Digital disruption, is haunting the Business Process Outsourcing (BPO) legacy for many business leaders.
Gone are the days of outsourcing your process problems for quick tactical wins that compromises strategic needs. Where the seduction of labour arbitrage and small step change improvement overwhelmingly trumps reengineering for agility and the future strategic needs of the business and it’s customers.
As companies using services in the $180+ Billion BPO industry (growing at 5.3% pa) are going through a reflection or ‘learning cycle’, many face into Business Process Outsourcing (BPO) decisions of ‘legacy restriction’. Being ‘tied into’ these decisions in the wake of digital disruptive options becoming available.
The three highest ‘legacy restriction’ elements are;
1. Contract: Many tied into long term contracts that make it difficult to entertain a change;
2. Process interdependence: the entangled relationship with the outsource partners. Making change risks and cost hurdles too high due to the process complexity. Is this currently a lose- win scenario?
3. Process IP: The clarity around the process is poor, its real costs to execute unclear, and performance and efficiency ambiguous.
If the restriction strength is high, and the underlying process issues are high, then there is an emerging risk that many are not prepared for.
It is coming.
Digital disruption and process automation means that the thinking of moving to cheaper labour, has now evolved to automating the function. Does that leave your business exposed?
A recent Ernst & Young publication ‘20 issues on outsourcing and offshoring’ said “A well-developed outsourcing and shared services delivery model that is appropriate for your organisation can leverage capabilities, reduce costs and increase agility to deliver sustainable business value.” Of course this is true for those that are well developed. However, many are not, and falling further behind.
The rapid growth of digitisation and the ability for disruption in these markets, will expose many large businesses with a BPO solution in play with large third party providers. They and their partners will be too slow to react to the wave of change that is coming.