How are buy-side attitudes driving the evolution of the BPO space?
NelsonHall recently interviewed 500 sourcing managers on the future of BPO and found that the current economic environment continues to have a strong net impact on driving increased use of BPO. For example, in the banking sector 53 per cent of organisations expect to increase their use of BPO, roughly three times the proportion (18 per cent) expecting to decrease their use of BPO.
While organisations continue to be constrained by the climate of business uncertainty, lack of management bandwidth, and low appetite for capital spend, they have a considerable increase in appetite for greater organisational agility, standardised processes, and a variable cost structure.
So what does this mean for the future of BPO? Essentially it means that long-term, high-investment activity is out and incremental, short-term quick wins are in. It also means a more joined-up approach to delivery and governance. So organisations are increasingly moving towards mixed economy models combining in-house and third-party services within a Global Business Services structure, governed by client single-process owners. This creates incremental opportunities for BPO to move along the value chain in a relatively plug-and-play manner driven by capability, who does what best, the need for standardisation, and the need for new “edge” process roll-out.
The mechanisms for delivering BPO are now well-established, with the majority of vendors going down a path that involves:
- Benchmarking processes to understand relative levels of organisational process maturity and business value drivers.
- Increasing standardisation of processes (preferably on service roll-out).
- Global sourcing.
- Use of technology enablers to enhance the process functionality inherent in core client systems, surround technology for workflow, dashboards and process analytics.
- Lean for on-going and one-off process improvement.
The only question that really remains is the relative maturity of individual vendors in applying this approach and acquiring the necessary enablers for each individual domain. So while this approach is increasingly mature for horizontal processes, such as finance and accounting, vendor maturity is so far much lower in industry-specific domains.
But where do the buyers perceive the value to lie within this approach? A recent survey of banks shows that sourcing managers perceive the greatest value to lie in global sourcing i.e. the much-maligned offshoring, incorporation of business metrics into process dashboards, and standardisation of processes prior to BPO service roll-out. These are followed in terms of perceived value by use of BPaaS technology enablers as part of wider BPO service, and identification of key levers for driving process excellence.
Perhaps not surprisingly, organisations continue to place little faith in benchmarking in quantitative terms but regard it as a useful broad-brush indicator of relative process maturity. Typically organisations are more interested in the fact that suppliers can increasingly get straight to the key value levers and address them rather than precise quantitative comparisons with other organisations.
About the Author
John Willmott is the CEO of NelsonHall.