HfS: BPO – Pronounced dead, but still very much alive

InsightaaS: With Accenture moving away from use of the term “business process outsourcing,” there has been some discussion as to whether the concept itself is in need of replacement. In this post, though, Phil Fersht – founder and CEO of Horses for Sources, the award-winning outsourcing market analyst firm – takes the opposition position: BPO, he believes, “isn’t the dirty word anymore…it’s ‘operational labor costs’. Fersht uses HfS research to show that “close to 40% of IT (apps and infra) is outsourced today,” adding that while there is still scope for IT outsourcing growth, there is even more opportunity for BPO, as “the level of outsourcing of IT is double that of finance, HR, procurement and supply chain.” Fersht closes by noting that the “bottom-line” is that BPO provides a means by which COOs can focus resources on front office activities – and which leading providers (including Accenture) will view as a means of securing large end-to-end operational contracts.

If I had a Bitcoin every time someone claimed that BPO is “dead” / “hitting the bottom” / “merely staff augmentation that’s going away soon”, I could commission a whole team of robots to write this blog until the new year. And Accenture’s recent decision to drop outsourcing from its tag-line and submerge “BPO” under the broader term “Operations” felt somewhat like a death-knell for the troubled terminology.

However, I would argue that BPO is just at the beginning of a much more dynamic phase of its existence and is at least three years’ away from the term being put to bed.  BPO will evolve into “progressive operations” in time, but as our research illustrates (read on), the BPO market is still immature and has some room to grow before it becomes mainstream.

BPO is a powerful term — it genuinely implies the transferral of the management of processes

As negative as the connotations of BPO have been in recent years, it has a powerful meaning for businesses today. “Outsourcing” has always signified the transferral of the management of work to a third party, while the broader term “services” just means “work”.  “They performed services for us” can mean anything, from little projects through to a much larger array of operational delivery.  “I outsourced my xxxx to them” means you actually transferred work to the third-party to manage for you on a consistent, ongoing basis…

Read the entire post: http://www.horsesforsources.com/bpo-not-dead-yet_042514


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