Distances are shrinking, markets are globalising rapidly and businesses today need to operate at Internet speed. To compete successfully in the new world, companies are looking for ways to better align business and IT, standardise and streamline business processes, mitigate risk and reduce costs across the board.

Similar to IT outsourcing’s ability to help businesses compete through lower costs and improved access to technology, companies are beginning to take advantage of business process outsourcing (BPO), writes Oliver Fortuin, head of services at Hewlett-Packard SA.

 Specifically, companies are looking to identify those non-strategic processes that are ripe for outsourcing, to educate themselves on the risks and benefits and to understand the offerings and capabilities across the BPO service provider landscape.

Some interesting purchasing trends have emerged in BPO including such things as an increase in adoption rates, companies demanding more from BPO providers, clients demanding greater focus on measuring impacts and results; as well as a focus on service providers that can deliver rigour and governance within a multi-vendor outsourced environment.

Looking at the market, we are seeing the following trends and predictions in BPO in 2007:

1 – Companies want and need more from BPO: There is a need for more than just cost savings. Buyers are making decisions that will improve processes and customer service – balanced with cost-cutting goals. Customers are also looking for business transformation along with rigour from a BPO provider in benchmarking and measuring the performance outcome of the outsourced services. Leveraging the best people, processes and technology for business transformation organisations are looking to achieve greater consistency in the delivery of services to customers and suppliers, compliance with regulatory mandates, better governance as well as decreased time to market.

2 – Success will be defined by the collaborative nature of relationships and the ability for continuous improvement: As companies continue to outsource more of their business processes, building solid relationships with service providers will become more important. Relationships need to be collaborative, which means that an organisation and its service provider work together to build strategic frameworks, equipping the business for the growth and agility to meet changing business demands. Whilst reactivity could be tolerated in the past, pro-activity is now key to ensure a sustained competitive advantage. By working collaboratively, service providers will be able to better anticipate what changes and challenges companies will most likely face as a result of their business plans – and help them to respond accordingly.

3 – As multi-sourcing becomes more prevalent, governance will be key: As companies start to see the benefits of outsourcing, they are also made aware of an increasing number of sourcing options. Multi-sourcing has therefore emerged as an option that is gaining increased attention form businesses. Using multiple vendors enables organisations to have access to best-in-class across processes and industry experience. This does, however, pose a challenge in terms of which vendor to select. This also gives rise to the need for the effective management of multiple vendors. To achieve this, governance and training will be critical for organisations’ multi-sourcing project managers in order to mitigate risk and ensure service levels are met.

4 – Measurement and quality are top of mind: For both buyers and service providers, having a set way to measure the impact of outsourcing on the company’s growth will aid them in proving the benefits of outsourcing. Without it, customers are at risk of not making clear their expectations and service providers are at risk of not being able to prove their value. Effective measurement criteria enables customers to demonstrate to their organisation that by outsourcing, they are not only saving money; but gaining access to specialised skills, cutting-edge technology and processes that deliver tangible benefits to the business. This translates into greater productivity and cost-savings. Service providers need to utilise current standards for process management and measurement (e.g. Six Sigma and ITSM) to ensure governance and measure the benefits of outsourcing; such as process improvements, customer satisfaction and the ability to adapt to changing business needs.

5 – BPO contracts will become increasingly sophisticated: Contracts are becoming more sophisticated and will focus on how the service provider can transform the business by offering an array of business capabilities. In the past, contracts have focused primarily on cost savings and services, however, the focus has now shifted to value-add. Customers want more options and want a set way to measure progress. Contracts also need to be more flexible and need to be able to evolve with the changing needs of the company.

6 – The global footprint for BPO will continue to expand: India is no longer the only hub that buyers will go to for outsourced services. Although companies have become more comfortable with India, they are also evaluating other options. Outsourcing decisions will be based on what makes the most business sense – with the least risk. Evaluation criteria for a suitable destination include the availability of skilled resources and language proficiency. Companies are no longer just looking to move service desks or manufacturing capabilities offshore. There is a real need for highly educated people in specialised fields such as finance and administration, procurement and product fulfilment that have the right processes and capabilities to cut costs and help drive revenue.

7 – To become truly global, rigour and consistency will be needed: As companies become more comfortable with a global delivery model and having less worries as to where work is getting done, they will be looking for standardisation and consistency in services around the globe. Service providers that have a truly global sourcing delivery model will concentrate not only on building clients a solid and integrated global infrastructure, but on processes and standards that will deliver consistency. This is especially important now that work is being moved to different parts of the world.