Concerns About SLA And Value Leakage In Outsourcing

All businesses are currently attempting to maximize their strategic growth while trying to lower costs and achieve greater efficiency. Managements from the most forward thinking and cutting-edge businesses now consider opting-out their HR operations to third parties. This has been done for a long time now with the Department of Work and Pensions in the UK whose website, The Government Gateway, is administered by Atos Origin, an international IT company. Similarly, Capita Total Solutions provides a storage solutions programmed for the DWP and another facet in Capita provides their HR solutions.

Specialized organizations such as Capita are able to focus on the role of specialized HR within an industry which itself is specialized, requiring a certain entry level for staff and ongoing training throughout their careers in order to reach key performance indicators in accordance with compliance targets. A third party taking over this particular function releases the main company to focus on its prime concern, reducing overheads and staffing costs while maintaining an adequate level of service. In order to provide legitimacy to the new outsourcing industry, Business Process Outsourcing sets off on a journey of transformation resulting in a tribunal business model popularised by the Ulrich Model of Business, thereby creating an ‘infusion’. So, if HR infusion fails and outsourcing is not all it’s cracked up to be, the whole BPO is re-transformed and ‘insourced’ back to the main business from where it originated.

Then, of course, we have the acronyms: the KPI’s and the SLA’s, or Key Performance Indicators and the Service Level Agreement respectively, whereby levels of service are appraised. Naturally, if, after a successful evaluation, the third-party delivers, further work will get ‘smart-sourced’ unless, of course, the ‘lift and shift’ fails, in which case the management would prefer to be kept in the loop in case of ‘value leakage’.

Basically, what seems to be happening is that large businesses are contracting out various services such as HR divisions in order to save money. The outsourcing companies quote them a price for the job which is then written into the contract and, to ensure the outsourcing companies deliver, they have to submit to a mutually agreed compliance procedure which is where the Key Performance Indicators come in. Naturally, if the outsourcing companies fail to provide a service in accordance with their contract, the management needs to know about it as soon as they can to minimize any further problems and the outsourced work needs to be returned to the main company and slotted back in somewhere.