What’s wrong with BPO?

What’s wrong with BPO?

Outsourcing is not a bad thing. It allows companies to focus on their core competencies and let others do the rest. But there are some unintended consequences. When companies outsource processes to low-cost labor, they lose the motivation to modernize the process.

Handcraft can be of value. You can argue that a handmade leather purse or a piece of pottery is nicer than a machine-made one. But a hand-processed invoice?! I don’t think you’d find much beauty there.

When we outsource invoice processing, we settle for a short-term -fix rather than challenge ourselves to innovate. That’s when BPO becomes detrimental to long-term success. We are settling for cost reduction rather than process improvement.

Purchasing Insight logoTo be clear, the two don’t have to be mutually exclusive. It’s just the nature of humans and business. If we managed to bring our cost per invoice from $30 down to $15 by outsourcing the process, we feel pretty good about it and move on to the next thing. But what if by doing so we missed an opportunity to bring our cost down to 30 cents per invoice?

This situation is not unique to BPO. Think of e-invoicing for example. Moving from paper invoices to electronic format and transmission of invoices is a big step forward. It saves money and time and is good for the environment. No wonder we feel good about it. But feeling good is one reason we stop short of really innovating the process. Instead of taking an electronic invoice through the same manual process we invented for the paper invoice, why not automate the entire invoice processing—validation, reconciliation, and payment—and remove the need for manual intervention altogether?

Done right, invoice processing is something a machine can do faster and better than humans. There are just too many things that can go wrong. You have to match the invoice to the purchase order. You have to match it to the goods or services received. You have to check payment terms, currency, exchange rates, tax rates… there is no way that people can get it right 100% of the time.

Take automated pilot as an example. Pilots are some of the best-trained professionals in any business you can think of. Still, the introduction of auto-pilot technology has dramatically reduced the number of pilot errors and air traffic accidents.

The complexity of invoice processing means that you need pretty sophisticated technology to do it automatically. But if computers can fly an airplane I trust they can also process our invoices. That is if we just put our minds to it instead of settling for a lower-cost solution.

Eyal Rosenberg is CEO of Nipendo. He can be found on twitter @eyalrosenberg

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