By Laton McCartney

Traditionally, the business heads for, say, human resources or finance and accounting would sign a business process outsourcing (BPO) agreement with a supplier. Then, after the fact, they'd go to the CIO and ask if IT could integrate the newly acquired service into the corporate system.

Today, however, as companies seek greater synergies and try to jump-start growth coming out of the recession, the relationship between IT and BPO is strengthening and becoming increasingly vital. "The link between technology and BPO is becoming more important now," Anoop Sagoo, a senior executive with Accenture, told CIOZone. Indeed, that link is critical to many third-generation outsourcing strategies designed to reap the benefits from improving inefficient processes and functions. IT, Sagoo says, provides the major underpinning for -- and payoff from -- this goal.

Which for the CIO can prove both a difficult challenge -- BPO can be extremely complex and its benefits may seem elusive -- and an opportunity for IT leaders to provide strategic vision and leadership on an enterprise-wide basis. Indeed, by taking a leading role in integrating IT outsourcing (ITO) and BPO, the CIO can achieve a degree of business and IT alignment that would have been out of reach not long ago.

Like ITO, the BPO market is dynamic and currently in flux. Here are six trends CIOs need to track in order to keep up to speed:

BPO Spending Is Catching Up

The global IT outsourcing market has traditionally outpaced the BPO market in growth, but that's changing. In 2009, ITO spending was estimated to be between $230 billion and $250 billion, well above BPO spending, according to Accenture. Now, though, BPO is growing at a faster rate. Accenture estimates mainstream BPO expenditures will top $300 billion by 2012.

BPO Supplier Consolidation Is Inevitable

According to a 2009 Gartner study, a number of business process outsourcing service providers will exit the market in coming years, as it is difficult for them to stay afloat due to the slowdown. "One-quarter of the top business process outsourcing service providers will not exist as separate entities by 2012," said the study. Market exit, acquisitions and the ascent of new vendors will rearrange the BPO provider landscape in the coming years, it said. The study focused on India-based BPO suppliers.

Bundling Is on the Upswing

If the mega-suppliers such as Accenture and IBM have their way, IT and BP outsourcing will increasingly be bundled, meaning all the departments from IT to HR will deal with the same vendor. And with the bundled or consolidated model, CIOs need to be front and center in regard to everything from contract negotiating to determining the long-term business outcome of the contract. The result: In many instances ITO and BPO are merging into one seamless enterprisewide solution.

Getting Smarter

Sagoo notes that Accenture has added business intelligence capabilities to its BPO capabilities as improving BI has become a priority among customers. It's not alone in this regard. Other suppliers such as Capgemini also offer BI and analytics capabilities. By some estimates the convergence of process, technology, and BI/analytics may produce exponential savings in the near future.

Savings Are Secondary

Initially, both ITO and BPO were driven by cost reductions, price and labor arbitrage. That's still true to some extent, says Sagoo. "Cost reduction remains a driver," he says. More important, however, are business outcomes created by an effective ITO/BPO program. One example is being able to close your books early and reduce the billing cycle by a few days. "And driving more cash and liquidity into the business," adds Sagoo.

A cautionary word, however. In earlier days, outsourcing clients realized the benefits in the first year in the form of savings, and from then on the question was, "What have you done for me lately?" So-called business outcomes are not as easy to gauge, especially from a bundled service, and may take longer to achieve. As a result, Accenture advises planning the end of the engagement at the beginning of the contract. In other words, know what you want the business outcome to be upfront.

The Governance Factor

Sagoo sees governance -- making sure organizational structures are aligned -- as another key driver in creating a combined ITO and BPO approach. "Companies are taking governance very seriously these days," he notes. As an example, one of Accenture's clients, Thomas Cook, says it moved to a bundled outsourcing model in large part to generate value thorough a strong joint governance model that encourages problem solving on both the client and supplier side.

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