Ann All spoke with Stan Lepeak, research director for outsourcing advisory firm EquaTerra.
All: Your research notes that users are increasingly considering the quality of the BPO provider’s IT solution as more important to the overall success of a BPO initiative. Why is this? Did folks have bad experiences in the past? Or is it just an understanding that the right technology can be a cost-effective way to achieve process improvement?
Lepeak: I think it’s a little bit of both. I think there is a growing recognition when buyers are either looking at challenges they’ve had with their own BPO efforts or they are hearing from their peers about challenges they’ve had – that some of those challenges go back to the underlying IT solutions being deployed. That could be problems migrating to the service provider’s solution — which is frequently the approach taken in HR, for example – or it could be just a recognition that performing some of the process improvement work they’d like to do is very dependent on the underlying IT solutions.
I think there’s also a little bit of a contribution from the standpoint that some of the enterprise software vendors, particularly SAP, have been going out and trying to educate their enterprise software clients about how their platform is better for BPO, perhaps, than the competition. Or minimally, why it’s important to think about the underlying platform when you go into a BPO effort. I think in some respects the software vendors are a little concerned about being marginalized or being a little less important with a client looking at BPO. So they’re trying to do a lot of outreach and education to make sure that they are not reduced to a secondary status once the client begins an outsourcing effort.
Another point: We’ve seen a lot of general focus in the market over the past couple of years on where buyers are going with their underlying software solutions. In many cases, they’ve had their ERP solutions in for quite some time now, and they’re starting to look at where they are going to go with these environments. Perhaps they didn’t get the benefits they had hoped to when they initially implemented those systems. So I think it’s a renewed emphasis on “What’s the state of the enterprise platform?” And if you are pursuing BPO, is that an opportunity to make some improvements to that platform, fix some of the things you never fixed on your own. Or in some cases, is it an opportunity to offload some of the work around the platforms. I think there is just generally more focus on the ERP systems now than there was just a few years ago.
All: The three most critical attributes, according to BPO buyers, were: flexibility to adapt to specific buyer processes, cost efficiency to be passed along in added savings to the customer, and ease of use for end users. It seems a little unrealistic to expect to get the first two items on the list. Doesn’t adapting an outsourcing model to a customer’s specific processes tend to drive up costs?
Lepeak: I would agree, and I think it shows there are unrealistic expectations. I think part of it is, this was a survey of business people, and particularly senior business people. I think they know what they want conceptually, but perhaps from the perspective of how to get that from the IT solution, their expectations may be unrealistic either because they don’t have a background in IT or they are taking the kind of strategic, high-level approach where you think about what you want, but maybe not how you get there. One of the key underlying messages of the research is that the business should make sure the IT experts are involved so they aren’t making unrealistic choices or unrealistic assumptions.
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