While the BPO market continues to grow, how
do you ensure outsourcing will work for you?
According to IDC, worldwide Business Process Outsourcing spend has grown from $380 billion in 2004 to $640 billion in 2009. Clearly BPO is more than just a passing trend – but what continues to spur demand and how is the market changing? Corporations the world over recognize that non‐core activities contribute to the wrong side of the P&L. The BPO market was born on this premise, and has produced some truly huge outsource contracts in the last decade. Companies asked themselves, ‘Why are we investing in capital systems and spending resources on this when we could have a specialist BPO supplier take on the process on a cost‐per‐task basis?'
But outsourcing isn’t just about taking call centers offshore ‐ it’s about handing a complex process to a service supplier and gaining some added value. Indeed the offshore bubble may be about to burst in India, for example, with Gartner warning that skills shortages, cost, quality and security issues may erode as much as 45 percent of India's market share. So where will BPO find growth over the next five years?
Changing demands
There's a shift towards smaller, niche suppliers. Customers are demanding greater added value and flexibility from their BPO partners, and are therefore beginning to migrate to more specialist companies. Often this will involve outsourcing a single process rather than a whole department, therefore suppliers need to be nimbler and more flexible:
• Cost reduction is not enough ‐ buyers should expect to see an improvement in the process itself, requiring the supplier to have specialist business and process knowledge.
• Companies want better management of their intellectual property. They want to build a working relationship with their supplier in order to improve security and trust.
• Flexibility is critical – suppliers must be ready to adapt to fit with clients'
operations, and not expect long‐term, fixed contracts. Buyers expect to be able to outsource smaller, specialist processes and seek options such as ASP, mobile working and hosting services.
• The process that is outsourced will change as the business requirements change or new regulations come into force. The supplier needs to adapt to this changing landscape and not penalize the customer via excessive change fees.
More than just managed applications
The days of simply outsourcing a business application to a BPO supplier are numbered. Handing over an existing software solution to be run by a third party adds little or no value – it may be possible to switch operations offshore to reduce labor costs, but it does not benefit the organization as a whole process.
Customers today are looking for specialists that can offer technologies that can cut costs without resorting to offshoring. They are looking for suppliers that own the technologies, bringing further value ‐ if they need to tweak the processes or add functionality for a client then this makes it much easier. Organizations that use outsourcing services do not wish to pay excessive fees for change. Ideally, a BPO supplier will offer skills and experience you may not have yourself – it's not about throwing cheap labor at a task – the process may be non‐core but you want to improve it, not trash it. For example, some airlines outsource the processing of passenger flight tickets and use secure hosted archives to access the ticketing information. Does the supplier have experience with this type of task? Can they provide the necessary audit trails, compliance standards and service level agreements? Can they add value to the archive, allowing it to add value back to the business?
The emergence of BPO suppliers that use their own technologies (and understand how to optimize the business process) has blurred the lines between developer, integrator and outsourcer, to the benefit of the customer. It's now possible to pick and choose which parts of the technology to run in‐house and which to outsource. A single supplier for the whole solution brings the obvious benefits of supplier accountability.
Who's looking at your data?
One of the major barriers to outsourcing has been security. Keeping data secure can be of paramount importance. Clients are often dissuaded to outsource mission critical processes as they do not want to lose control or sight of the data, particularly if it is legal, financial or customer oriented. This is a valid concern, with recent cases highlighting the pitfalls. Clearly, security has yet to reach the top of the agenda for some suppliers. Before trusting sensitive customer data to third parties, organizations should satisfy themselves that their partner's data security is not just good – it must be excellent, it must be demonstrable, and preferably certified.
Bending over backwards to help
Customers want to work with BPO partners that can offer them the flexibility to change and adapt their processes according to their needs – your business does not stand still, so why should your outsource deal? Clients no longer want to be roped in to long‐term, inflexible outsource agreements: the days of the mega outsource deal are over. Clients are looking for outsource partners able to provide a range of solutions and services that fulfill today's requirements and can change according to business needs.
Flexibility extends to offshoring: many customers recognize the cost benefits but are reluctant to outsource processes to Asia – there are many risks associated with moving processes to another continent. The smart money is now looking at the on‐shore market. Companies looking to outsource a process or group of processes should consider the significant list of benefits.
How to find the right Client/Supplier fit
With customers demanding greater value, seeking to reduce risk, asking for service guarantees, increased security and greater flexibility, who'd be mad enough to be in the BPO game? Suppliers will need to adapt to survive ‐ specialization is the way forward. Suppliers must know their market, be able to control the technologies they use and minimize the risk to their clients.
For the clients, procuring the right outsource provider must be a strategic process. It’s important to have an open dialogue from the onset. Use your best people within the procurement team, and to ensure continuity, the same individuals must continue to manage the retained business. Set timescales realistically and don’t cut corners just to get a quick win. It is more important that the agreement will work operationally as well as legally. Above all, ensure there is a cultural fit. If you are looking to transform your business operations through process improvement you will need to look for the ‘soft’ benefits. Don’t just chose a supplier that can hit your SLA’s (after all, SLA’s are only a set of minimum standards to comply to). Look for a supplier that can also provide the ‘soft’ benefits; market knowledge, specialist processes, increased flexibility and security best practice. IDC is the premier global provider of market intelligence, advisory services, and events for technology markets
Worldwide and U.S. Business Process Outsourcing (BPO) 2005‐2009 Forecast: Market Opportunities by Horizontal Business Functions
Staff Attrition May Stall the Offshore Call Center Boom
About Extend Outsourcing Services
The Extend Accounting outsource operation provides a business process outsourcing service focused upon delivering highly efficient, high value business processes. The operation started in Silver Spring, MD in 1983 and has grown to offer diverse services across to many industries throughout the United States. Extend Services:
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NVOICE Our Extend Invoice solution optimizes process performance in financial departments and business units, enabling your organization to focus on creating added value for your clients. With Extend your business can automate the entire invoice‐handling process, including paper‐based and e‐ invoicing data capture, invoice‐purchase order matching, review and approval workflow, and payment transfer.E
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EMIT Our Extend Remit solution leverages our payment‐processing economies of scale to eliminate the high costs of paper check processing, reduces labor, alleviates check fraud and facilitates positive cash management. Additionally Extend makes it easier to transition your vendors to ACH payments, provide detail remittance information and issue secure positive pay files.E
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TILITY Our Extend Utility solution enables your organization to optimize energy costs with extensive invoice audits, line‐item utility usage capture and robust reporting and analysis. Establishing an energy management plan and implementing cost‐effective energy conservation opportunities can contribute significantly to your bottom line.E
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OCUMENT Our Extend Document solution eliminates your paper management hassles on Day 1. Our solution provides your organization with a transactional audit trail and rapid access to documents and their histories. Its focus on efficiency enables you to comply with mandatory legislation and achieve a return on investment.
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URCHASE Our Extend Purchase solution enables your organization to optimize the buying process, saving time and money. By introducing organized procurement processes, you’ll have a solid foundation in place for improving the rest of the purchase process relating to receiving goods and automating payments.E
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UPPLIER Our Extend Supplier solution is an information portal for the receipt, processing and recording of supplier invoices. The system enables suppliers to enter invoices directly into the portal (as applicable) and follow the status of invoices throughout the entire process. The portal allows for more efficient communication between supplier and buyer and simplifies the entire process for your AP staff as well as for your suppliers.E
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ROFESSIONALS
ERVICES Our Extend Professional Services team provides design and implementation know‐how utilizing over 25 years of experience . This experience provides value add throughout the implementation process with key significance during the design stage leveraging in‐ depth knowledge of Procure to Pay systems and processes. As operators it is our business to build and operate the most efficient systems and solutions.E
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NALYSIS Our Extend Analysis solution provides financial and non‐financial metrics to quantify objectives and reflect the strategic performance of your organization. These metrics serve as the active link between strategy and operational performance. Extend enables you to gain real improvements in quality, productivity and customer service.E
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ERVICE Our Extend Accounting Full‐Service solution allows organizations to benefit from best‐in class service solutions and extensive process expertise. Our shared service/outsourced business model has demonstrated that organizations can lower their accounting costs while maintaining—if not improving—quality and customer service. Our Extend team will work with your organization to identify a service package best suited to your business needs.
