Desperately Seeking Innovation in Business Process Outsourcing: Enterprises Speak Out

Is that what I think it is?

Innovation is now the critical ingredient for most buyers of Business Process Outsourcing (BPO) services –unequivocally proven by a new HfS Research study.  Most buyers of BPO services are initially delighted when they trimmed 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 measureable 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.     

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.  Click here to access a freemium copy.


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Founder and Chief Executive Officer of HfS Research, the leading global research analyst organization covering global sourcing strategies. Acclaimed Industry Analyst and Consultant who scribes the leading blog for the services industry "Horses for Sources".  Previously worked  at AMR Research (Gartner Inc),  Deloitte Consulting’s BPO Advisory Services, the  Everest Group and  IDC .  In 2010, Phil was named “IIAR Analyst of the Year” by the Institute of Industry Analyst Relations (IIAR). This is the most coveted global award for industry analysts in technology and services.

2 responses to “Desperately Seeking Innovation in Business Process Outsourcing: Enterprises Speak Out”

  1. Business Process Outsourcing Solutions

    hmph-.. very infomative post, to find a good supplier is not that easy task but if you do so then you really are going to cut your cost continuously and also bringing innovation to the business. thank you very much Mr. Phil Fersht

  2. MicroSourcing

    In terms of services or results that should be delivered within a two-year time frame, there are variables that change over time. One of the ways to address this is to adjust the contract or agreement every six months, since that’s where responsibilities of parties are stated.