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Business process outsourcing (BPO): Knowledge infrastructure

43 Comments · Business outsourcing

We have already discussed the data and information infrastructure that is important part of any BPO relationship.

Competitive businesses are data driven, and in many cases a large part of their overall value is derived from industry and market data they have collected, stoned, and analyzed.

A company’s knowledge infrastructure is even more important because knowledge refers to the practical application of the analyzed data and information.

The knowledge infrastructure of the BPO buyer refers to several components, some of which are directly affected by the BPO relationship.

Knowledge is defined as “analyzed and applied information that helps the organization compete and grow.” Data and information are generated by raw transactions knowledge is generated by analysis and reflection on aggregated transactions.

Organizational knowledge comes from a variety of sources. One common source is analytic software that seeks patterns in transactional data and reports these patterns to human users.

For instance, the balanced scorecard approach used by many companies today conveys aggregated and analyzed transactional information to the desktops of users who can apply that knowledge to their work.

Sales managers who receive daily reports that aggregate real-time sales data will know when to crack the whip and when it is acceptable to relax a bit.

BPO buyers and vendors should ensure that the output provided by the buyer’s analytic software systems before the BPO project is not corrupted on changed without intent.

The systems used by the buyer before the BPO project may need to be upgraded on replaced, but such upgrades should not be made without a full understanding of who is using the generated knowledge and how it is being used.

Knowledge output from an analytic software application may be distributed to multiple databases.

If a new analytic package is introduced, each output database should be identified to ensure minimal disruption of internal workflows.

Too often a reengineering process in one business unit results in an unexpected loss of essential data in another unit.

BPO project managers must always be mindful of the interdependence of data flows within an organization and between an organization and its various stakeholders.

For example, many organizations routinely share data with suppliers and customers to create efficiencies and, in the case of customers, to increase perceived value and switching costs. The integrity of these data flows must be maintained.

Though analytic software is a common source of organizational knowledge, it often goes unrecognized that another common source is wetware.

Wetware is the term used to refer to the analytic resource between the ears of organizational employees (i.e., their brains).

Far too often, organization leaders neglect to recognize the knowledge-generating capacity of their human resources.

It is easy to maintain the perspective of people as knowledge repositories, but their key role as knowledge generators is too often underappreciated.

Outsourcing a business process means that the organization will not be exposed to the raw data that used to be transformed into knowledge by people within the organization.

For instance, as a result of outsourcing the firm may no longer employ front-line employees who used to recognize data patterns and call attention to outliers, anomalies, and opportunities.

The outsourcing vendor can generate the knowledge that used to be generated by internal staff if appropriate incentives are established.

Internal staff were motivated to recognize and react to data patterns based on their commitment to the organization’s strategic objectives, their interest in receiving greater compensation, and their desire to simplify their jobs.

These incentives may not exist for the offshore agent, who may not even be aware of nor deeply care about the industry or market of the BPO buyer.

To ensure that this valuable source of organizational knowledge is not lost in the operating phase of the BPO Life Cycle, the buyer and vendor should establish incentives for front-line agents (vendor employees) to seek and report data patterns that may result in process improvements.

One way to address this issue is by specifying incentive terms in the BPO contract. However, the establishment of knowledge-generation incentives may be too granular for the BPO contract and may be better established in the project management plan.

This provides greater flexibility to both parties to determine where the likely points of mission-critical knowledge generation are within the workflow and how to properly arrange incentives for individuals at those critical points.

The Case Study illustrates how British automobile manufacturer LDV switched its IT outsourcing vendor and gained valuable new insights into its manufacturing processes.

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