PublicationDate:6May2003MarketAnalysisBPO:ClimbingtheLearningCurveAbstract:Increasedawarenessandadoptionofbusinessprocessoutsourcingshouldnotovershadowthefactthatearlyadoptersarestillseekingtounderstandthecostandbusinessbenefitsoftheseservices.ByRebeccaSchollandLisaStoneStrategicMarketStatementsBusinessprocessoutsourcing(BPO)canonlybemasteredthroughdisciplineandcontinuousfocusontheanticipatedbusinessbenefits.Establishedrelationshipsshouldbereviewednowandevaluatedintermsofprogressmadetodateagainsttheoverallscheduleandintendedbenefits.2BPO:ClimbingtheLearningCurve2003Gartner,Inc.and/oritsAffiliates.AllRightsReserved.6May2003TheBPOMarketModelSince1999,twoforceshavebeenatworkintheBPOmarket.First,wehaveseentheemergenceofaggregatedserviceofferings—forexample,aBPOofferingisinclusiveofallmajorHRprocessesorseveralspecificfinanceandaccountingprocesses.Second,enterprisesincreasinglyacceptBPOasameanstofocusoncorecompetencies,reducecostsofcurrentoperationsandspeedimplementationofnewtechnologies.InresponsetothesenewertypesofserviceofferingsandtheincreasedadoptionofBPObyendusers,GartnerhasdevelopedanewBPOmarketmodel(seeFigure1).Thecircularnatureofthemodelisreflectiveoftheincreasinginteractionsamongprocessesindemandandsupplymanagement,suchasordertofulfillment.ThenewBPOmarketmodelcanbeusedbyenterprisestoviewandsegmentthetotalityoftheirinternalbusinessprocesses.Asunderstandingofthisgrows,itfacilitatesanalysisofwhatprocessescanbeoutsourced.Enterprisescantheninvestigatewhatisandisnotreadilyavailablefromexternalserviceproviders(ESPs).Figure1presentsafewexamplesofprocessesthataregoodcandidatesforBPO.Figure1GartnerBPOModelEnterpriseServicesHumanCapitalFinanceandAccountingITFacilitiesManagementCustomerAcquisitionCustomerRetentionCustomerSelectionCustomerExtensionMoveBuyStoreMakeDemandManagementSupplyManagement114686-00-01Telemarketing,NegotiationandClosingAccountsPayableAccountsReceivableLogistics,DistributionWarehouseManagement,InventoryManagementInquiryHandling,FieldSupportPayrollBenefitsDirectProcurement,IndirectProcurementContractManufacturing,Product/ServiceCreationSource:GartnerDataquest(April2003)3©2003Gartner,Inc.and/oritsAffiliates.AllRightsReserved.6May2003Formoreinformation,see"BPOMarketModelSpotsProcessestoOutsource"(M-18-9580).StillanImmatureMarketBPOwasvalidatedin2002.Despitethedifficulteconomicenvironment,asignificantnumberoflargecontractsweresigned,andexecutive-levelinterestinBPOrosedramatically.ManyCEOsandCFOswhohadbeenoutsourcingcertainfunctionsinapiecemealwaybegantakingaholisticviewofthebenefitsofoutsourcing.Furthermore,theybegantakingstepstoadapttheirorganizationstothevirtualenterprise—creatingastrongerfocusoncorebusinessandanetworkofspecializedrelationshipsfornoncore—yetstrategic—functions.Otherscontinuetoturntooutsourcingfortransactionalreasons:hopingtoimproveoperationalperformancewhilesimultaneouslyreducingcosts.IncreasedawarenessandadoptionofBPOshouldnotovershadowthefactthatBPOservicesarestillimmatureandthat,inmanyinstances,earlyadoptersofBPOarestilltryingtounderstandtheircostandbusinessbenefits.Thoughbusinessprocessserviceshavebeendeliveredsincethe1960s,BPOhasemergedasamarketonlyinthepastdecade.Eventoday,theBPOmarketshowsthedynamiccharacteristicsofan"emerging"market.DuringthetransitionphasetowardhighermaturityinBPO,thereissignificantconfusiononwhatexactlyBPOis,how...
