Cloud computing and business analytics are set to inject new life into the business process outsourcing (BPO) sector through reduced upfront costs and better use of the data.
IT-enabled BPO is big business, but IT’s role is largely as an enabler of efficiencies. The IT infrastructures that support BPO can be fine-tuned to cut costs, but the best-performing BPO deals are using IT to innovate.
Recent research from Accenture revealed that only 20% of BPO projects “are delivering sufficient business value to be classified as high performance”. The findings from the research, which was completed in conjunction with the Everest Group and the London School of Economics, also revealed the changing role of technology in BPO.
The survey questioned 263 buyers of a range of BPO services such as finance and accounting, procurement, human resources, and supply chain.
The report also validates eight best-in-class practices that are strongly correlated with high-performing engagements. These include using technology as a tool for innovation rather than just the infrastructure.
Anoop Sagoo, products industry BPO lead at Accenture, said cloud computing and data analytics are two technology areas that are currently offering businesses the opportunity to get more out of BPO.
He said software-as-a-service (SaaS) means businesses can introduce the applications used in BPO agreements without the need for large upfront payments: “Best-of-breed technology is now readily available and easy to apply.”
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Sagoo added that the early parts of BPO agreements are usually loaded with costs associated with technology.
In the past, a business would have to buy licences and install heavy-duty business applications as part of a BPO deal, but today they can sign up to cloud-based services and easily scale up and down the number of users. “It allows you to set up and run technology with a different total cost of ownership [TCO] model.”
Technology is also providing increased value from BPO relationships. The use of the latest business analytics software enables businesses to get more from the data being handled within BPO relationships. “Analytics is the big focus on technology in BPO at the moment,” said Sagoo.
Mark Lewis, head of outsourcing at law firm Berwin Leighton Paisner, said if the cloud is to offer massive BPO savings through platform-as-a-service (PaaS), BPO suppliers need to invest in cloud platforms.
“Otherwise it is the public cloud route you have to go down. If you use a private cloud, with virtualisation behind your firewall, you still need to buy licences,” he said. “It would be interesting to see how many Fortune 500 companies are willing to move all or some of their processes to the public cloud.”
The Accenture research also revealed:
- 85% of high-performing BPO engagements consider the service provider to be a strategic partner, compared with 41% of typical engagements;
- 75% of high-performance BPO engagements involve senior leaders from both parties spending time to understand each other’s objectives and strategies, compared with 33% of typical engagements;
- 90% of the high performers reported that the client and provider were able to productively resolve conflicts – this was true only with 44% of typical performers;
- 77% of high-performing BPO engagements have successfully executed change management plans, compared with just 34% of typical engagements;
- 85% of high-performing engagements proactively refine their objectives as the relationship matures, compared with just 40% of typical engagements;
- 67% of high-performing engagements include business benefits beyond cost in the business case, compared with 26% of typical engagements;
- 58% of high performers will consider service options with greater value, even at higher costs, compared with 31% of typical performers;
- 56% of high performers seek competitive advantage through BPO, while only 28% of typical performers aim for that goal;
- 64% of high-performing engagements place more focus on capturing other benefits as they achieve cost reduction, compared with 40% of typical engagements;
- 54% have contract performance incentives in place, compared with only 24% of typical performers.