My friend Phil Fersht says:
“Cloud BPO” is, simply put, really a load of nonsense in today’s environment. The core fulcrum processes of BPO are the toughest to move into the Cloud, and only the small-to-medium business sector is going to enjoy any modicum of success of moving genuine “BPO” processes, such as finance and HR, into the Cloud in the near-term. And this is mainly with very standardized and straightforward Internet-hosted apps (i.e. simple interface, no integration requirements), as opposed to genuine Cloud-enabled ERP apps that leverage IaaS/PaaS/SaaS architecture.”
It’s not Phil’s intention, but basically he just wrote a brochure for incumbent on-premise apps software vendors, hosting firms, systems integrators who focus on release upgrade projects and offshore apps management. Those four categories of spend cost most companies upwards of $ 1,000 a user a month. If that cannot be lowered to the sub-$ 100 benchmark using cloud solutions, any labor arbitrage from BPO tasks is trivial.
As I wrote last year:
“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.”
So, if not clouds, BPO providers need to propose other cheaper on-premise solutions – even their own. For too long they have told customers “we can work with what you have” and hurt their own value proposition.
