Without a Net
I am going through the excruciating process of buying (and selling) a house. Frankly I’d prefer amateur dental surgery with a rusty pair of pliers, but my kids are getting bigger, etc. So I gotta do what I gotta do...what are you gonna do?
Anyway, the interesting part is the “broker vs. do-it-yourself” decision. I’ve always resented that “real estate”—or at least the level at which I play—is portrayed as a kind-of black art ... mostly by those who stand to benefit the most from maintaining an impenetrable shroud of mystery over the process. I’m not saying it’s a walk in the park. There is a fairly high degree of knowledge that an experienced agent can bring to the table. But basically, it’s more of a “who you know” than a “what you know” kind of thing.
So I’m thinking about this whole area of what I can do alone versus what I need help with, when I call Tracy Shelby at DST Technologies. DST is a Kansas City-based business process management (BPM) software developer and business process outsourcer. And oddly enough, this whole subject of “own vs. outsource” was on Tracy’s mind, too. For entirely different reasons. I’m sure Tracy has a nice home.
“Companies in the financial sector are continuing to try to do more with less. They are increasingly willing to exploit automation, too, and take people out of tasks where they don’t really add value and put them where they do,” Tracy begins. “There’s a growing sense of acceptance in places where, just last year, people didn’t have an appetite for automation.” He goes on to say that many of the industries DST serves—mutual fund, mortgage lenders, and healthcare, insurance and pharmaceuticals—have “cut all they can cut. They DON’T want another layoff.”
I’m thinking about this when he adds: “So some of the sacred cows are going away. They are looking more closely at what outsourcing can bring to the table.”
The Surprise of BPM
In these White Papers and in KMWorld Magazine, we have historically covered Business Process Management (BPM) software as an end-user productivity tool that emerged from early workflow “point A to point B” document tools and gained sophistication as it inherited increasing levels of business logic, rules and process smarts. So it comes as a novel concept to me that BPM technology can actually enhance the relationship between you and a potential outsourcer.
“I don’t want to imply that customers are knocking down the doors, wanting to spend money on automation,” says Tracy. “I wish they were. But they are inviting our consultants to look for areas to apply automation. They may not be looking for places to spend money, but they are willing to spend smart money in the right places,” he explains.
“When the markets were booming, the financial services industry was busy taking orders and watching their portfolios rise. When the market fell, they were busy dealing with the impact of that,” says Tracy. “Now, financial services have developed an appetite for automating certain business practices that they think can be improved.”
And that’s where we arrive at the unexpected intersection of BPM and outsourcing. For a while it’s been common for financial services companies (scratch that, all companies) to take a look at their typical functions—call center, mailroom, imaging, some of their back-office processing—to determine whether these operations could be improved in some way. (I know; I have made a living covering just such efforts.) Even though some of these processes seem inextricable from the operational requirements of the company—“the phone rings here; I have to answer it”—operational managers have learned that these processes can and maybe should be handled by outside providers.
The difference today, for companies such as DST, is that the comfort level with outsourcing business processes is extending deeper into the organization’s core functions, and into even more tightly attached business processes.
What’s driving this? Is the decision to outsource business processes based on purely economic factors (let’s do it cheap) or on the deliberate strategic choice to stick to the knitting and let non-core-competencies be handled by capable partners? I ask.
“It’s a little of both,” confesses Tracy, who contends that the decision to outsource or not will ultimately be based on the critical nature of the process in question, and the value proposition brought by the outsource partner.
To understand the strategy behind a company like DST, you have to know a little bit about its history. DST started as a service-provider to the (mainly) mutual fund industry. Gaining experience and a growing customer base, it needed an internal tool for directing work efficiently to the various agents as well as providing the guidance and business rules necessary to make those agents just that much smarter.
DST quietly developed a BPM tool that, eventually, became a product with value in its own right. It turned its workflow and process management tool, developed for internal use, into a software product called AWD, or Automatic Work Distributor, and began marketing it, with a separate sales organization and the whole nine. I’m sure they thought the two efforts—the service bureau and the software sales division—were distinct, and would probably propel themselves along with little interaction. “Different sets of customers” they probably thought. And while that’s partially true, they probably didn’t expect the level of synergy that has emerged.
Connecting the Dots
“Outsourcing” has a connotation. When you choose to outsource, it usually means you’re looking for the absolute low-cost solution. So, in certain cases, it makes sense to go to the cheap-labor boilerrooms of India, China or the Caribbean.
But DST views outsourcing quite differently. DST already acts as a business processes outsourcer, processing mutual funds and other financial transactions, and they also have customers in parts of the pharmaceutical industry. What these processes have in common is that they are sensitive, mission-critical functions that require expertise and experience. In their world that includes hospitals and healthcare payers, banks, mortgage and insurance providers, the decision to outsource such sensitive services is not taken lightly.
You do it for another reason. The back-office functions such as mailroom and call center are not revenue-generating, and have nothing to do with the core competencies of the organization. The bright minds in the user organizations could be put to far better use. Their customers say: “We sell securities...we don’t want to open mail.” So the premise underlying the decision to outsource is more complex than simply “get it done cheaper.”
Then there are the practical aspects that verge on the strategic: What if you need some overflow coverage? Should your call center activity suddenly surge, what are the costs involved in longer wait times, more abandoned calls or surlier customers? Even under that pressure, the decision to hand off critical call traffic to an outsider is a very tough call. So DST thinks their history as a service provider that works with very sensitive information and routinely conducts very value-attached transactions helps provide some of the comfort necessary to make that decision.
But, you say, an outsourcer can’t know all the nuances and ins-and-outs of your product...how can they possibly pick up the ball in mid-game and reach the levels of service necessary? Because there is magic in the technology. Business process tools provide not only workflow and process control, “they can have certain business rules and logic built in,” says Tracy, “so an operator may not be trained to understand everything about your business, but the business process application can guide that operator at a very granular level and the technology can make him an expert.”
Here’s an example of how it can work: Let’s say you’re a small mutual fund company, and right now your outsourcer has five people handling your call center activity. Then this week’s Money Magazine runs an article that says you have the best mutual fund in the world. Without the outsourcer in place, you’d be hard-pressed to suddenly take on the extra volume. But with a few clicks, the business process management tool at the outsourcer can not only activate the additional people to take the calls, but can also push your business rules to them. Voila! The additional agents are now “instant experts” in your hot little fund.
And just because you’ve decided to engage an outside party to act as your surrogate doesn’t mean you have to give up control. BPM tools routinely provide customized reports—activity reports as well as real-time status reporting—from the outsourcer as though it were happening downstairs in your operation.
Still not convinced? Outsourcing can come with a money-back guarantee. It’s called a service-level agreement, or SLA. If someone is running mission-critical apps on your behalf, they certainly wouldn’t do it without an enforceable agreement that you’re getting the optimal performance, and your outsourcer is able to prove it. This is yet another area where BPM products, running at the outsourcer (and appearing in your viewer as well), can actually add a level of value to your overall BPM.
Not only does the BPM application force the outsourcer to meet SLAs, it also allows the customer, who can be running the same BPM application, to monitor and see whether the requirements are all being met in real time. “So rather than getting a report at the end of the month that says ‘Oops, we messed up with your customer base,’ you would have known proactively whether there were any problems,” Tracy explains.
Value Piles Up
There’s yet another area that’s getting hot, and outsourcing is playing a key role from a strategic (as opposed to cost-cutting) perspective.
Companies—financial services definitely fall into this market, but also pharma—can use the synergies of BPM automation, outsourcing and carefully planned human interaction to bring new service-based products to market. Companies are increasingly pre-planning product launches with the outsourcer as part of the initial plan, rather than an afterthought, cost-cutting measure or spillover stopgap.
Let’s say I have a hot new product idea that can’t fail, but I have no experience in running the level of call center support that the demand from this new service will drive. I don’t have to abandon my idea just because I can’t deal with the service issue. I can instead concentrate on my skills, and bring an outsourcer in as a more-or-less partner in this new venture from the get-go. “I don’t have to ramp-up training, build a building...there are people who already have that. I can focus on bringing my new service to market,” says Tracy. And enjoy the security of having the back-office functions well-covered by somebody for whom such work is a walk in the park.
This is a completely radical way to think about outsourcing anything...outsourcing is supposed to be a cheap ticket out, not a part of the master plan.
So I guess at the end of all this, I’m kind of re-thinking the relationship between customer and service provider; broker and house-seller. If I can just find a broker who is willing to be creative, think outside the old real-estate box and respond to my needs in a whole new way...
Wow...I may have just thought of a new line of work. This writing stuff is getting kind of old anyway.