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Jul 02, 2007


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I think you may be assuming "ITO" as "Consulting" in this context, where your analogy of behavior and power divisions is spot-on. Consulting firms thrive on business situations where there is change and complexity, whereas outsourcing firms thrive on "steady-state" situations. Hence, consulting dollars are generated through driving change, innovation etc.; outsourcing dollars through driving more and more cost from their delivery centers through economies of scale and improved technology and process. Hence, there is a major divide in people skills, culture and behavior between the two entities.

When I talk about ITO and BP0, I am referring to the outsourcing servces being deployed from service centers, and not the consulting/transformational pieces. Almost all the ITO vendors are trying to expand their BPO offerings (Wipro, TCS, Infosys, Cognizant, Satyam to name a few) and some of the BPO firms are trying to bolster their IT capabilities. Not to mention the Western suppliers all go to market with combined ITO and BPO offerings. There are issues with the skillsets and cultures between IT-focused and process-centric delivery etc., but those same firms who have offshored their IT services are looking to optimize their business processes in a similar manner, and these suppliers are gearing up for the opportunity,


I believe organizational dynamics will preclude those who have combined ITO/BPO offerings from presenting a unifed face to multi-tower clientele. Divisions of power within and across provider business units create competiting strategies and prioritization for success. We see this today with those providers whose consulting arms are reluctant to reduce rate cards to support internal cross-sell opportunities, thereby relegating the BPO/ITO arms to using second-class or Tier 2 talent.

Until and unless motivations to support the broader "good of the firm" begin to manifest themselves in material ways, increasing consolidation among ITO and BPO providers will add to the already formidable challenges in provider profitability.

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