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The business process outsourcing (BPO) industry has reached a critical inflection point in terms of what clients expect from outsourcing engagements and what providers can deliver, according to an Accenture-sponsored study from HfS Research.
According to the report, which featured a survey of 773 BPO industry stakeholders including enterprise buyers, service providers and advisers, two-thirds of the industry remains trapped in engagements focused on cost reduction alone with existing processes simply “lifted and shifted” from the client to low-cost delivery centers.
Yet, nearly one-half (49 percent) of today’s clients expect to undertake a wide-scale transformation of their business processes within the next two years to capture new and more sustainable business outcomes that are enabled by technology, the report found.
Most technology-enabled BPO buyers are achieving real effectiveness in higher value areas, namely new ideas and initiatives (50 percent), analytical insight (45 percent) and even gain sharing with their providers (42 percent).
While clearly there is room for improvement in these areas, the report noted how clients that have invested in technology to enable their BPO are able to focus on higher-value outcomes.
“The HfS report validates that technology-enabled BPO engagements—those we would consider to be high performing—are achieving significantly higher value business outcomes than those focused merely on cost reduction and labor arbitrage,” Mike Salvino, group chief executive of BPO at Accenture, said in a statement. “The HfS research report is an important call to action for those that want to realize the full potential of outsourcing and move into the next generation of the market.”
The majority (52 percent) of buyers with technology-enabled BPO said they are seeing real progress towards shifting away from the “lift and shift” BPO model where the only value metric is based on cost per employee–twice the proportion of those clients which haven’t undergone technology-enablement of their BPO processes.
Despite this change in buyer expectations, six out of 10 clients said they feel their providers are failing to deliver the technology skills and capabilities needed to drive this transformation, a sizable chasm that needs to be crossed in a short time frame in order to move into the next generation of the market, which is characterized by greater use of technology and higher-level skills.
In addition, more than one-half (52 percent) of the buyers who have undergone a technology transformation felt they could boast much greater effectiveness of process delivery in the cloud, with significantly improved cost, quality and organizational agility.
The report recommended clients need to invest in improved governance skills to cover new capabilities, while many service providers need to invest in the higher-caliber talent, analytics capabilities and technology platforms required to create this value.
The current research is an extension of Accenture’s “High Performance in BPO” study, which identifies the specific business outcomes and the collaborative behaviors and practices that enable clients to capture the greatest potential value from BPO.