Information Technology Plays a Critical, Yet Misunderstood, Role in Business Process Outsourcing

Although an increasing number of business process outsourcing (BPO) decision makers understand the critical role Information Technology (IT) plays in BPO success, many continue to struggle to determine how to tangibly act on this knowledge when undertaking a BPO effort, according to the results of a just-completed EquaTerra market study. The study also found that buyers in the Americas and Europe are still uncertain about how to actually account for IT solution options in the BPO sourcing and solution design process.These are the overarching findings from EquaTerra's third annual "Assessing the Role of IT in BPO Success" market study. Respondents to the 2008 survey included more than 250 BPO decision makers in North America and Western Europe. All respondents were responsible for HR, finance and accounting, or procurement BPO decision making in organizations with minimum $100 million in revenue operating across all major industry groups.

Additional key findings from the 2008 market study include:

Perceived importance of the BPO service provider's IT solution to BPO success

- The average score given to the importance of the BPO provider's IT solution was 4.36, up 17 percent from the 2007 edition of the study
- 88 percent of 2008 study respondents cited the provider's IT solution as being somewhat or very important to BPO success

Most critical attributes of BPO service providers' IT solutions

- Flexibility to adopt to buyer process specificities
- Cost-efficiency, so the provider can pass on additional savings to the buyer
- Ease of use for end-users (e.g., via self-service tools, strong reporting)

Top enterprise software preferences in BPO

- Buyer preferences for IT solutions in BPO: While the majority of buyers are open to considering BPO service providers with different IT solutions, they have clear IT solution preferences
- Buyer preference for enterprise software solutions: When entering into BPO efforts, most buyers prefer to continue using the same commercial enterprise software solutions they currently have in place

Said Stan Lepeak, EquaTerra's managing director of Research, "Although IT is linked to business process performance, EquaTerra consistently finds the IT topic, and often the buyer's IT group, under-represented in the BPO process. As a result, poor planning around IT needs and issues in BPO frequently becomes a common root cause of BPO problems."

Similar to prior years of this assessment, the internal IT group was the lead source of advice on IT issues in BPO processes, cited by just over half of the respondents. However, while 75 percent of U.S. respondents identified the IT group as a key source of advice, only 31 percent of European respondents did so. In the 2007 survey, 63 percent of U.S. respondents cited the IT group as a source of advice, compared to 44 percent in Europe.

While these rankings overall are positive, they still show that a relatively large number of the BPO buyers do not meaningfully include their IT group in BPO efforts. While this approach has potential risks, EquaTerra asserts that BPO buyers must seek external IT subject matter expertise if they truly feel their IT group cannot provide the needed support, or if the IT group does not step up to the challenge.

To receive a copy of the EquaTerra Perspective paper on the study, please send an e-mail to: research@equaterra.com.