BPO Grows As Companies Look To Save Money

Going outside the organization for advice on fixing a problematic business process is anathema to some executives

Rusty Weston, Contributor

May 14, 2004

2 Min Read

Going outside the organization for advice on fixing a problematic business process is anathema to some executives. Perhaps it's threatening to their power base. Can you blame them? The idea that someone else can execute a business process more efficiently or for less money is hardly comforting.

Along comes business-process outsourcing, the hottest growth area in the outsourcing space. No longer relegated exclusively to IT or payroll checks, BPO includes a wide spectrum of back-office and customer-facing functions, such as accounts receivable, data processing, customer analytics, tax processing, and legal and equities research.

Customers can save from 15% to 40%, according to vendors and market-research firms. But savings alone rarely justify the effort. The quality has to meet or exceed what customers could achieve with their own employees.

Business FocusMany companies evaluating BPO don't examine whether the business process is ready to be handed off to a third party. Is the process well-documented? Is it broken, in that quality of service is inconsistent or delivery costs are unacceptably high?

BPO will undoubtedly propagate the concept of the virtual enterprise, in which companies hire third parties to build and operate a significant facet of their service offerings. It's an easy way to launch a service without having to make substantial up-front capital investments in people or infrastructure. Bank of America, Citibank, IBM, General Electric, and others have made investments in BPO or acquisitions of providers that may spur even more activity.

CMP Media recently introduced a monthly newsletter for global-sourcing managers and project leaders, called Managing Offshore. You're invited to download the first issue, which is free, at managingoffshore.com.

Is your company planning to engage in BPO activities this year? Let us know at the address below.

Rusty Weston
Editor, InformationWeek Research and Managing Offshore
[email protected]

Reversal Of FortuneReversal Of Fortune

Will your company take back outsourced or offshore-outsourced functions this year?

A key issue for Indian business-process-outsourcing providers today is the sustainability of growth in BPO-related call centers. Providers are hiring and training tens of thousands of well-educated workers to staff call centers in Bangalore, Mumbai, and Chennai. However, canceled contracts by American and British customers increasingly are becoming a concern, given the economy's dependence on business-process outsourcing as an engine of growth.

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