Innovation is now the critical ingredient for most buyers of Business Process Outsourcing (BPO) services –unequivocally proven by a new HfS Research study of 588 shared services and outsourcing executives, as revealed in our new report Desperately Seeking Innovation in Business Process Outsourcing: Enterprises Speak Out.
Most buyers of BPO services are initially delighted when they trim 30% of their costs on one process, and 50% on another, but once those costs disappear from the balance sheet, they are quickly looking at new initiatives to help them attain new thresholds of productivity or revenue growth: what HfS Research terms as “innovation”.
Moreover, while half of buyers are dissatisfied with the innovation they are currently achieving from their BPO endeavor, the majority are seeing significant potential to achieve it across certain processes within a two-year time-frame.
Essentially, once they have out-tasked as much of the feasible routine administrative work to service providers, they quickly discover that next tranche of productivity is not nearly as straightforward as documenting standard processes and training an offshore team to replicate them effectively (commonly termed in the BPO industry as “lift and shift”). Those buyers realize they actually need to introduce new, creative methods to actually change the old way of managing processes to find improvement. This scenario continues to dominate the vast majority of large-scale BPO engagements today.
The answers lie with both BPO buyers and their service providers working together to achieve measurable business outcomes as part of organized and collaborative long-term partnerships. However, too many enterprise buyers jump into a service provider relationship polarized on the initial cost take-out from the “lift and shift”, and gloss-over the future initiatives they will need to implement in a couple of years, when they seek to find new value through better processes, talent and technology.
We believe buyers need to put the innovation track-record of service providers high up the decision-making tree when they select make selection decisions. As earlier HfS Research has demonstrated, service provision is commoditizing and leveling the playing field, with several BPO service providers today pushing services within a similar price-band, and sufficient track record of successful “operational” delivery.
Most large enterprises have already experienced offshoring and outsourcing varying degrees of their operations for several years, and are smart enough to realize outsourcing provides an opportunity to deliver more than simply cost-savings through lower cost labor. Consequently, the ability to provide outcome-based solutions that encompass helping BPO buyers achieve innovation, is fast becoming a crucial differentiator.
We’ll be highlighing more snippets from our new report, entitled “Desperately Seeking Innovation in Business Process Outsourcing: Enterprises Speak Out” this week, but if you can’t wait that long: [emember_protected]click here to download your very own freemium copy[/emember_protected] This report dives into the experiences and expectations of today’s enterprise BPO buyers when it comes to achieving innovation, and offers actionable recommendations for devising a strategy to improve their innovation agenda with their BPO endeavor.