« Musings from abroad... dispatch #2... meet me at Nasscom | Main | Finance and Accounting BPO continues its growth path »

Jun 01, 2008


Feed You can follow this conversation by subscribing to the comment feed for this post.

Gianni - good to hear from you. Thanks for the link - a very good article which I suggest anyone here reads. I especially agree with your comment "the provider must leverage economies of scale and process optimization ruthlessly to hit its targets". Your insight on HRO requiring much more discipline than ITO is spot on.

Why I think "Platform BPO" - which hasn't yet been commonly defined - is a starting point, is the fact that some companies are starting to tackle BPO from a standpoint of common IT as the glue to standardize their delivery more effectively.

The Indian vendors (and the Western BPOs with huge offshore resources) have been learning the hard way how to leverage labour arbitrage more effectively, and bring new clients onto more common processes than they had done in earlier engagements. The lessons from F&A BPO are becoming valuable training grounds for these providers - it's those engagements where the vendor took ownership of the ground-up "bread-and-butter" processes, that are proving more successful in the long haul, and they learned to drive (ruthlessly) common operational standards into the engagement; but it often takes the entire duration of a first phase contract to get to a point where the vendor and buyer can work together effectvely. If the provider owns and delivers ground-up processes - i.e. payroll / general ledger accounting, from both the platform and the process perspective, it is much easier for them to develop broader BPO solutions around these hub operations.

What we can learn from ITO is the fact that mature buyers today take far more ownership over their delivery that they used to. They realize their vendor can provide skills, resources, processes and technology, but arbitrage only works when the buyer takes on equal responsibility for delivery.

Where some early HRO deals "failed", was when the blame was commonly heaped on the service provider. However, as outsourcing PMOs get more experienced, they realize that success lies in their own hands, and many more and improving at working with their providers to drive more efficiencies into their relationships. You hear many buyers say today "we need to develop a strategic sourcing strategy" - they are realizing the world has changed and they need to change with it. Outsourcing is just one vehicle for change, and the onus is on them to drive it correctly.



I agree to what you say and the focus on platform BPO in the coming week is both timely and healthy. But equating platform BPO to a unified-tech-platform game may be missing the point. The economic fundamentals of BPO need to go beyond the mere technology platform per se: the platform IT must be the "embodiment" of a standardized service delivery, without which there is often no reason why the provider can be better and cheaper than the client. See my article on this topic too: http://www.hrotoday.com/Magazine.asp?artID=1661
BPO is an engine about with three pistons: scale, better processes, and labor arbitrage - not just about saving IT money by deploying a unified tech platform. And these "pistons" most often only fire well when the provider can build a replicable engine.


If you'd have asked me the question of the Indian offshore providers a couple of years' ago, I'd have said they would struggle in HRO. However, they are becoming much more experienced at taking work offshore that is closely tied to the ERP platform, and also dovetailing it with onshore services. They can also offer cost reductions that some of the incumbent HRO provider cannot offer these days, combined with the fact that they are mining their existing ITO clients. One of the major Indian providers, for example, won a major HRO contract last year, which has been transtioning well. I don't foresee a flood of these HRO contracts moving over to the offshore providers, but certainly a handful over the next year that will give them a foothold into this market,



Thanks for sharing this data - am surprised at the high proportion of firms that haven't outsourced comp, payroll of contact centers. It also appears as if benefits outsourcing is clearly leading the way forward for HRO services in the US (assuming this is a US study).

Do you think the Indian offshore firms have a geniune chance of getting into this market, with all the previous issues firms have had with HRO?

Gavin Healy

The comments to this entry are closed.

Your email address:

Powered by FeedBlitz

Follow me on Twitter

    follow me on Twitter


    My Photo