Cost reduction is back at top of management‘s agenda
“Your mess for less” is how business process outsourcing (BPO) has typically been summed up and, although the industry has moved beyond cutting costs alone, the current economic climate has once more made reduction of expenses the number one priority.
BPO rose to prominence in the 1990s and matured in the current decade as an industry which would allow, typically, a company to outsource its routine administration to staff dedicated to that role in an office in a part of the country or offshore where property costs and wages were considerably lower.
Large companies that were spending millions on white collar workers in the expensive capitals of the Western World, particularly in the USA and UK, were attracted by the large savings that were offered alongside promises the work would be performed to the same or a better standard with the client spared from having to directly fund new staff hiring, training or building and updating IT and software systems upfront.
The trend caught on and over the past decade some agreements amounted to multi-million pound deals as global enterprises entered in to ‘transformational’ projects that would see large parts of their back office outsourced to popular destinations such as India, the Philippines and East Europe.
Andrew Warren - "Outsourcing has matured"
Whilst this does, of course, show that outsourcing is becoming more strategic and being considered in a wider sense, Andrew Warren, Managing Director of Public Sector at Vertex, points out that it also shows how outsourcing has matured.
“The guys who are at board level now are the same guys who were in middle management over the past decade when outsourcing started to become proven as a way of driving down cost,” he says. “So, yes it is now strategic, but I think it’s always been strategic, just the guys who did the deals for their departments over the past decade or so are now in the board and realising it should be done across the business.”
These far-reaching enterprisewide discussions have yet to lead to huge deals this year so far but Warren is confident they will later this year and next year.
“It’s not surprising that in an economic downturn there’s a lot of tactical outsourcing where people are simply looking to get admin work done for less,” he says.
“However, where this gets really interesting, and what we are seeing coming up in the pipeline, is where a company uses outsourcing not just to drive down cost but actually effect change. When they decide they want to actually change the way they do something, such as interact with customers, then an outsourcer can actually use analytics, research and know-how to help them change their organisation.
“The conversations we’re having now are showing that there is a lot of interest in changing methodologies and not just industrialising processes so they can be done cheaper.”