The upcoming new year brings in new business realities, delivery models, destinations and technologies to the outsourcing industry, according to the fifth annual trend predictions released today by the International Association of Outsourcing Professionals® (IAOP®).
While the uncertain economy and the elections will impact the industry, the winners will be: locations in the U.S. and nearshore; collaborative delivery models; and companies using converging technologies and corporate social responsibility, IAOP’s thought leaders say.
Here are the top trends to watch:
- Sourcing Close to Home: Higher unemployment, economically blighted urban areas and local government incentives will drive more companies to stay on shore, especially in the U.S. Nearshoring, rural sourcing and domestic sourcing will be on the rise.
- BRIC: Brazil, Russia, India and China will surge as outsourcing destinations. As the host to the 2012 World Cup and Olympics, Brazil will be in the spotlight as a destination.
- Collaborative and Strategic: Models where customers and service providers work collaboratively to develop performance-based partnership will be increasingly used. Customers will move outsourcing out of the back-office and into more customer-facing processes and strategic opportunities.
- M&As: Expect to see more consolidation as providers struggle with tight access to capital and to meet growth expectations given the uncertain economic and political situation worldwide.
- Technology Convergence: The convergence of social networking, collaboration and mobility platforms will create a significant demand for value-added outsourcing services. Companies will increase their emphasis on social media to source talent globally, position their products and services, and collect intelligence.
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- Cloud concerns: As cloud computing solutions continue to proliferate worldwide, customers and suppliers will struggle to comply with increased government regulations, the real risks of cyber-security and threats of eco-terrorrism.
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- Impact Sourcing: Employing individuals with limited opportunity for sustainable employment as principal workers in Business Process Outsourcing (BPO) centers to provide high-quality, information-based services to domestic and international public and private-sector clients will increase.
The International Association of Outsourcing Professionals® (IAOP®) is the global, standard-setting organization and advocate for the outsourcing profession. With more than 110,000 members and affiliates worldwide, IAOP helps companies increase their outsourcing success rate, improve their outsourcing ROI, and expand the opportunities for outsourcing across their businesses. To learn more, visit www.IAOP.org.
While the philosophy of offshore business process outsourcing (BPO) is still evolving, there have been some distinct trends and business models that have emerged. The concept of outsourcing has its genesis in a number of industries. Be it information technology, healthcare – organizations have taken the step in this direction by outsourcing various components of their IT – hardware, software, application development, etc. BPO, in many respects is an extension of this same philosophy, but operates at a higher level and is more strategic in nature. Almost all BPO strategies in this industry will have two major components to it – one is the supporting information technology and the other is the business function to be outsourced.
Hereunder are the emerging business models in most industries offshore BPO include:
Managed Services Outsourcing
Is primarily outsourcing that refers to activities which are transactional in nature. Business functions outsourced include low value and non-strategic activities which have very little business impact. These include mailroom services, data entry, data digitization, etc. Broadband technologies are the main drivers as to why transaction based outsourcing is being rapidly adopted. For many organizations it is easier to outsource these basic services and see rapid returns. Once an organization outsources these business functions, it is then ready to move on to more complex ones. These also do not entail high capital expenditures and are easy to operationalize.
Business Function Outsourcing
This business model encompasses outsourcing complete business functions and processes. It hence operates at a strata above managed services outsourcing. A classic example of this is outsourcing business process claims adjucation wherein both, the IT as well as the business processes is outsourced. It is necessary though that both (the IT and the business process) need to reside offshore. In fact, in most cases, the IT is outsourced and remains onshore while the manual processing is sent offshore. The outsourcing vendor takes over the function at all 3 levels – people, process and technology. Organizations should identify specific business functions which represents specific points of pain and explore the option of outsourcing these.
Such function presents a true transfer of responsibility and ownership of an entire business function. These business functions are generally high volume and the level of client involvement post-outsourcing is high. The key differentiating factor between this and managed services outsourcing is the strategic and financial impact on the business. This model tends to generate greater returns of investments for the client organization. Service levels in such as arrangement tend to be important components of the expected benefits.
Enterprise Operations Outsourcing
This is essentially an extension of business function outsourcing with two major differences. While business function outsourcing is limited to one business process, enterprise operations outsourcing spans multiple processes. For an organization adopting this business model, the majority of its back office functions are outsourced through one vendor and one combined package. The other key difference is one of specialization. Most offshore vendors who offers enterprise-wide outsourcing services specialize only in this industry. Hence the service offering is specifically tailored to meet the needs of the client organization.