by Anoop Sagoo,

How IT is reinvigorating business process outsourcing

Sep 05, 20124 mins
IT LeadershipIT Strategy

Business process outsourcing (BPO) can be a cutting-edge practice. Yes, really.

This may well be a shocking statement to some, given that BPO has been a standard operating procedure at many companies for more than two decades, but for those CIOs prepared to take a fresh look at what they do, it is now possible to uncover significant additional value.

There was a time when BPO was simply about saving money. Today, while efficiency is still a driver of outsourcing deals, the most forward-looking companies also want to realise a number of other benefits – business insight, innovation and industry expertise, for example – that will deliver strategic business impact.

How, though, to achieve those goals? A new study of best practices in BPO from Accenture, conducted in association with the Everest Group and the London School of Economics’ Outsourcing Unit, considers exactly that question. One important lesson to draw from companies already getting the greatest benefits from BPO is that it’s crucial to make better use of technological developments through the services provided.

Just add technology

Some 40 per cent of the companies identified as BPO high performers in the study consider the technology provided by their service provider as an important component of their relationship, compared to only 27 per cent of companies whose BPO performance is considered typical.

The key is to use technology in BPO as a source of innovation and competitive advantage. There are many examples of this:

Analytics applications:These tools can be real drivers of value when built into a BPO provider’s services. They provide real-time insights into a company’s operational performance in a range of areas, and can be used to predict trends. Consider for example customer retention, where analytics tools can help businesses segment clients into demographic or geographical groups in order to identify specific needs or interests on which to focus by introducing a new service or improving their customer support experience. BPO service providers are also in the right position to identify and monitor the performance of their client companies on a wide range of metrics – tools that process and channel this data will add further value. Forecasting tools: BPO services may incorporate applications that give companies a much clearer view of the location and variation in potential demand across their businesses, and, for example, generate substantial improvements in supply chain management.

Technology innovation:BPO service providers should have the scale and experience to develop new and valuable proprietary tools that businesses themselves would never come up with alone, implementing new ideas that can result in improved business results. These may at times be relatively minor applications – a tool to identify invoices that have been paid twice, for example – but provide process improvements that could not be achieved by businesses operating without this support.

Automated disclosure:Some BPO services offer technology tools to automatically disclose key information to the client company’s key stakeholders based on a set of agreed rules, thereby improving transparency and building trust.

Underneath the refresh

None of these facilities have traditionally been associated with cost-driven BPO, but each of them offers CIOs the possibility to generate tangible business outcomes such as improved use of working capital alongside the efficiencies with which many organisations are much more familiar.

However, businesses will have to make some adjustments in order to capture such potential. One is technological: in order to make the best use of BPO services, especially as they develop over time, a switch to cloud-based computing will likely be necessary. Cloud offers increased flexibility and provides organsations with access to key technologies without having to incur the costs of building and maintaining the infrastructure themselves.

More fundamentally, CIOs will need to begin thinking about their BPO service providers in a different way – as business partners rather than the suppliers of a commoditised technology solution. In practice, only those providers who have really detailed knowledge of their clients’ needs and access to their most sensitive data will be able to offer a full range of BPO tools, particularly in areas such as analytics and performance measurement.

That will require high levels of trust on both sides and a much closer working relationship. Get it right, however, and the prize is a valuable one: BPO services that generate competitive advantage as well as cost savings.

About the author:

Anoop Sagoo, BPO cross-operating group lead, Accenture