Business process outsourcing: IT makes the call
IT needs to have a seat at the outsourcing table. And increasingly, business is welcoming the input
The writing is on the wall. If your company hasn’t outsourced an entire business process yet, bodies and all, there’s a good chance it will in the near future. According to IDC, worldwide spending on BPO (business process outsourcing) will grow to $641.2 billion by 2009, from $382.5 billion in 2004. Moreover, in the future, BPO won’t be limited to today’s typical segments, such as customer care and logistics; IDC expects procurement and training to grow in double digits annually. And companies that typically outsourced discrete processes, such as payroll, will increasingly outsource larger chunks of the business.
Does BPO simply fall under the heading of yet another factor outside of IT’s control? Or is there a definite role for IT in the BPO process -- from deciding which functions to outsource to choosing a provider, including all the negotiations, maintenance, and transitions that ensue? Think of it this way: If IT doesn’t have a seat at the table, it risks calamitous fallout from business decisions that gloss over technology implications.
Just about everyone InfoWorld spoke with, including major BPO vendors, their customers, and BPO analysts, agree that IT’s role in the BPO process is increasing. “For every $100 spent on BPO in 2003, approximately $12 was spent, on average, on IT related services,” says IDC’s Vipul Bhargava, author of “Who Let the Processes Out,” a report on the impact of BPO on IT. “We expect the IT services component to rise to $20 by 2008. If organizations spend more money on the IT component of BPO, then IT’s role in BPO will inevitably increase as well.”
Jack Caffey, managed services BPO solutions director at Hewlett-Packard, agrees. “Two years ago we might walk into an RFP meeting with a potential client and have to insist on speaking with the IT manager. The finance guy would say, ‘I thought you guys would handle all that.’ That doesn’t happen very much anymore. With all the questions around security, terms, and future strategy, they understand that IT has to know how we’re doing things.”
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One critical reason IT should be included in the BPO process is its long experience with outsourcing arrangements. “IT usually has much more experience with outsourcing than the business units, and lots of lessons learned that could be very valuable,” says Gartner Research Director Robert Brown. “IT best knows how to manage multiyear outsourcing contracts and relationships and how best to resolve problems that come up. And they have long experience making multiple outsourcing vendors work together.”
At the first stage of BPO, where the business actually decides what to outsource, IT still may not be invited. But that can be a costly mistake.
“It may make a lot of sense to outsource a certain process from the business point of view, but business owners are often not aware of which systems relate to which processes,” Bhargava says. “Certain processes may be so tightly coupled that it would be very difficult to outsource one of them. This can end up being a big pitfall if IT isn’t there to think about it from the beginning.”
