Panic selling

I nearly choked on my breakfast this morning with the stunning news that "34% Buyers Axe Their BPO Deals", according to a study conducted by Diamond Management & Technology Consultants and headlined in Global Services Media.  I have observed over 400 publicly-announced and private BPO engagements over the last decade, and barely 6 of these were discontinued, normally as a result of the enterprise downsizing to the point where the BPO engagement was no longer viable for both parties.  I am not arguing that the other 394 engagements are all going extremely well, but when enterprises move beyond a BPO contract transaction, the short answer is they rarely go back to the way they were.

For starters, the article states "One of three customers of Business Process Outsourcing (BPO) services ended their offshoring deals prematurely". There is a marked difference between "BPO" and "offshoring".  Offshoring is the process of moving work offshore, and – in most cases – involves a firm moving more work into its own offshore "captive" center.  So are we actually talking about Business Process Outsourcing or offshoring?  This is a major difference, as many firms who try to "offshore" work themselves experience far more problems than they anticipated, usually because they do not have the skills or experience internally to manage offshore transition successfully.  That is why many firms decide to outsource their business processes, rather than try to offshore them.  That is also why many of the large BPO deals signed today are companies selling off their captive operations to an outsourcing provider.

I respect consulting firms that invest in quality research for their clients, to generate eminence in the marketplace, create discussion points with their clients, and use it to support their consulting engagements. However, "research" can be a dangerous tool when firms use it to panic people for the sole purposes of creating attention.  I can understand why Global Services Media picked up on the story, as it is a major attention-grabber, but there are no details regarding how the study was conducted, what sample of firms was used and how exactly is "BPO" defined for the purposes of this research. 

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One Comment

  1. Posted February 6, 2008 at 8:13 am | Permalink

    Phil …

    I couldn’t agree more!

    Our industry seems to be attracting tourists that feel compelled to offer marginally relevant observations as a means of fueling their own legitimacy. The nuances you highlight are significant to the practitioner. Perhaps that’s actually a sign of affection for a business strategy that has become quite pervasive?

    Peter

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