Enterprises must be careful to understand the difference between the hype surrounding BPO and its actual business benefits, according to a Gartner study.
Posted Aug 23, 2006
So what's all the hype about? That's what C-level executives might be asking themselves when their quarterly outsourcing numbers role in. Despite all the publicity that business process outsourcing (BPO) has received in recent years, a new Gartner report predicts that 50 percent of organizations involved in BPO relationships will experience cost overruns and unacceptable service delivery quality through 2009. The problem lies with enterprises not understanding which BPO markets are mature enough to match their hype, according to the report.
"It's clear that buyers across the market are experiencing consistent and pervasive hype concerning which processes and service providers can truly deliver on the promise of business process outsourcing," says Lisa Stone, research vice president for Gartner.
According to the report, "Hype Cycle for Business Process Outsourcing, 2006," certain BPO markets more mature than others. While the outsourcing market for banking and comprehensive finance and accounting (F&A) are both far from mature (each is more than five years away, according to the report), others such as the contact center market are reaching peak maturity, and can pay big dividends for companies when leveraged right. These are the considerations that companies need to take into account when considering outsourcing, says Matt Goldman, research director for Gartner. "When these markets do mature, they will assert a pervasive influence on basic service delivery approaches for their sector."
Contact center outsourcing, which is expected to plateau in less than two years, appears capable of reaching maturity within in the foreseeable future and has a high potential for delivering business impact. Because these services improve or drive business functions for interacting with customers, partners, and suppliers, when driven by the provider's expertise and industry-specific capabilities, contact center outsourcing can deliver on the promise of BPO. "Organizations that have adopted a multichannel, multidomain contact center and realized its effectiveness should only investigate outsourcing those functions or channels that aren't economically viable for them to maintain," Goldman says. "Midsize and smaller organizations that need to appear bigger than they are should investigate contact center outsourcing or globally delivered [offshore] contact center outsourcing as a potential solutions."
Whichever is the case, Stone says the key to a company making the right decision when it comes to BPO is a well planned and thought out choice. Stone says companies should tackle BPO in the same manner they undertake any business venture: by developing a business case by identifying the drivers behind why BPO is being considered, constructing a business strategy, and considering and then selecting the approach that is best for entering into a BPO relationship. "Companies need to set up a BPO strategy in order to block out the hype and determine the best offering for them to achieve their goals," she says. "Then use a structured sourcing process through vendor evaluation, contracting and negotiating, and creating an internal management support team to ensure that all details are in place to support the service before signing an outsourcing contract."
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