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By Lauren Bielski
Whether you're talking about IT or back-office work, business process outsourcing contracts signed during the recession have tended to save dollars in a way that can be easily demonstrated to senior management, say BPO experts. As companies move past simple labor arbitrage, deals will share another trait: the promise of simplified execution via business process management (BPM).
Why is BPM a hot commodity? For one, it promises efficiency by helping out with best-practice deal execution and creates more clarity around business process. "Events surrounding the downturn have pointed out that longstanding inefficiencies in a series of support areas won't cut it anymore," says Stan Lepeak, managing director of research with EquaTerra, a global expert advisory services firm.
At the same time, the buzzword "transformation" has reemerged after relative seclusion since earlier in the decade. TPI, a human resources outsourcing specialist, defines transformational sourcing as "effecting continuous strategic change and tying the results of the outsourcing initiative to strategic business outcomes." The firm notes that such an engagement is collaborative and requires a risk- and gain-sharing relationship among the organization and its service providers.
Part of this call for transformation is simply the result of a crowded and confusing sector that is in need of consolidation and new forms of differentiation. "There is an excess of providers in the current market," says Scott Gildner, partner and president of TPI North America, which has U.S. headquarters in Houston. "What you'll see, I think, is a healthy trend toward specialization. Some of this will be in the more overt areas such as industry, or operational excellence, but some of it will be platform-based."
BPM tools will help drive transformation and make these deals float. Emerging BPO deals of all types, even if ambitious in scope, with distributed IT assets in support, will rely on BPM. "Call it the amplification effect from a crossover between BPM and BPO," says Eric Deitert, director of horizontal product marketing and analysis with Pegasystems, a BPM vendor that also functions as a go-between in BPO arrangements.
BPM can help in the end-to-end processing involved in revised mortgage workarounds in the financial services industry, for example.
In guiding and codifying workflow, BPM makes digital what used to be flow charts scribbled on white boards or sketched out on notepads. This method allows so-called child, or subordinate, processes to be more easily taken over by contracted outsiders in jobs such as loan processing, application support, or claims processing, according to experts.
Cost Savings Via Control
According to a recent article in CRM Buyer, the current business doldrums offered an opportunity for some BPM vendors—a market currently valued at about $3 billion annually—to take charge and gain market share. Companies such as IBM, which now offers BPM capabilities affiliated with Websphere; Global 360, which in July released its Process-360 10.0 program; and Software AG, with WebMethods, are all positioned to better cement the working partnership between outsourcer and client.
Why is BPM so appealing in the context of BPO? It presents the possibility of control, the ability to make higher-risk deals deliver quality work with a lighter operational footprint. Ken Volmer, principal analyst at Cambridge, Mass.-based Forrester Research, told CRM Buyer that the recession has dramatically increased the pressure to operate efficiently, perhaps with less dependency on suppliers and with easier ways to enter—and exit—arrangements.
Volmer noted that BPM tools, when used correctly, create visibility into what is or isn't going on with business processes. BPO performance management tool Gravitant, for instance, supports metrics management and benchmarking to make sure objectives are reached.