Nearshore Americas

Knowing When BPO Engagements Are Going to be a Train Wreck

What are the biggest red flags that should scream out to you that your BPO partnership is headed toward a brick wall? Even though it is an overused cliché, it is a very fitting one: Strategic outsourcing is like a marriage, and it pays to know what you are getting into. It’s not even enough to rely on an outsourcing partner’s good reputation if they are not a good fit for your company’s culture or your specific needs.

Once a small, growing provider took on a very prestigious and storied client with a rich history. They considered it an honor to have such a client and were very eager to accept the engagement. Literally days before the largest and final payment was due, the client went into liquidation bankruptcy and the provider was faced with absorbing huge losses. Had they conducted a detailed financial analysis, the precarious position of the customer would have been revealed in advance.

Not only is it important on the provider side to know your clients can pay, it is just as critical for buyers to know your providers are stable enough to deliver – and that they have the size and capability to absorb any unexpected expenses or losses that they may incur. Conducting due diligence applies to all aspects of a potential provider’s operation.

Does the provider have any lawsuits, current or historical? It is inevitable that large, global corporations will be sued by someone, somewhere. But what is the context? Are there questionable circumstances or signs that point to a problem in the corporate culture? Do they have a legacy of canceled contracts or unhappy customers? Don’t rely upon them to present this information to you, do your homework. The less homework you do, the more likely you will encounter surprises in your engagement.

‘Nickel and Dime’ Mentality

It is only fair to pay for services contracted for and rendered, but if you have the feeling that your provider is looking for every reason to pad the billing, then it may point to a bigger problem. There could be a personality clash between key people, an ethical problem, or often the case is financial difficulties on the provider side has the provider scrambling for cash flow and pushing the limits of ethics to maximize billing – beyond either the letter or the limits of the engagement agreement.

High Turnover

Are you constantly dealing with new faces at your outsourcing partner? Do you find that people don’t seem to stay in the same position for long or that an unusual amount of team members are jumping ship?  This can point to trouble brewing at your provider that has not yet become public. It could be anything from a pending merger to financial difficulties that have not become public, or even simply bad management and an unattractive, uncompetitive workplace. At a minimum, this can be disruptive to your engagement and diminish service levels. At worse it could signal impending doom at your provider.


As businesses are fundamentally groups of people with a (hopefully) common alignment of purpose, an engagement will not go well if the key people – at all levels, do not get along well. This does not mean that they must be jolly friends, but it does mean that the two sides must work well together as one team. If there are multiple points of interpersonal friction it is bound to affect engagement performance and can lead to very serious problems. A sage and seasoned insurance executive once stated:  “At the end of the day, a whole lot of lawsuits could be avoided if someone simply said “I’m sorry, let’s work it out.” Both sides must demonstrate a willingness to work together and if this is not happening, get the highest level executives on both sides involved as well as outside help, if necessary, to put an end to the soft problems that can soon become hard problems.

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This boils down to the old saying: “If it doesn’t make dollars, it doesn’t make sense.” If the BPO engagement is not showing tangible benefits, and measuring up to goals and KPI’s that should have been clearly delineated at the beginning, there is likely no business case to extend the engagement. Even if the motivation is other than cost savings, such as qualitative factors, flexibility, or specialized expertise, the success factors of the engagement must be measurable or demonstrable at some point.  A lack of metrics is a lack of accountability. If your BPO provider is not measuring up, or if you are not getting the benefits that motivated the engagement in the first place, then a re-evaluation is in order to either fix what might be broken, or come to an amicable conclusion.

This article was first appeared on NSAM’s sister publication BPO Outcomes.

Loren Moss

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