A new InformationWeek survey takes a look at enterprise use of business process outsourcing and reveals a mixed report card. While the market for BPO globally continues to grow at a healthy pace, we are beginning to see some of the growing pains associated with such rapid expansion.
More than seven out of 10 companies surveyed are forging ahead with BPO initiatives, even as a sizeable minority expresses dissatisfaction with results.
This dissatisfaction emerges particularly in the area of staffing quality
When it comes to performance declines, it's people issues that keep readers awake at night. Underscoring the difficulty of retaining staff and management in BPO operations, especially in specialized areas, the difficulty of assigning and retaining quality staff for projects was cited by 32% of respondents, with retention of key people assigned to accounts coming in a close second, at 28%.
Clearly, a relentless focus on lowering costs combined with currency effects and high demand for labor in certain sectors is running up against the desire for companies to have the best staff assigned to their projects. The cliché "you get what you pay for" comes to mind ... simply put, BPO isn't as much of a bargain as it once was.
The survey also highlights one of the continuing areas of concern for BPO providers. As the mainstream BPO lines of business drive towards a market of commoditization, with pressured margins, how do service providers differentiate their service/solution in meaningful and recognizable ways? An approach that some providers are taking is to promote the transformational or value-adding capabilities of BPO.
Perhaps even more interesting is that another small cadre of companies surveyed sees BPO not only as a cost-cutting tool, but as a way to push strategic agendas, such as transforming processes or increasing revenue.
Nevertheless, companies continue to pursue BPO first and foremost as a cost-saving endeavor.
Perhaps the most interesting data point from a BPO vendor perspective centers on meeting agreed-on metrics, cited by 38% as the biggest area of improvement respondents would like to see from their BPO providers. Vendors may get a leg up on rivals if they can consistently deliver on their service-level agreements.
The survey also looked at the challenges to broader adoption of BPO. With outsourcing becoming an increasingly mature solution, any meaningful increase in the amount of outsourcing has to move beyond the self-imposed limits and barriers with which companies have become comfortable. Areas where the opportunity for growth exist include:
- Outsourcing larger task
- Outsourcing front-end tasks
- Outsourcing core competencies
- Migrating work from offshore captive sites to offshore outsourcing
- Blended outsourcing wherein the vendor takes over an entire discrete process, from IT systems and execution to driving future innovations and improvements.
- Outsourcing knowledge-based work
As the mainstream BPO solutions, such as F & A, financial operations, and customer care, become subject to more of the dynamics that a commodity market creates, it will be increasingly important for service providers to stake out ground in some of the higher value add arenas to maintain the margins to which they have become accustomed to.