Posted by: Adam Deane | 08/02/2012

BPM and BPO

BPOBusiness Process Outsourcing (BPO) isn’t a topic that gets discussed much in the BPM community.

This might be due to lack of implementations at BPO customers, or that large BPO companies usually have their own software solutions and internal process teams.
It might be due to regional differences (we hear a lot of BPO being used in India, Asia and South America – but little in USA and Europe).
But it’s probably down to the snub we give anyone that dares uses the phrase “business process” in their industry description, without referring to BPM (…how dare they…)

There is not a lot of information on BPM and BPO.
Is the lack of information and interest because BPM vendors have not targeted BPOs, or something else.

Sure, BPO probably belongs to the CRM sector. They fit well together.
But it actually makes good business sense for BPOs to look for BPM platforms.

Lack of transparency and communication are BPO’s biggest risks.
Yes, we can run and manage business processes, but instead of putting an emphasis on the operational functionality, I’d actually put an emphasis on management dash-boarding.
The ability to show management that the operations in the BPO are running smoothly, on time, and with KPIs – is crucial.
The dashboards actually lower management worry, lower operational risk, and prove that the BPO is running smoothly.

It is typical in the BPO industry to have hundreds of very similar customers.
The ability to improve business processes would prove to be more effective here than in a standard BPM implementation.

So why are BPO and BPM not talking to each other?


Responses

  1. Adam, my take:

    If you can take care of something with BPM, you can just as well outsource it. It is that low priority to the business in terms of individual customer outcomes. On the other hand I would not outsource anything that is a core customer competence, BPM, BPO or otherwise.

    Like BPM, BPO is just about cost cutting.

  2. They don’t always grab big headlines, but there are some good examples. For example Capgemini’s fledgling BPO business runs off Lombardi/IBM; Steria’s F&A outsourcing business uses Nimbus/TIBCO. And are you familiar with AWD from DST Technologies? That product was actually spun out of the technology platform for a huge BPO business (mutual fund servicing etc – take a look at DST Systems’ website).

  3. Large BPO’s the UK are certainly using BPM. The 3rd party BPM engine delivering the BPO solution probably says under the radar as it is rebadged by the BPO vendor.

    Surprised you say that BPO belongs to the CRM sector? Surely BPM is the perfect fit?

    The interesting thing for me is how the BPO market will be impacted by the move to the cloud and the growth of BPaaS (business process as a service).

    http://peterwhibley.wordpress.com/

  4. Thanks Adam for bringing up an interesting and important topic.

    To your question about why BPOs and BPM aren’t talking to each other, I know some definitely are and many others are just beginning to do so. BPOs are going through an industry transformation that’s leading them right to BPM. For many years, business process outsourcing was largely about picking up processes and moving them to ever lower wage geographies to reduce labor costs, but not doing anything to improve the actual process. This era of “lift and shift” is now over because there are no lower wage geographies left to go to. In effect, we’ve hit labor cost bottom.

    A few of the leading BPOs saw this event coming. They sought ways to improve their customer experience while also creating defensive barriers and improving their margins. The first of these providers took moves to develop their own software or acquire specialty packages to make their client’s processes more efficient. This provided some additional value, but those BPOs found themselves struggling with the same software challenges their clients did – working with packaged software that’s not designed for their specific needs and not easy to change.

    BPM has huge potential for BPOs. I made this clear in a blog post I wrote over the summer. I also wrote a white paper titled, “The Five Characteristics of Highly Successful BPM Deployments in Shared Services and BPO” where I noted some specific successes. In summary, here are the ways BPM can help BPOs:
    • A shortening of the service provisioning phase of a BPO engagement (which can eat 20-33% of a contract value) through process templates which can be easily customized from one client to another.
    • An increase in work that can be processed automatically without human interaction through easy integration and flexible rules within the BPM application.
    • A reduction in staff turnover as BPM’s great ability to track work helps identify the most productive staff who can be rewarded and encouraged to stay.
    • Dramatically reduced training costs for new staff through “zero training” BPM interfaces which eliminate the interrupt impact of switching between different client systems.
    • The opportunity to redesign a client’s process for further efficiency due to the extreme flexibility of the most modern BPM platforms.

    I’ve seen some BPOs do amazing things once they’ve adopted BPM. For example, a major outsource print provider reduced their new client onboarding time from several months to just 3-5 weeks, while simultaneously giving their clients unprecedented visibility into tasks, deliverables, SLAs, etc. A Federal Government program support vendor went live with an application and enabled their staff to process new job applicants on iPads that same day. Another insurance industry outsourcing firm claims BPM is key to their competitive advantage and strategic vision as they begin to roll it out enterprise wide.

    BPOs are sitting on a huge opportunity to capitalize on the most modern BPM systems and deliver mobile and social capabilities to their clients. Imagine a competitive bake-off for a BPO contract. Wouldn’t you want to be the vendor demonstrating how you can leverage your pre-built platform that you’ve used for similar clients, which will help get the customers work transferred and delivering savings faster? Won’t your prospective client love the idea that they can get updates, dashboards, and task to approve anything out of the normal on their mobile devices? You’ll be heads and shoulders over anyone trying to pitch “lift and shift” or improving process by trying to use traditional software tools.

    One final note, perhaps the reason we don’t hear more discussion about BPOs using BPM is that those providers want to keep it a secret from their competitors. We’ve had more than one request like that at my company. I wish I could tell you and your readers about some of the success and advantages those BPO organizations are building. Oh boy!

    Evan McDonnell

  5. I file this under “I could tell you about our successes, but then I’d have to kill you” 🙂
    BPO organizations are/were not exactly known for being innovators. I didn’t notice any of them “anticipating” the lack of cheap labor – their whole business was typically based on the premise that the cheap labor pool was virtually limitless. It is no surprise that they are late to BPM, late to process improvement (for real). And a BPO’s process improvement is not for the customer’s benefit, it is for their own. As a customer to a BPO firm you have to own your own process improvement.

    You might think I’m crazy or talking nonsense. Does Apple leave it to their suppliers to figure out how to improve their processes or their manufacturing? Or do they go in there and make it happen at a detailed level? Don’t think you can just hand off and walk away. If you do, you’ll find something that went from differentiator (when you made it a core competency) to commodity (when you stopped differentiating on it), eventually turn into a weakness and a cost center (after BPO has set in for a couple years). Only by then, you’ll have lost the critical internal organizational expertise to run that outsourced process…

    There are benefits to BPO, but big risks as well. Handle with care.

  6. […] Adam Deane has once against sparked a discussion in his comments – this time about BPM and BPO – and he ends with the question: “So why are BPO and BPM not talking to each other?” […]

  7. Adam, you’ve hit the nail on the head. BPM and BPO belong together, and first of all because of economics.

    I’ve written a post looking at how the relationship of BPO and BPM can be analyzed using an approach by economist Ronald Coase. His well-known work starts with the question “why do firms exist?”

    And Coase’s answer is that firms exist because of the transaction costs associated with the coordination of work … do we begin to hear echoes of both BPO and BPM yet? Firm sizes will stabilize over a range for any given industry, given the technical/managerial characteristics of work in that industry.

    But now along comes technology and automation. And the transaction costs of organizing the different functions of work begin to change and vertical integration becomes less and less attractive, economically. “Core competencies” become the order of the day. And eventually, the Zachman enterprise architecture crew gets going with the mantra to “normalize the enterprise” — and in the extreme version of that vision there might be “only BPO”, i.e. what is defined as core competency becomes increasingly narrowly defined. (It’s interesting that Coase’s work has been noted by some BPO-oriented writers.)

    There are two key technical variables that will govern how fast BPO grows. First, B2B inter-organizational integration technology (i.e. supply chain B2B software, which is basically BPM and ERP between organizations) is still expensive and difficult. And secondly, data governance or data chaos is a further major impediment. Both technical variables increase the transaction costs of coordinating BPO. So, insofar as data standards, B2B protocols and such keep improving, transaction and coordination costs will keep dropping. And thus under competitive pressure, the Coasean economic size of the firm will shrink further and further, with the corollory that BPO accounts for more and more economic activity.

    BPM in the broadest sense, being the technology that defines the work of business, is the defining technology for BPO. The two are intimately linked; one as technology enabler, the other as economics and governance.

    Original posting here: http://www.decisionmodels.org/content/bpo-b2b-integration-and-mdm-opportunity


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: