Insight
BPO trend: Assisted captives is getting traction
Nordic CFOs are looking at assisted captives as a new way of reaping the benefits of outsourcing and automation.
Director in Deloitte’s service line CFO Services Shakti Singh headlines the newest trends and explains why Nordic businesses should pay attention.
What is new on the Business Process Outsourcing (BPO) scene?
We are seeing an integration of captive and BPO called assisted captive is drawing interest from Nordic businesses. An assisted captive is a captive where the BPO-vendor supports the parent company with recruitment and process management assistance during the start-up phase, which helps accelerates the offshoring process significantly. Assisted captive is not a completely new model, as it is one of several hybrid models, but it is getting a lot of attention.
Why should Nordic businesses pay attention to this?
The Nordic businesses are typically not as large in numbers as other customers of BPOs e.g. North American firms, who are further ahead on their respective outsourcing journey. So at times, it can be difficult for Nordic businesses to get the BPO vendor’s attention and land the right deal. Therefore, a captive provides a way to reap the benefits of offshoring. However, setting up an office, recruiting the right talent etc. requires a special skill set and it is time consuming. For those reasons the assisted captive enters the picture as a favorable solution.
Are BPOs a viable option as we have not seen many success stories in the Nordics?
The short answer is yes. BPO providers have invested heavily in robotics and related technologies, which they can deploy fast and efficiently. Those digital assets represents a great potential for Nordic businesses. Globally, companies have achieved a variety of target offshoring their traditional financial accounting, IT, human capital but also marketing, sales, customer service, legal and more. Assisted captives provides a way for Nordic companies to reap similar benefits by fast-forwarding their offshoring progress, cutting costs and having both repetitive and more knowledge-based tasks performed at a high level.
What has historically been holding Nordic businesses back?
First, I believe change management and the lack of standardization plays a part. For any kind of outsourcing to work, it is key that the business has a centralized mandate and a global process ownership. Bigger Nordic companies reaps the gains of offshoring as they are pursuing the standardization agenda very relentlessly, whereas it is harder for decentralized companies with a myriad of different process. It is also crucial to have a strong vendor management office, which handles the contracts and makes sure that all parties keep their end. Secondly while outsourcing is a valuable instrument for CFOs, they need to get other executives pushing this agenda as well by highlighting the gains from economy.
Is assisted captives only relevant for companies who are just starting their offshoring journey?
It is also very much relevant for firms with a shared service center who are looking to expand. Rebadging of existing employees is another lever that can be used where the existing staff can be rebadged to BPO employer to shorten the setup time.
What are the main pitfalls and how do businesses avoid them?
First, as the contract with the BPO vendor is not standard, businesses needs to have experience in negotiating and managing solid contracts. Secondly, BPO vendors needs incentives and a good business case to prioritize partaking in an assisted captive versus a regular BPO agreement. Making it a win-win situation is crucial. Additional revenue and the prospect of additional business down the road can help motivate the BPO vendor.
Captive and BPO Global explained
Captive Service is a type of operating model where an organization will use a wholly owned subsidiary for offshoring instead of a Third Party Vendor (BPO). The benefit of doing so is to leverage the cost savings of using offshore resources while maintaining complete control over process and delivery. BPOs, on the other hand, provides organizations the ability to cut costs faster and benefit from the vendors digital assets while the core business functions focus on the primary operations.
Which three aspects should Danish businesses pay special attention to, when choosing a BPO vendor?
- Be aware of what you are buying: On the surface, the vendors BPO offerings may appear to be the same but based on their origins each BPO vendor comes with their own unique selling proposition.
- Time saved while requesting for proposals is not time earned: Use the RFP phase to meet the actual delivery team and build the solution together. If you do not, you will need to spend the time later in delivery management due to lack of calibration and alignment on the desired solution.
- Having your own GBS organization: Irrespective of the vendor you chose, you need your own Global Business Service (GBS) organization. The organization should have a vision and a clear understanding of the change management needed to make the collaboration a success.