GartnerEntirecontents©2002Gartner,Inc.Allrightsreserved.Reproductionofthispublicationinanyformwithoutpriorwrittenpermissionisforbidden.Theinformationcontainedhereinhasbeenobtainedfromsourcesbelievedtobereliable.Gartnerdisclaimsallwarrantiesastotheaccuracy,completenessoradequacyofsuchinformation.Gartnershallhavenoliabilityforerrors,omissionsorinadequaciesintheinformationcontainedhereinorforinterpretationsthereof.Thereaderassumessoleresponsibilityfortheselectionofthesematerialstoachieveitsintendedresults.Theopinionsexpressedhereinaresubjecttochangewithoutnotice.COM-18-7320L.StoneResearchNote19November2002CommentaryAggregatedBPODealSigningsWillContinuein2003Aggregatedbusinessprocessoutsourcingwillgrowsteadilyin2003,andproblemswithsomeearlydealswillemergein2005.Enterprisesandoutsourcersmayneedtoadjusttheirdealsasassumptionsareprovedinvalid.Businessprocessoutsourcing(BPO)hasbeenaroundforseveralyearsintheformofaccountspayable,payrollprocessing,claimsprocessingandmore.However,thistypeofsingle-processoutsourcingisnowbeingsupplementedbyhighlyaggregatedBPOofferingsthatarefocusedonenterprise-levelservicesupport.Inthesetypesofarrangements,asingleserviceprovidertakesresponsibilityforthepeople,processesandtechnologyassociatedwithabroadsupportcategory.Anexamplewouldbeoutsourcinghumanresources(HR),includingnotonlysimplepayrollprocessing,butalsobenefitsadministration,personneladministration,hiringandrecruiting,andtrainingandeducation.In2002,manyaggregatedBPOdealsweresigned.Table1containsarepresentative,butincomplete,list.Table1SomeoftheAggregatedBPODealsThatWereSignedin2002ClientProviderScopeStateofFloridaConvergysMultiprocessHRGrafTechCGIGroupMultiprocessfinanceandaccountingAT&TAonMultiprocessHRIBMFidelityMultiprocessHRPrudentialExultMultiprocessHRHydroOneCapGeminiErnst&YoungHR,customercare,andfinanceandaccountingTrinityBearingPointMultiprocessfinanceandaccountingSonyElectronicsHewittAssociatesMultiprocessHRSource:GartnerResearchThedegreesofprocessownershipvaryfromdealtodeal.Therefore,itisnotpossibletocompareonerelationshipwithanother.AcommonthemeofmanyoftheearlyaggregatedBPOdealsistheir"newness"andimmaturity,whichmanifestsitselfinseveralways.Sometimes,itisthefirsttimeanexternalserviceprovider(ESP)hasofferedthistypeofserviceorsuchacomplexoffering.Insomeinstances,itisthefirsttimethatanindustryoraparticularenterprisehasoutsourcedsuchabroadsetofCopyright2002COM-18-732019November20022processes.Thislevelofimmaturity,coupledwiththecomplexityofthevariousserviceofferings,canleadtoasignificantmisalignmentofexpectations.ManyofthecurrentcropofaggregatedBPOdealsresembleearlyIToutsourcingdeals,becauseenterprisesaretransferringassetstoESPs.Prediction:ThirtypercentoftheBPOdealssignedbetween2000and2002willprovetobeunprofitableforESPsorunabletodelivertheoriginallyanticipatedresults.GartnerpredictsasteadycontinuedgrowthintheaggregatedBPOmarketthroughout2003.Theprimarydriversbehindthisgrowthwillbe:1)anenterprisedesiretofocusontheircorecompetencies,2)aneedtotransform(orcreate,inthecaseofaspin-offorstartup)currentenvironmentsthat,inmanycases,havebeenunderfunded(asisthecasewithmanyHRlegacyenvironments),and3)adesiretoreducetransactioncosts.Impactin2003:FromtheESPs'perspective,theBPOmarketrepresentsahighlyattractiverevenuesourcebecauseofthelowdegreeofpenetration,coupledwiththesignificantspendingthatisassocia...
