BPO Collaborations – There is a pressing need for them, but are they possible?

Dynamics of doing business in the BPO world are fast changing. Clients are increasingly seeking –
·         Global delivery with emphasis on near, mid and offshore locations comprising both established and new geographies,
·         Solution driven approach that requires a platform play in lieu of the classical lift & drop approach,
·         Combination of services covering different spectrums of BPO and KPO.
Given these requirements, it is impossible for several service providers to offer the same on their own, except for the few fortunate large service providers who possess Consulting, IT and Process Design & Delivery capabilities.
If this is the case
·         Should the new versions of BPO and opportunities there upon a prerogative of only the large and full service players?
·         Do the small and medium players invest substantial resources in time and money to develop these capabilities organically?
·         Or do these players invest capital on inorganic pursuits to fulfill the requirements.
No doubt the options mentioned above are valid. In addition to these, an important option could be BPO Collaboration. Some possible collaborations could be
1)       Niche IT companies with out BPO play collaborating with K/BPO providers. This will help IT companies introduce annuity revenue streams over the existing revenue streams that may be primarily project based and also help them deepen their client engagements. Collaboration with K/BPO service provider can also help IT companies pioneer services model (SaaS) which seems to be finding favor with the buyers of software services
2)       BPO service providers with delivery centers in a particular geography aligning with the BPO service providers in other geography to expand / create a global footprint on a win-win basis. This will also help BPO service providers to introduce new language capabilities in addition to the existing ones
I have listed just couple of possibilities above and there could be several others. Also, if we look at any IT company a small one though, they talk of partnerships either for system integration or software implementation etc. It is not uncommon too see a very large / marquee IT company collaborating with a small IT company for mutual benefit. This leaves me wondering why the same concept cannot be applied to the K/BPO companies.
Is the revenue potential a limiting opportunity or are there other compelling reasons? It will be interesting to obtain views from the readers of this post.

2008 – And Beyond

Happy New Year. I’m adding my voice to the year-ahead punditry – but taking a different approach by looking further out. The views are based on a look through the end of 2010 and represent my own thinking as well as the input of several of my colleagues. I’ll be concentrating primarily on demand trends today, with more thoughts on provider trends in a later post.

With those parameters in mind, here are the top six issues to watch in services sourcing in the months ahead. We know these are already on the minds of many corporate executives.

1.   A desire to address the global dimension of the business strategy – i.e, the land of tomorrow’s customer:  More companies are talking about outsourcing and offshoring — almost interchangeably — as part of an overall globalization agenda.  Cost savings still matter, of course, but the desire to participate in emerging new economies is also gaining import.  This, in turn, is affecting the time horizon of the initiatives.

2.   A growing preference for selecting sourcing alternatives within the context of a multi-year strategic agenda. We’re already seeing fewer acts of desperation in the sourcing initiatives being launched. To many of us, this implies that the low-hanging fruit of labor-based sourcing has been harvested.  Companies are now looking for more partnership-minded relationships. (Yeah, many of the words are the same, but the contracting tactics differ).

3.   A push to evaluate sourcing options through the 3C paradigm; total value orientation. I’ll write more about the “3C Framework for Sourcing” in a coming post, but suffice to say it’s the balanced consideration of costs/capability/capacity.  The prior overemphasis on near-term cost reduction is giving way to a new equilibrium.  Providers that won under the former rules may not be positioned for the future orientation toward total value.

4.   Assessment of existing service delivery relationships for alignment with strategic direction – i.e., not a tactical move. Many of our clients tell us that they have awoken to find a veritable nest of service provider contracts existing within their companies. It seems that each business unit and corporate function has two to three different providers doing work for them. A serious rationalization is in the offing for the coming quarters, with a weeding out of the cost-only providers for those that align with the strategic direction of the client. This, of course, gives rise to …

5.   Considering outsourcing options for all technology-enabled, people-intensive work processes i.e, go big and fast. Looking hard at work and asking whether activities couldn’t benefit from scale and automation. We’re seeing wall-to-wall reviews of work processes and serious scrutiny of the efficiency of the delivery models. There is no slowdown in the consideration of sourcing alternatives.

6.  Looking at the role and value of captive offshore operations. Captive centers are showing great value, and we see expansion plans being deployed for those operations in the coming quarters.  While the make-versus-buy decision is complex, we’re sensing a continued desire to move knowledge-based work to locations that offer lower costs and greater capacity, with equal or better capability.  Look for a continued desire of some larger conglomerates to monetize their captive operations, but those will be a handful, at best.

Unto the (Data) Breach: A 2008 Topic

Concerns about data privacy are rising in the sourcing industry, and I expect the issue to get a real workout in 2008.

Which is fine. But first a couple of points: From the earliest days of outsourcing there have always been third parties involved in processing client information. More to the point, data breaches can and do happen with in-house operations, too.

Still, the data issue is gaining traction in light of legislation aimed at protecting financial and medical data. Both clients and providers are feeling the heat.

The sourcing industry has already adopted safeguards and best practices to protect information, but the question remains in the mind of many: Does sourcing mitigate or exacerbate data risks?

Companies are calling us seeking advice on the capabilities of service providers to help reduce the perceived risks relating to data protection. At the same time, providers are starting to squirm at contractual terms aimed at allocated damages due to breeches in data security policies.

We shall see whether the sourcing industry is a source of extra risk or solution. But there are two things we already know: Whether data are processed in country or offshore doesn’t matter, so don’t believe in headlines about “outsourcing” as a culprit. And the market can and will play a regulatory role, as it always has, because reputations and bottom lines will suffer if customers suffer.