With IT managers increasingly keeping one eye on their resumes when making business decisions, Gartner's warning this week that CIOs who ignore business process outsourcing (BPO) options in their strategic planning are making “career-limiting decisions”.

Gartner analyst Jim Longwood claims an organization can potentially move 30 to 60 percent of its back-office operations to a BPO service provider, radically reducing its spend on IT projects and related infrastructure, by implementing a BPO strategy.

Longwood says BPO companies, including Accenture, Australia Post, EDS, Kaz, Oxygen, IBM, Salmat and Unisys, as well as specialists from countries such as China, India and the Philippines, are “knocking at the doors of Australian chief financial officers right now”.

“Large enterprises have the opportunity to save millions of dollars from BPO, and CIOs must ensure they are part of any negotiations or risk being marginalized in their own organization,” he said.

Not all BPO will go overseas, according to Gartner research.

Global estimates say that only 14 percent of $US173 billion spent globally on business process outsourcing by 2007 will involve offshore contracts.

Longwood says that for most organisations the key question regarding BPO is “not if, but when it will happen”; and he predicts the practice will be commonplace among Australian companies within three years.

Many local financial institutions are now outsourcing activities such as mortgage processing, credit card applications, claims processing and insurance renewals.

“When an enterprise outsources repeatable transactions, the number of IT projects and related infrastructure to support and improve those processes goes away,” he said.

“This serves to further reduce costs to the business, as well as dramatically changing the size and role of IT in the organization. Even software giants, such as Oracle and SAP, stand to lose a lot of enterprise customers as BPO takes off.”

“However, this is a two-edged knife. While there may be substantial cost-savings, executives must also consider the impact on the delivery of internal and external services. This aspect of change, particularly if it affects customers, is often forgotten to the detriment of the business.”

Globally, Gartner estimates that this year some 65 percent of all offshore BPO expenditure will be dedicated to running call centres in low-wage countries. Another 20 percent will be spent on transaction processing with the rest dedicated to e-mail and chat services.

Analysts also predict 50 percent of offshore centres established by western companies will be sold to indigenous entities that will then contract-back the services.

Longwood says it is a mistake to assume significant chunks of Australian business activity will move offshore. Initially our privacy legislation will restrict the amount of process work that can go offshore, he said.