Why 6 out of 10 GBS Operations are Actively Outsourcing

Business process outsourcing - or BPO - is a key topic for GBS, and unfortunately, it's one that risks being neglected from the limelight. While many GBS conversations over the last decade have centered around optimization, process improvement, and automation, we may have lost sight of a core fact that 6 out of 10 Global Business Services are still actively outsourcing.

In the last decade, BPO service providers have come up the value chain and across many functions including finance, supply chain, HR, and IT. These days many providers have upped the ante. Therein lies a win-win opportunity for organizations. Today’s BPOs are experts in what they do. They bring in best-in-class business process management capabilities, and access to the tools and technologies that GBS organizations need to outsource seamlessly.

Barbara Hodge, Global Online Editor of SSON and Host of SSONext, sat down with Sandeep Poddar, Head of the AkzoNobel GBS India Center to get the low down on where BPO is heading in the recession and beyond. Sandeep is responsible for managing the firm’s BPO relationships. His specialty is leading teams in virtual environments, implementing intelligent automation, driving business transformation and cross-functional collaboration.

The importance of selecting the right BPO service provider 

Selecting a service provider with deep expertise and knowledge about your function is vital. For the majority of organizations, this decision offers many choices. Sandeep lays out a 3-step framework that focuses on the foundations of finding BPO partners:

1. Experience and expertise: Many firms focus on service providers who bring years of experience, with specific expertise in their function - for example finance. This needs to be front and center.
2. Technological prowess: More and more, firms are looking to gain an advantage by creating partnerships with BPO to deploy technology. Huge opportunities lie in exploring what this can do for your businesses.
3. Commercial viability: Sandeep’s final factor is the commercial aspect or the economics of outsourcing. How this fits into a firm's budget is a pretty key factor.

Where does an outsourcer fit into today's sourcing decisions with all the automation options (like RPA) at play?

Almost 50% of organizations start with cost arbitrage in mind when it comes to BPO decision-making. If you look at overall outsourcing in shared services and GBS, as the company develops over a period of time, value is realized. More recently, organizations have observed that value is produced through analytics, automation, and the use of process engines, which allows for much more work to be done with fewer people and hours, and better integration of time zones. 

Often, the automation at play comes from the outsourced service providers themselves. They bring in the relevant automation engines and related technology. While RPA (robotic process automation) can indeed dynamically improve business performance by automating the repetitive processes that cut into the human resource pool, an organization-wide RPA implementation can be extremely complicated, and this is where BPOs will continue to play a relevant role.

Where should BPO ‘centers of excellence’ sit?

Depending on an organization's maturity in the outsourcing journey, centers of excellence need to be looked at differently.

“For example, if somebody just started with outsourcing, I think the organization needs to spend a little bit of time to standardize, optimize, and automate,” Sandeep said. “And once you reach a more evolved stage, then it becomes quite a natural choice to start looking at centers of excellence. On the other hand, if you work in a hybrid model, where you have shared services, and BPO providers, then it makes sense to retain the centers of excellence within the shared services portfolio, and work with a more transactional framework with your service provider. That’s how you will really get those automated solutions from them.”

Captive vs Outsourced model

Sandeep also spoke about a Captive vs Outsourced model for BPOs. In some recent research at SSON Research & Analytics, it was found 80% of respondents polled about their preference between a captive and outsourced model said a captive model gives you more benefits. Only 20% said outsourcing gives you more benefits. However, overall, the survey indicates the plan is for companies to outsource more. Right now we have about 35% of the market that's fully captive, and in three years' time, that will reduce to 25%. The point the data highlights is that even though the perception is that there are greater benefits in a captive model, the fact is that shared services and GBS do outsource a lot.

If you like the audio medium, and would like to hear a detailed interview that dives much further into BPO for GBS, please listen to the SSONext podcast with Barbara Hodge and Sandeep Poddar on Spotify or Apple Music.