I was part of a panel at the Shared Services and Outsourcing Network (SSON) conference in Orlando this week, moderated by Prof. Anthony Hesketh from Lancaster University Management School.
Tiger Tyagarajan, COO of Genpact, George A. Price Jr. sell-side analyst covering services at Stifel Nicolaus and I had a lively debate which brought out the tension someone like Tiger feels between delivering to “value” expectations of a financial analyst like George and the “value” clients expect based on advice from buyer advocates like me.
My view is BPO, particularly horizontal process BPO (finance, HR, procurement etc) is due for a major upheaval. The vision for BPO has always been to optimize the transactional metric end point – price per check, price per invoice etc. Somewhere along the way the industry accepted the albatross called “and do it with my existing system”. When I go to a restaurant, I don’t take my Weber grill along and insist the restaurant use that. I go there expecting industrial scale food equipment, economies of scale in their food and other procurement and for the finished product to be as advertised - wholesome, well priced, well served etc. But we have burdened BPO with existing Oracle or SAP’s annual maintenance, and all the associated hosting, application management, upgrade cost.
Does it matter how my payroll check or AP invoice gets processed so long as the cost, quality etc are attractive? To twist Larry Ellison’s words does the check have to smell of Chanel's latest or be in its shade of fuchsia or puce?
I talked to a few BPO providers after the session and the questions were what would you do? I would leverage the data center processing and storage efficiencies coming out of clouds. I would learn to leverage massively shared application management services and 5 minute upgrades coming out of SaaS world. Either partner with them or build your own. If the client insists on bringing their Weber grill in show them your industrial scale grill. Easier said than done – many customers are unwilling to write off their massive ERP investment and pay early termination fees to get out of bad hosting and AM contracts. Others will use their auditors as the reason – they have already validated our existing system.
Well, show them the financial analysis. In most cases you should be able to reduce the cost of the technology by 5X, if not 10X. Most reasonable business people will find that attractive. But you have to step up and show you can do it, not just keep supporting the status quo path.
And if the client still insists on continuing with the legacy technology, please don’t call it BPO. Call it what it is - Business Task Outsourcing. You are touching a very small part of the business process – and frankly opening the door for someone disruptive to come along and optimize the entire process at the fraction of the cost.
BTW – Alan Alper at Cognizant recorded some more emerging BPO trends in this video with Ramesh Ramani, who leads Cognizant’s BPO efforts for the bank and financial services vertical and me.