Tips for large scale business process outsourcing contracts

Kit Burden is co-head of technology and sourcing group DLA Piper on outsourcing. He gives us his overview of business outsourcing.

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For some years now, the "sexy" part of the outsourcing industry has been very much business process outsourcing (BPO), covering such diverse areas as HR, finance and accounts, logistics, back office administration and even legal services.

In contrast, IT outsourcing has been increasingly seen as more of a commodity service, and as such is more mature and probably better understood as a result.

However, the reality is that just as businesses began to fully appreciate how much they were dependent upon their IT systems once they had been outsourced, so it is clear that the majority of BPO services are similarly dependent upon the IT systems which deliver them. What then are the implications of this for a typical BPO contract?

Establishing the service levels

A frequent challenge in BPO deals, is working out what kind of contractual service levels should be set. Unlike IT outsourcing deals (where internal departments will frequently have been measuring their performance in terms of such things as fix times and levels of availability, for some time, as part and parcel of good practice), customers can sometimes struggle to find metrics which are genuinely reflective of the "quality" of the BPO services, or to provide details of what the relevant levels of performance were before the BPO contract was signed.

However, it will frequently be the case that many of the types of service levels commonly seen in IT outsourcing deals (eg availability of particular applications/systems, times to resolve particular problems or to provide workarounds for them) will still appear, if only because the delivery of the relevant BPO services is dependant upon the integrity of the underlying IT systems and networks.

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