Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

State of Business Process Outsourcing


Published on

Published in: Business
  • Be the first to comment

State of Business Process Outsourcing

  1. 1. The State of Business Process Outsourcing TechWeb July 2008
  2. 2. Overview <ul><li>Increasingly, organizations are outsourcing to service providers to take over more business processes. In some cases, these are non-core commodity competencies, but in others they are mission-critical operations that outsourcers can help to optimize, and thus help organizations transform their business. </li></ul><ul><li>This State of BPO study, sponsored by Satyam, was designed to reveal the opinions of IT professionals regarding business process outsourcing (BPO). </li></ul><ul><li>For purposes of this study, business process outsourcing (BPO) was defined for respondents as the following: </li></ul><ul><ul><li>BPO includes services (horizontal and vertical) such as call/contact centers, HR benefits administration, finance and accounting, engineering services or procurement, among other examples. </li></ul></ul><ul><ul><li>Some of these business services may have an IT component to them, such as hosted services or managed services. They chiefly entail process and domain expertise and are measured in business outcomes. </li></ul></ul>The State of BPO
  3. 3. Methodology <ul><li>Sample: In May 2008, TechWeb sent e-mail invitations to an Nth name sample of those who have agreed to be contacted by TechWeb. The sample was drawn from the U.S. and Canada. </li></ul><ul><li>Questionnaire : The questionnaire was developed by TechWeb, and administered via a Web-based survey. </li></ul><ul><ul><li>Method: E-mails were sent to subscribers inviting them to participate in an online survey. An embedded URL directed respondents to the survey hosted by our Web survey host partner, SurveyGizmo. </li></ul></ul><ul><li>Response: A total of 475 respondents completed the survey. Data is based on these 475 respondents unless otherwise noted. </li></ul>The State of BPO
  4. 4. Conclusions The State of BPO <ul><li>The study results reflect the burgeoning interest in BPO–and highlights its potential to help organizations on the road to transformation. </li></ul><ul><li>Significantly, 45 percent of respondents say they have attempted to transform a business process after outsourcing it to a provider, and 75 percent of these customers say that their organization's transformation of an outsourced business process has been a success. </li></ul>
  5. 5. <ul><li>The State of Business Process Outsourcing </li></ul>STUDY FINDINGS
  6. 6. HR, Tech Support and Finance Top the List of BPO Areas Is your organization engaged in any of these types of business process outsourcing? The State of BPO The high interest in HR outsourcing speaks to the growing trust customers are placing in their BPO providers, as these processes touch the assets that are most vital to the success of any organization: its employees. A failure to properly execute good service can damage the reputation of a company, especially when it comes to the recruitment and retention of talented workers. 41% 38% 31% 28% 25% 24% 23% 20% 20% 19% 14% 14% 12% 10% 8% Multiple responses allowed
  7. 7. Majority Have Integrated IT + BP for Some or All of Their Outsourced Functions Do you currently have or are you considering an integrated IT+BP outsourcing strategy? Yes, we currently have an integrated IT+BP outsourcing strategy for all our outsourced functions. Yes we currently have an integrated IT+BP outsourcing strategy for some of our outsourced functions. No, we do not have an integrated IT+BP outsourcing strategy for our outsourced functions, but we are considering it. No, we do not have an integrated IT+BPO outsourcing strategy for our outsourced functions, and we are not considering it. 38% 30% 14% 18% The State of BPO The State of BPO Integrating IT and BP outsourcing for some or all outsourced projects requires contracting with service providers that have a broad range of offerings, some of them blended between business processes and IT functions, such as managed or hosted networks or application environments. The advantage to this approach is that, if a problem occurs, a single vendor must take ownership of the issue.
  8. 8. Half Do, Half Don’t Use BPO Services for Core Business Areas Do you currently procure BPO services that are core to your business? It’s a mix of core and non-core 28% No 46% Yes 26% The State of BPO The State of BPO Some companies remain hesitant to part with core processes. About half the respondents still refuse to do so. But the tide is turning, as companies increasingly value the expertise of BPO providers with strong practices in key vertical and horizontal areas. More than half are looking to business process outsourcers to take over some, if not all, of their core functions.
  9. 9. Decreasing Costs Is the Top Driver for BPO Services What are the primary and secondary business drivers for BPO services within your organization? One response allowed per column Primary Secondary Decrease costs 26% 14% Add business value 17% 11% Need to outsource non-core services in order to focus internal staff on core services 16% 15% Improve service levels/quality 14% 13% Drive business transformation 11% 12% Manage services 10% 13% Provide domain knowledge 6% 14% Other 2% 9% The State of BPO The State of BPO BPO adoption is tied to much more than cost savings, yet that is the primary business driver for respondents. If BPO providers don’t succeed on that level, they may not get the chance to prove their merit in terms of other important drivers, such as adding business value or creating business transformation.
  10. 10. BPO Is a Success at Most Companies Has your organization achieved success in outsourcing BPO services to onshore, near-shore or offshore destinations? 59% 21% 20% 16% 11% The State of BPO The State of BPO Organizations can be successful with BPO whether it is undertaken onshore, near-shore, offshore, or using a combination of these locales. Eighty-four percent of the BPO buyers surveyed have experienced success with BPO engagements, no matter the location of the service delivery. In many cases, success equals improving service delivery and performing the function at a lower cost –not necessarily transforming it. Multiple responses allowed We have had success with domestic BPO We have had success with offshore BPO We have had success with combination BPO model We have had success with near-shore BPO We have not experienced BPO success
  11. 11. Transformation Efforts Stay Close to Home Has your organization attempted to transform a business process by outsourcing to service providers in onshore, near-shore or offshore locations? 56% 35% 23% 12% Multiple responses allowed The State of BPO The State of BPO Most of the respondents transforming a business process undertake such projects with providers who offer onshore services. But more than one-third are comfortable working with talent that is located offshore to transform their processes–overtaking near-shore options by a significant margin. Onshore (U.S.) Offshore (Asia, Europe) Near-shore (Mexico, Canada) Never attempted to transform a business process
  12. 12. Transformation Approach Depends on the Process In your view, is it wiser to transform a business process by … Carry out process improvement internally before outsourcing of the processes Having the service provider carry out process re-engineering first, prior to shifting the processes Having the service provider do a &quot;lift and shift&quot; of the processes and then carry out business process re-engineering It depends on the processes being outsourced 34% 12% 45% 10% Multiple responses allowed The State of BPO The State of BPO There’s no right answer when it comes to how you will transform a business process. But experts agree on one thing: Before you or your outsourcer can improve a process, you must understand your process workflows. That means it’s important to invest time to document and diagram the workflows, including roles and responsibilities, business rules and policies.
  13. 13. About Half Transform a Process After Outsourcing It Has your organization attempted to transform a process after outsourcing it to a BPO service provider? No 55% Yes 45% The State of BPO The State of BPO BPO providers have taken on the job of transforming a process in 45 percent of cases. Typically, companies will work in tandem with the provider to make changes that are often impossible to do on their own with overburdened in-house staff.
  14. 14. Tech Help Desk and Customer Care Top List of Transformation Targets Which is the most recent process your organization sought to transform with the help of a BPO service provider? The State of BPO The State of BPO While the most recent targets of provider-led transformation have been tech help desk, customer care, finance and accounting, and engineering service processes, nearly 10 percent have turned to their business process outsourcer to help them innovate their industry-specific processes. 16% 14% 15% 9% 14% 8% 5% 4% 3% 3% 1% 1% 1% 5%
  15. 15. Three-Quarters Have Successfully Transformed a Business Process They Have Outsourced Overall, would you consider that you have successfully transformed the business processes that you have outsourced? 26% 48% 13% 13% It’s too soon to tell It was/is somewhat successful It was/is very successful It was/is unsuccessful The State of BPO The State of BPO Impressively, three out of four BPO customers say that their organization's transformation of an outsourced business process has been a success. Two-thirds of those respondents qualify their success as &quot;somewhat successful&quot; rather than &quot;very successful,&quot; but when it comes to transformation–an exercise that is not without risk–any form of success is welcome.
  16. 16. Proven Track Record Is Most Important Which of the following conditions must a BPO service provider meet before you would award it a contract for business process transformation? Which of these is the most important? 63% 51% 3% 47% 18% 6% 41% 31% 54% 12% 46% 6% 40% 4% 34% 8% 33% 3% 25% 4% 23% 1% 21% 2% 7% 2% Proven track record of successful transformations Willing to share risk and rewards for stated business transformation objectives Compliance with U.S. regulatory standards Operations in local and low-cost destinations Scalable supply of trained domain experts Ability to send staff to work with us at our locations Latest and highest global standards and certifications Track record of at least one successful project with us Willingness to accept third-party technology and business audits Proven investment in infrastructures across service locations Ability to execute in multiple languages Consulting expertise/Six Sigma or Lean Sigma expertise Other All Conditions – Multiple responses allowed Most Important Condition – Single response only The State of BPO The State of BPO When buyers consider awarding a provider a contract for a transformational BPO engagement, most will not consider a vendor that lacks a proven track record of successful transformation.
  17. 17. Slow Execution and Poor Customer Service Cited as BPO Partner Performance Issues What are the biggest gaps between your expectations and your partner's performance? Multiple responses allowed The State of BPO The State of BPO Given that delays can reflect poorly upon the project managers, it is easy to see why “slower than expected execution” would vex a higher percentage of BPO buyers than, say, insufficient cost savings, or mistakes, flaws or bad transactions. 52% 39% 40% 34% 35% 31% 24% 24% 24% 20% 18% 17% 13% 2% Multiple responses allowed
  18. 18. Three-Quarters Use Metrics to Benchmark Performance of BPO Contracts Does your organization use metrics to benchmark the performance of its BPO contracts? 24% 53% 7% 16% We use third-party industry-standard and our own benchmarks Yes, metrics are established and measured by us with our service provider No Yes, we use third-party industry/benchmark metrics The State of BPO The State of BPO You can’t manage what you can’t measure. Most organizations have imposed metrics—key performance indicators (KPIs) or service-level agreements (SLAs), such as network availability for network management processes—to gauge how well their BPO provider is performing.
  19. 19. Incenting Service Providers Does your organization offer any of the following types of bonus or incentives to BPO service providers? Multiple responses allowed Quality standards bonuses/incentive Gain/profit sharing based on SLAs Service delivery staff/ retention bonus/incentive Time-to-market bonus/incentive None/We do not offer incentives Other 23% 16% 59% 13% 18% 1% The State of BPO The State of BPO Of those organizations that offer incentives to their BPO providers, most provide bonuses based on adherence to quality standards. As more organizations consider how they might incentivize providers, it is important to note that process improvements will be realized only when incentives are designed to bring about greater efficiencies and effectiveness.
  20. 20. Most Organizations Decide on BPO Contract on Their Own 64% Does your organization work with third-party experts for identification, evaluation, or contracting with identified service providers? 27% 37% 2% Multiple responses allowed Decide on our own Consulting firms (TPI, Deloitte, neoIT, etc.) Research advisory firms (Gartner, Forrester, etc.) Other The State of BPO The State of BPO It’s important that the internal parties charged with the task of choosing service providers understand the rationale for outsourcing the business process. They also should have deep insight into potential providers’ market presence and whether those providers can provide services at the scope and scale required.
  21. 21. Most Respondents Work With Four or Fewer BPO SPs How many BPO service providers does your organization work with now? 46% 34% 7% 9% One to two Five to six Three to four None Seven or more 4% The State of BPO The State of BPO When it comes to IT, many multinational companies are comfortable with multisourcing, spreading billion-dollar deals across multiple service providers. That’s been slower to take off in BPO, however: Very few respondents are working with more than four providers, and most work with one or two.
  22. 22. Most Have Not Attempted Multivendor Strategy Has your organization attempted to outsource a specific business process simultaneously to more than one BPO service provider (multi-vendor strategy)? No, we have not attempted it 67% Yes, we have done it successfully 12% 21% Yes, but it has not been a success The State of BPO The State of BPO Just as organizations have not gravitated to wide-scale use of many BPO providers, most also have not outsourced a specific process simultaneously to more than one outsourcer.
  23. 23. It’s a Near Split for the Need for Global Services Do you require that your business process outsourcing partner be able to deliver its services globally? No 51% 22% Yes 27% Yes, for select functions The State of BPO The State of BPO Customers that require a business process outsourcer to be able to deliver its services globally may need to support multi-lingual business operations, or they may want a &quot;follow-the-sun&quot; customer care operation that involves establishing contact centers on several continents to exploit time-zone advantages.
  24. 24. Majority Have Not Consolidated Functions Into Shared Services Have you consolidated F&A, procurement, order management and HR into shared services? No, we have not consolidated these functions into shared services 72% Yes, we have consolidated these functions into shared services using in-house IT 16% Yes, we have consolidated these functions into shared services via an outsourcing provider 12% The State of BPO The State of BPO Among organizations that have consolidated finance and accounting (F&A), procurement, order management and HR processes into shared services, the preferred route is to use internal resources to handle the job.
  25. 25. Respondents Choose In-House Approach Due to Complexity of Processes 60% For those who answered “in-house” on the previous question: Why did you choose the in-house approach? 37% 44% 32% Data based on the 73 respondents who answered “in-house” on the previous question. Multiple responses allowed Complexity of processes In-house cost of consolidation lower than service provider's Lack confidence in service provider‘s capabilities to perform consolidation Geographical requirements The State of BPO The State of BPO By a wide margin, companies say the processes are too complex to entrust to an outsourcer for consolidation into shared services.
  26. 26. Outsourcing Partners Expand Their Influence 24% Which service providers do you currently use as business processes outsourcing partners? Which service providers are you most likely to consider in the future as potential business process outsourcing partners? 26% 16% 24% 22% 14% 13% 9% 14% 8% 12% 7% 7% 10% 6% 13% 5% 9% 4% 9% 3% 8% 7% 2% 2% 5% Multiple responses allowed Currently in use Would consider for use in the future The State of BPO The State of BPO
  27. 27. RESPONDENT DEMOGRAPHICS <ul><li>The State of Business Process Outsourcing </li></ul>The State of BPO The State of BPO
  28. 28. Respondents’ Roles in BPO 64% 58% 42% 39% 7% How are you involved in your organization's sourcing or management of BPO service providers? Multiple responses allowed The State of BPO The State of BPO
  29. 29. Majority of Respondents Are In IT Which of the following best describes your job function? 22% 27% 15% 26% IT Mgmt. Executive IT Mgmt. (CIO, VP of IT) Consultant IT Staff 5% Executive Corporate Mgmt .(CEO, President, Corp VP) General Corp. Mgmt. 3% General Corp. Staff 2% 52% of respondents have an IT job title The State of BPO The State of BPO
  30. 30. Respondents Equally Distributed Among Small, Medium and Large Companies How many employees are in your organization in total? 500-999 Less than 100 100-499 1,000-4,999 5,000 or more 11% 19% 32% 9% 29% Approximately one-third from small companies (less than 100 employees) Approximately one-third from mid-sized companies (100-4,999 employees) Approximately one-third from large companies (5,000 or more employees) The State of BPO The State of BPO
  31. 31. Organization’s Primary Industry Consulting and business services 14.9% IT vendors 7.9% Financial services/Banking 6.8% Health care and medical 5.7% Manufacturing and industrial (non-computer) 5.5% Other 5.1% Education 4.9% Telecommunications and ISPs 4.9% Financial services/Securities and investments 4.5% Government 4.5% Media and entertainment 4.0% Insurance and HMOs 3.8% Electronics 3.2% Biotech, biomedical, and pharmaceutical 2.3% Consumer goods 2.3% Financial services/Insurance 2.3% Financial services/Other 2.3% Automotive 2.1% Construction and engineering 2.1% Nonprofit 2.1% Retail and E-commerce 1.9% Food and beverage 1.3% Real estate 1.3% Distribution 0.9% Logistics and transportation 0.9% Utilities 0.9% Energy and utilities 0.6% Hospitality and travel 0.4% E-marketplace (portals or auction) 0.2% Metals and natural resources 0.2% The State of BPO The State of BPO