BPO Outsourcing Outlook Looks Strong, But...

Arthur Cole

What exactly does 2007 hold for the Business Process Outsourcing (BPO) industry? That subject is on the minds of many these days, judging by the number of studies that have come out recently.


Diamond Management & Technology Consultants, for one, says enterprises are likely to continue to outsource significant operations, but are looking for greater leverage in terms of managing effectiveness. It noted that last year's study revealed that nearly half of buyers experienced "abnormal contract termination." And if the pace of outsourcing remains constant, or even increases, look for a number of operations to be brought back in-house.


Regardless of which operations are outsourced, expect enterprises to scrutinize potential providers much more closely than in the past to ensure compatibility of applications and IT infrastructure, according to the latest report from EquaTerra. Respondents to the survey report that IT capability is at the top of the list in factors that make a successful outsourcing operation and that developers looking to foster hosted services need to have a clear vision of what BPO entails. Look for some of these ideas to work their way into the OpenDoor human resources outsourcing (HRO) initiative EquaTerra recently started with ARINSO and SAP.


Many Indian outsourcing providers, at least, are looking forward to slowing economic conditions in the West in the hopes that it will lead to even greater off-shoring as firms look to trim employee costs. This article quotes some top execs at leading outsourcing firms talking about a return to pre-2005 activity levels, provided the run-up to the presidential elections in 2008 doesn't gin up a lot of resentment of foreign workers. Look for pressure on the Indian government to trim taxes that the industry says are detrimental to the outsourcing industry.


Consultants and studies are certainly helpful, but there's nothing like hard economic activity to get a handle on what the future is likely to bring. That's why we noticed this little article in All Headline News describing a Manilan real estate firm ponying up more than $30 million for new office space geared specifically toward outsourcing firms. The group is banking on reported increases in call center, accounting and transcription services in the 20 percent to 30 percent range.


Still unclear in all this overseas activity is what impact investments in buildings and infrastructure will have on rates. Is it possible to imagine that as the industry comes under pressure to recoup its initial start-up and expansion costs that rates could actually rise, making the whole idea of outsourcing less appealing?

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