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A new research study from HfS Research, sponsored by Accenture, examines the extent to which new technologies and platforms can help companies break out of their current business process outsourcing (BPO) situation, in which BPO is still basically transactional and operational in nature and rarely transformational.
The report, “BPO on the Brink of a New Generation: Technology Transformation,” is based on a survey of 773 BPO stakeholders—including enterprise buyers, service providers and advisors.
The survey results show that new technologies are already helping to create more efficient operations by streamlining the systems environment and reducing the number of systems involved, often standardizing the technology environment on a unified, centralized platform. However, high performers are also using technology in their BPO relationships to provide effective monitoring of performance, greater transparency, and innovations to fuel new generations of products and services.
The report concludes with the contention that both buyers and service providers need to “up” their game if they want to capture more BPO value through technology. The opportunities are there. Practical innovators have an opportunity to set themselves apart from the crowd.
According to “BPO on the Brink of a New Generation,” the old approach to BPO is running out of steam in today’s business environment. Among the survey results is the fact that half of today’s BPO engagements are trapped in a “lift and shift” operating model, essentially reproducing the same processes that BPO clients were managing pre-engagement at lower cost using labor arbitrage. Outsourcers may have selectively improved processes at a function-point level, but these improvements have had minimal transformational impact for most buyers.
The report examines technology tools and platforms as important business elements of breaking out of the old BPO model to capture sustainable business value. It examines buyers and providers’ perceptions of, and capabilities in, such tools and platforms as analytics, automation, mobility, social media and cloud.
The good news is that expectations are high. The report finds that about half of those surveyed expect that their BPO relationships in two years’ time will be focused on a wide-scale transformation of business processes enabled by technology. The report challenges buyers and service providers alike to step up to the challenge of leveraging tools and platforms to deliver on that transformational promise.
The following are some of the key insights found in “BPO on the Brink of a New Generation: Technology Transformation”:
Two-thirds of current BPO engagements remain focused on cost reduction alone, with existing processes “lifted and shifted” from the client to low-cost offshore delivery centers. Yet half of today’s buyers expect to undertake a wide-scale transformation of their business processes within the next two years through greater use of technology to drive higher-level business outcomes.
A small group of buyers that have already begun to leverage new technologies in their BPO arrangements are reaping much better results than those who lag behind. Among the benefits are: faster movement away from the “lift and shift” BPO model; greater optimization in higher-value areas such as analytical insight and innovative capabilities; and more standardized processes and workflows leveraging cloud technologies that reduce cost, improve quality and increase organizational agility.
Buyers view analytics as the technology with the most potential impact on their business. They expect their BPO providers to not only deliver services, but to be sources of both descriptive and predictive insights that can improve overall business outcomes. HfS believes that the current approach to analytics—driven by automation-light, labor-heavy analysis—will be replaced by a more integrated analytics engine when more powerful transformational processing platforms specifically designed to exploit analytics become the norm.
Buyers identified "automation" as a critical technology that can help them make the move to achieving value beyond cost reductions. Automation can be the means to reduce errors, enhance compliance, improve job satisfaction (eliminating repetitive, tedious tasks), achieve deeper analytical insights, and deliver “always-on,” 24x7 services.
Buyers are struggling to understand how to embrace the potential of cloud with their current BPO engagements. Chief among their concerns is the perceived loss of control and security – something that must be addressed by the BPO community.
Although buyers are placing greater importance on mobility, it must be deployed in the context of an overall enterprise mobile-enablement strategy if it is to yield the greatest value. Piecemeal, process-by-process approaches to leveraging mobility will only increase service fragmentation.
According to HfS, buyers will likely not see the full value of social media until much more sophisticated technology-enabled BPO platforms are in place that embed social as an essential element of the service rather than as a bolt-on. Social media has the potential to create new value in several ways: harvesting ideas and innovations; improving customer engagement; understanding and responding to feedback from the market; and enabling greater collaboration between the enterprise and service provider teams.
Phil Fersht founded HfS Research in 2010 and has overseen the growth and development of the organization to become the leading analyst authority and knowledge community for global business and IT services. He was the Institute of Industry Analyst Relations’ Analyst of the Year in 2011. Phil has worked at AMR Research (Gartner Inc.), leading the firm’s BPO and IT services practices. He also served as market leader for Deloitte Consulting’s BPO advisory services. In 2011, Globalization Today, the official magazine of the International Association of Outsourcing Professionals, named Phil to its first "Powerhouse 25" list.
Charles Sutherland is the executive president of research at HfS Research where he oversees the entire research agenda. He has been in the BPO marketplace for more than 12 years including roles as the chief strategy officer for SourceHOV and the managing director, growth & strategy for Accenture’s multi-billion dollar BPO Growth Platform. Charles lives in Southlake, Texas.
March 13, 2014
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