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In fact, BPO vendors have begun bulking up on best-of-breed software assets for their delivery platforms. For example, IBM recently acquired a company called Equitant, which had software assets and expertise in finance business processes, including working capital management, collections, credit, and invoicing.
IBM’s Schulman says the company has also built analytics tools internally, such as software that can audit outsourced employee expense reports to flag questionable items.
“It actually knows how much it costs to take a cab in New York City, so we know whether or not [the employee is] taking advantage,” says Schulman. “If you build out a robust tool like that you can save 10-15 percent on the total travel and expense budget of a corporation.”
Inside the black box
How much can enterprises actually influence which technologies or standards a BPO vendor uses on their accounts? In some cases, says HP’s Schwarz, BPO is simply a wrap-around to existing IT systems.
“There tends to be a reluctance to go off your ERP for these functions,” Schwarz explains. “In a sense, BPO is all about bolt-ons to ERPs, which allow us to provide more efficiency: business-logic types of software, better workflow, software that could take an aggregate look at a company’s customers over various business segments.”
For some regulated processes, customers may legally be required to know the inner workings of a BPO vendor’s system. “One of the challenges,” says UPS’s Long, “is being able to prove that we have processes and supporting technology that can meet or exceed our customers’ auditors’ internal-control requirements.”
But in other cases, notes Deal Architect’s Mirchandani, customers won’t be able to pry open the BPO vendor’s black box. Enterprises may specify standard interfaces and most vendors will use common processing engines. But some won’t, says Mirchandani. “It’ll be like a sausage factory. Do you really want to see what goes on there?”
IBM’s Schulman argues that at a certain level of the stack, as long as the interfaces are based on open standards, the innards may not matter. “At an application layer,” he says, “talking about features and functionality of how you process a general ledger transaction or a benefits administration transaction, the technology piece becomes less important. That’s not where the value lies. It’s in the process you’re providing, not the technology.”
Wipro’s Garnick agrees. “We see an emerging trend where customers are agnostic on the platform. They’ll come to us and say, ‘We need this output; it’s up to you what system you deploy to run on.’ ”
When major enterprise processes are outsourced, what will be the impact on IT? “Suddenly you lop off a major transaction-processing system and all you get is input and reports,” Deal Architect’s Mirchandani explains. “That ... drives certain CTOs nuts. They’ll essentially be getting results and need to monitor how that analytical stuff flows into other apps that are still owned by the organization.”
Mirchandani predicts that the role of the CIO “will become huge” in this new BPO world, as the art of vendor management and crafting SLAs begins to assume even more importance. “But not necessarily the techies,” Mirchandani adds. “The nitty-gritty IT person will lose quite a bit of power in this whole process.”