Users warned as BPO hits the hype meter

IT managers are warned not to buy into the business process outsourcing (BPO) hype with some vendors exaggerating their capacity to offer end-to-end solutions.

The warning was issued by Forrester Research in the wake of a survey of 82 senior IT executives and 12 BPO early adopters that found vendors are making promises about their capabilities that they cannot keep.

Customers are suffering which has led to "strained interactions" with service providers over inflexible contracts and an inability to measure performance.

Despite the buzz surrounding BPO, which has emerged as a sweet spot for providers in the past 18 months, Forrester said there isn't a single vendor that can offer a comprehensive end-to-end menu of BPO services.

Instead, vendors tend to be strong in one or more BPO segments, for example in bulk transactions which is set to generate global revenue of $US58 billion by 2008 the research firm said, with Unisys and Affiliated Computer Services (ACS) two vendors that stand out from the pack.

Other areas of BPO include broad shared services (HR and finance administration), high-volume vertical processes such as the administration of loan applications or insurance policies and niche vertical applications that cover more complex processes.

Perth-based Cockburn City Council's MIS Tony Manno, who has served in IT management in local government for the last 16 years, has always been cautious of outsourcing any business function to an outside provider. His wariness, he said, is culturally ingrained. "Local government likes to be in control of [its business] rather than give it to an outsourcing provider to look after.

"While I've been in various government agencies, the trend has always been not to offload the provision or control of a particular function - whether that be HR or helpdesk - to any big-name providers. However, I will buy a solution and implement it through a partnership with a trusted vendor to leverage things like R&D, staff training and best practice."

Manno has mixed feelings about the skills of outsourcers in general, although he did investigate helpdesk support from a service provider, but feared delays in response time when an internal person can "get off their butt and walk 50 metres across the building to have a look at the problem".

Information services manager at pharmaceutical company Boehringer Ingelheim, Matthew Perry, admits he is not a big fan of outsourcing, although "we outsource some of our IT infrastructure and helpdesk".

"I would only outsource something we really need and are not experienced in [managing] in-house, like an SMS desktop solution," he said.

"It doesn't surprise me that users are being warned about the merits of service providers. I'm yet to be [convinced] of any of outsourcing's benefits." However, Perry has found it is not only BPO providers that overstate their capabilities.

Customers, he said, are sometimes to blame for their relationship with vendors becoming difficult because their "expectations of outsourcers are often poorly defined or poorly conceived".

This is because outsourcing decisions often exclude IT and are made by finance and business heads, he added.

- with Juan Perez

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