, SAP BPO
Gianni Giacomelliâ€™s Biography
Head of Strategy and Marketing, SAP BPO Gianni Giacomelli is Head of Strategy in the BPO business unit of SAP. He joined SAP in late 2004, and has more than 16 years of experience in organizational development, transformation strategy and related services. He has served in companies such as Boston Consulting Group, Danone and Datamonitor, and in US-based consulting firm Everest prior to joining SAP. He is a widely published thought leader in the outsourcing/offshoring/G&A transformation space. He holds a degree in Economics and Business from the University of Florence, Italy and EME Business School of Strasbourg, France, and a Masters in Organizational Behavior from London Business School. He can be reached at: email@example.com
Designing the retained organization from a technology perspective Business processes are delivered by combining workflow, the right people, and the appropriate technology. These three elements, designed to work together, ensure effective service delivery. Often when process transformation fails, a pattern emerges: the experts and decision-makers across these three domains have not been working properly with each other. In the case of outsourcing, which involves managing the relationship with a service provider, there is an even greater potential for dysfunction
if the right governance model is not put in place, especially during contract negotiation and implementation. Essentially, it is necessary to ensure that the required skills and objectives that are clearly defined for all the parties involved are in place at the beginning of the HR transformation journey. Changing direction too late, for example when the discussions hit the implementation phase at the local level, will create new issues because it will lead to deviation from holistic objectives.
Designing the retained organization from a technology perspective Specifically, with regard to technology, three types of decisions need to be made: • Whose technology is to be maintained or implemented in respectively the retained HR organization and in the outsourced one? For example, retained-organization employees can now use the technology that is proposed by the service provider (often software-as-a-service). • Who is to drive and who is to own the configuration of that technology – client or provider? • How to coordinate the retained processes seamlessly with those that are outsourced?
Whose technology is it? Here, the decision is to choose who owns the technology. Whoever owns the technology can redeploy it – at least theoretically. A couple of scenarios may occur: 1. When the provider owns the technology, the contractual agreement sets out how that technology can be used. This prevents dilution in service quality or changes in process workflows unless pre-agreed. It also means that the possibility exists for the provider to re-use the technology with other clients. This can generate cost savings. 2. If the client owns the technology, it can be redeployed by the client upon completion of the provider’s mission. However, the client is contractually obliged to ensure the provider has access to the technology required for service delivery.
Discussions about technology ownership can have unexpected consequences. Whoever owns the technology must recognize that process requires certain parties to have access to specific functionalities and/or data; otherwise, service delivery will break down. Identifying points where this can occur prevents surprises later. For example, access to an employee’s master data, identifying elements like personal and organizational data related to a specific employee, is necessary in many outsourced processes, even though in some cases the master data repository may stay within the client’s organization.
Who drives and who owns the configuration? The second important decision is to determine who drives and who owns the configuration of the selected technology.
This is often the case for processes that impact the client’s employees, a common occurrence in HR.
From a legal perspective, configuration is considered Intellectual Property (IP). But from a business perspective, configuration is often modified according to specific processes to be handled by the software.
Nevertheless, if the client drives the configuration too far, it might limit the provider’s opportunity to template the process. This in turn would diminish the client’s ability to enjoy the benefits of a one-to-many service model. Although the client can decide to avoid change management, there is a risk that the provider will be unable to deliver economies of scale, process optimization and more cost-effective labor.
On the one hand, the party driving the configuration has the possibility to personalize the software to accommodate some business rules and process flows. On the other, the party who owns the Intellectual Property has the right to re-use the developments beyond the specifications in the BPO contract. When the client drives the configuration, it is possible to dictate to the provider, at least to some degree, how the service will be run.
Another consequence of who drives the configuration is that the clients’ retained organization will be different. If the client is simply asked to provide the boundaries of the process (e.g. expectations of input-output), in-depth expertise in the process steps that fall within the provider’s scope will not be necessary.
How to integrate seamlessly what stays in and what goes out? Regardless of the ownership of the technology and its configuration, there is still a need for the process to function seamlessly end-to-end. In practical terms, the service provider needs to act as the client’s extended enterprise. A number of failures in reaching such results stem from the inability of the parties to design an appropriate technology integration architecture that ensures data integrity and avoids latency. In some cases, this outcome may be provoked by the difficulty of building interfaces or by the fact that data are not maintained properly on either side. For example, if the client does not require certain
data fields to be constantly updated by their employees (e.g. address, number of children, etc.) or if those fields do not exist in the client’s retained system, the employees’ personal data transmitted to the provider might be incomplete or inaccurate. It is important to note the difference between interfacing and integrating. Consequently, deciding where to draw the line between the two organizations, i.e. what is retained on the client’s side and how it integrates with the provider’s side, is a critical act and requires intense scrutiny from the business process and IT specialists from both organizations.
Below is an example of the importance of deciding what is kept on each side:
Service for a General and Administrative process such as HR is typically delivered in tiers. Tier 0 is usually self services, pulling real-time data from applications and databases. Here, technology enables strong economies of scale. Tier 1 is the layer of call/contact center clerks who rely on scripted processes to respond to queries.
Tiers 2 and 3 include more specialized staff who require access to policy repositories as well as reporting and other analytics. Here, economies of scale are even lower and the cost of complex operations is high. The client and the provider need to decide who takes which part of the technology for which layer. Unintended consequences of poor decision making can be the following:
In case something does not work correctly, the HR transactions cannot be handled by the lower tiers, which in turn generates a heavier workload for these tiers and finally results in higher total cost.
Technology should not be a constraint, but to avoid surprises it is critical to bring the CIO’s team into the loop upstream when deciding retention of technology is decided.
Wrap-up • •
Deciding where to draw the line between what is retained and how it integrates with the provider’s side, is a critical act. Business processes are delivered by combining workflow, the right people, and the appropriate technology. These three elements, designed to work together, ensure effective service delivery. With regard to technology three types of decisions need to be made: whose technology is to be implemented, who is to drive and own the configuration, how to coordinate the retained processes seamlessly with those that are outsourced. All have implications on the sustainability of a BPO relation. Technology should not be a constraint, but to avoid surprises it is critical to bring the CIO’s team into the loop upstream when retention of technology is decided.