Business process outsourcing has become not just the hottest trends but also the undeniably intelligent thing to do in organizational structuring. Every BPO engagement begins with the design that another company can perform a certain business process better than you can. Unfortunately, proving the premise is often left to the wind. Estimates state that four out of five business process outsourcing (BPO) contracts inked today will need to be renegotiated within two years. And 20% of all such contracts will collapse.

However a failed BPO arrangement can be avoided if companies carefully analyze the nature of the processes they are outsourcing and establish the right contractual relationship with their vendors. Ensuring that there is consistent communication and following the recommendations listed below, any organization can boost the effectiveness and efficiency of their current or upcoming outsourcing relationship.

1. Streamline internal business processes before moving to an outsourcer. There is an age old adage -- if you automate a mess, its still a mess. If you can simplify your processes, it becomes easier to negotiate the deliverables with a particular partner organization.

2. Ensure a provision for change management. Processes and organizations change all the time. Providers must demonstrate the ability to adapt their staffing and infrastructure capabilities to scale up or down depending on a customer’s needs at any given time.

3. Employ a third-party consultant to help define desired business outcomes and the metrics that will measure them. Be clear about your business requirements and what you expect your outsourcing provider to provide.

4. Create watertight contracts which would focus on service level agreements unique to your business, change management, data security, business continuity and disaster recovery.

5.Often incorporating financial incentives to the BPO provider to meet or surpass the outsourcing relationship goals ensure a marked increase in the productivity.

6. Focus on BPO providers with deep domain expertise. Having a BPO provider with domain experts ensures you are gaining operational efficiencies, the needed guidance, and skills.

7. Use sophisticated business-oriented metrics to measure effectiveness of BPO programs. Productivity can be measured by using either output metrics – such as the time suppliers take to respond to requests – or by input measures, such as cost.

8. Relationship management also is the cornerstone of a BPO engagement. Provide for a governance model that requires structured meetings, so there are regular opportunities for customers and service providers to meet and work on issues, even if there aren't any.

9. Prepare for political upheavals. Political risks associated with offshoring business processes can be managed through the purchase of specialized insurance, or through arrangements with providers that offer service in more than just one country.

10. Ensure the vendors financial stability. An established BPO vendor will have the financial resources to deliver reliable service and to absorb some of the administrative and transition expenses associated with new engagements.