Saturday, 30 April 2016 12:50

Business Process Outsourcing (BPO) – send in the clouds

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Unlike traditional labour outsourcing, BPO is all about contracting the operations and responsibilities of a specific business process to a third-party service.

I interviewed Accenture’s Russell Ives, Managing Director of Operations in Australia and New Zealand responsible for the delivery of Accenture’s Business Process Outsourcing (BPO) programs.

He joined Accenture in August 2012 from IBM where he was leading the IBM BPO sales team for IBM’s growth markets (Asia-Pacific, Middle East & Africa, Latin America).

Over the past 25 years, he has worked with clients in multiple industries, in particular, Financial Service, Communications, and Utilities, with deep experience across consulting, systems integration and business transformation. For the past ten years, he has focused on transformational BPO – ensuring that clients achieve the full value of BPO through global delivery, industry capabilities, analytical insights, and innovation.

He holds Bachelor degrees in Science and Commerce from the University of Melbourne, and a Master of Management (Technology) from the Melbourne Business School, completing research into information management.

The remainder of the interview is paraphrased to avoid overuse of ‘he said’.

Want are Accenture’s main industry focuses?

  • Communications, media, and technology
  • Financial services
  • Government and public service
  • Products – an interesting bag covering retail, department stores, travel, transportation
  • Resources – mining, energy, utilities

It has industry based consulting groups in each area that know what is happening in their markets, technologies, changes in dynamics, and operating models.

It is heavily into digital strategy – multi-channel, security, analytics, implementation – with a focus on the cloud, virtualised desktops and technology.

What is BPO?

I see BPO as an end-to-end change vehicle for organisations to drive operational efficiencies and new capabilities.

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service. It typically involves back office – like HR, finance, and accounts or front office like customer facing contact centres.

Ives thinks it can be almost any aspect of business as long as it is cost effective and delivers a better outcome. It can be related to peak needs or ongoing needs.

But he is trying to differentiate Accenture’s offerings by adding strategic consulting and digital strategy (technology) to BPO customers. There is a real difference between operational and infrastructure BPO and real line of business process outsourcing. Accenture is more process oriented – not just providing ‘bums on seats’.

What has been the evolution of BPO?

  • The 1st generation of BPO was to get operating functions and headcounts off the books. That was the mid-90s.
  • The 2nd generation was to lower cost by going off-shore - early 2000 – offshore labour arbitrages
  • The 3rd generation is about service levels – mix and match of on-and-off shore with a heavy focus on continuous improvement
  • The 4th generation is about using analytics to structure contracts to committed outcomes – real objectives and outcome oriented contracts
  • The 5th generation is interesting – up until now most of the BPO has been delivered on a client’s own technology - IT - and now we see it delivered by cloud and service. BPO as a service!

But the bulk of the market is still at the 3rd generation – labour oriented. But there is a very strong move to add technology and innovation to BPO. Clients need to look at BPO as an end-to-end process.

What we are seeing is that clients are getting cost and labour advantages but have not really moved the business forward. Where do I go next? The answer is to use digital transformation and end-to-end processes using digital channels to deliver not only more efficiency but do it differently – better and change the balance to a technology-enabled model.

In many respects the latest 5th generation is best – it is very focused on what the client wants to achieve. It is more of a partnership based on trust. BPO is not just about the basics but a focus on what is really important. And that’s also about payment models to – the move to OPEX over CAPEX.

But the organisation has to be ready for change, and its leadership has to be ready!

What about Analytics – what do you mean by the term?

For my sins, my master’s thesis was on business intelligence. To me simplistically there is a spectrum of reporting that comes from ERP and core systems, and then it is sliced, diced and charted. But there is a huge challenge in drawing additional insight and inferences from that data – statistics and predictive modelling.

Analytics, arguably, is the most pervasive of these trends, and we will see more and more insight being gleaned from the masses of data that can be accessed inside and outside of the organisation.  Insights that can be applied to operational improvements, customer engagement and net promoter scores, product, and marketing, channel design and optimisation, employee engagement and development.  The more effective BPO providers are in collating data and generating valuable insights, the better positioned they will be to drive value inside BPO and for clients.

Perhaps that is the 6th generation where BPO is not about process outsourcing but digital transformation via machine learning, advanced analytics, workflow analysis and even robotics. Do we really need a person to do the job?

What impact is cloud computing having on BPO?

Technology is the enabler. Some predict it will make some providers redundant. Others are talking about the potential of BPaaS (Business Process as a Service) to add significant value to clients and providers.

Managed Services, BPaaS, and 5th generation BPO are the key trends for the industry over the next five years.  Clients will be able to reduce their traditional IT spend by taking advantage of cloud-based applications (SaaS) while getting the operational and service quality advantages that BPO can provide. Clients are already requesting the integration of SaaS and BPO, and providers will need to develop new capabilities to be able to respond.

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Ray Shaw

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Ray Shaw ray@im.com.au  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

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