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Dangerous Liaisons

Symptoms of Outsourcing Success

Agile Workforce, Agile Company

BPO providers are finding that technology is becoming the foundation of every major business process. Technology is now a crucial arrow in their quiver. One of the best ways to outsource technology is through the Application Service Provider (ASP) model. In their desire to service their clients totally, many BPOs are forming partnerships with ASPs so they can add ASP services to their product mix.

This is a great idea as long as BPO providers are aware of "the risks of getting into the ASP business," says Richard Raysman, a partner in the Manhattan law firm of Brown Raysman Millstein Felder & Steiner. Suppliers who ignore these risks could lose a hard earned customer because the ASP – whom they can't control -- did not perform. "If the ASP's standards don't match yours, you could besmirch your reputation," says the attorney.

Technical issues stand at the forefront of the problem. For example, site availability is a key issue for ASP providers, points out Raysman. The buyer is also looking to the BPO provider to deliver on the Service Level Agreements (SLA) like response times, which are in the ASP's bailiwick. "Your buyer can sue you if the ASP doesn't adequately provide the services promised," Raysman reports.

Interfaces can be tricky. Most BPOs want the client experience to be seamless; the client typically receives all the ASP services from the BPO's Web site. Raysman likens this relationship to private labeling. However, the interfaces have to work so the buyer has no trouble accessing what is in reality the ASP's Web site. Whose responsibility is that?

Because its buyer might have some specific and unusual issues to address, the BPO might have to add content to the ASP's site. The two parties have to address this additional work in their contract with each other.

SLAs Become Critical In The ASP/BPO Contract

BPO providers must address these issues in their contracts with the ASP. Raysman suggests including very specific SLAs for the ASP. If the BPO client expects the ASP Web site to be available 100 percent of the time, say so in the contract. Make sure the ASP's response times are correct. "The BPO has to match up what it promised to the buyer with the services it is contracting for with the ASP," the lawyer says.

Confidentiality is another issue that BPO providers have to worry about when dealing in the ASP world. Buyers typically share sensitive information with their BPO providers, especially in the human resources, tax processing, and finance and accounting areas. BPOs have never had to worry about accidentally sharing that information with anyone.

But when an ASP becomes involved, the situation changes. What happens if the ASP has a technical glitch and shares confidential data with the ASP's other clients? It is the BPO's responsibility to make sure the chances of this happening are zero. "The ASP has to honor client confidentiality," says Raysman firmly.

A Complicated Legal Web

One way to ensure mistakes like this don't happen is to create a dedicated Web site for the BPO client. Shared sites increase the chance that confidentiality can be compromised. In addition, shared sites could also affect SLA performance.

"It's a complicated legal web," concludes Raysman. Pun intended.

Lessons from the Outsourcing Primer:

• Adding ASP services allows a BPO to use technology in the client's business processes.
• BPOs run the risk of losing their hard won clients if the ASP doesn't deliver as promised.
• BPOs must make sure the services they promised the client are reflected in their contract with the ASP. Strict SLAs protect the BPO and should be included in the contract.
• Technology and confidentiality issues are the two major trouble spots.
• Dedicated Web sites remove some of the BPO risks.

Publish Date: September 2000

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Copyright © 2000 - Everest Partners, L.P.

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