While the BPO market continues to grow, how
do you ensure outsourcing will work for you?
According to IDC, worldwide Business Process Outsourcing spend has grown from $380 billion
in 2004 to $640 billion in 2009. Clearly BPO is more than just a passing trend – but what
continues to spur demand and how is the market changing? Corporations the world over
recognize that non‐core activities contribute to the wrong side of the P&L. The BPO market was
born on this premise, and has produced some truly huge outsource contracts in the last decade.
Companies asked themselves, ‘Why are we investing in capital systems and spending resources
on this when we could have a specialist BPO supplier take on the process on a cost‐per‐task
But outsourcing isn’t just about taking call centers offshore ‐ it’s about handing a complex
process to a service supplier and gaining some added value. Indeed the offshore bubble may be
about to burst in India, for example, with Gartner warning that skills shortages, cost, quality and
security issues may erode as much as 45 percent of India's market share. So where will BPO find
growth over the next five years?
There's a shift towards smaller, niche suppliers. Customers are demanding greater added value
and flexibility from their BPO partners, and are therefore beginning to migrate to more
specialist companies. Often this will involve outsourcing a single process rather than a whole
department, therefore suppliers need to be nimbler and more flexible:
• Cost reduction is not enough ‐ buyers operations, and not expect long‐term, fixed
should expect to see an improvement in the contracts. Buyers expect to be able to
process itself, requiring the supplier to have outsource smaller, specialist processes and
specialist business and process knowledge. seek options such as ASP, mobile working
and hosting services.
• Companies want better management of
their intellectual property. They want to • The process that is outsourced will change
build a working relationship with their as the business requirements change or
supplier in order to improve security and new regulations come into force. The
trust. supplier needs to adapt to this changing
landscape and not penalize the customer
• Flexibility is critical – suppliers must be via excessive change fees.
ready to adapt to fit with clients'
More than just managed applications
The days of simply outsourcing a business application to a BPO supplier are numbered. Handing
over an existing software solution to be run by a third party adds little or no value – it may be
possible to switch operations offshore to reduce labor costs, but it does not benefit the
organization as a whole process.
Customers today are looking for specialists that can offer technologies that can cut costs
without resorting to offshoring. They are looking for suppliers that own the technologies,
bringing further value ‐ if they need to tweak the processes or add functionality for a client then
this makes it much easier. Organizations that use outsourcing services do not wish to pay
excessive fees for change.
Ideally, a BPO supplier will offer skills and experience you may not have yourself – it's not about
throwing cheap labor at a task – the process may be non‐core but you want to improve it, not
trash it. For example, some airlines outsource the processing of passenger flight tickets and use
secure hosted archives to access the ticketing information. Does the supplier have experience
with this type of task? Can they provide the necessary audit trails, compliance standards and
service level agreements? Can they add value to the archive, allowing it to add value back to
The emergence of BPO suppliers that use their own technologies (and understand how to
optimize the business process) has blurred the lines between developer, integrator and
outsourcer, to the benefit of the customer. It's now possible to pick and choose which parts of
the technology to run in‐house and which to outsource. A single supplier for the whole solution
brings the obvious benefits of supplier accountability.
Who's looking at your data?
One of the major barriers to outsourcing has been security. Keeping data secure can be of
paramount importance. Clients are often dissuaded to outsource mission critical processes as
they do not want to lose control or sight of the data, particularly if it is legal, financial or
customer oriented. This is a valid concern, with recent cases highlighting the pitfalls. Clearly,
security has yet to reach the top of the agenda for some suppliers. Before trusting sensitive
customer data to third parties, organizations should satisfy themselves that their partner's data
security is not just good – it must be excellent, it must be demonstrable, and preferably
Bending over backwards to help
Customers want to work with BPO partners that can offer them the flexibility to change and
adapt their processes according to their needs – your business does not stand still, so why
should your outsource deal? Clients no longer want to be roped in to long‐term, inflexible
outsource agreements: the days of the mega outsource deal are over. Clients are looking for
outsource partners able to provide a range of solutions and services that fulfill today's
requirements and can change according to business needs.
Flexibility extends to offshoring: many customers recognize the cost benefits but are reluctant
to outsource processes to Asia – there are many risks associated with moving processes to
another continent. The smart money is now looking at the on‐shore market. Companies
looking to outsource a process or group of processes should consider the significant list of
How to find the right Client/Supplier fit
With customers demanding greater value, seeking to reduce risk, asking for service guarantees,
increased security and greater flexibility, who'd be mad enough to be in the BPO game?
Suppliers will need to adapt to survive ‐ specialization is the way forward. Suppliers must know
their market, be able to control the technologies they use and minimize the risk to their clients.
For the clients, procuring the right outsource provider must be a strategic process. It’s
important to have an open dialogue from the onset. Use your best people within the
procurement team, and to ensure continuity, the same individuals must continue to manage
the retained business. Set timescales realistically and don’t cut corners just to get a quick win. It
is more important that the agreement will work operationally as well as legally. Above all,
ensure there is a cultural fit. If you are looking to transform your business operations through
process improvement you will need to look for the ‘soft’ benefits. Don’t just chose a supplier
that can hit your SLA’s (after all, SLA’s are only a set of minimum standards to comply to). Look
for a supplier that can also provide the ‘soft’ benefits; market knowledge, specialist processes,
increased flexibility and security best practice.
IDC is the premier global provider of market intelligence, advisory services, and events for technology markets
Worldwide and U.S. Business Process Outsourcing (BPO) 2005‐2009 Forecast: Market Opportunities by Horizontal Business
Staff Attrition May Stall the Offshore Call Center Boom
Profiting from European Near shore Outsourcing Data monitor
About Extend Outsourcing Services
The Extend Accounting outsource operation provides a business process outsourcing service focused
upon delivering highly efficient, high value business processes. The operation started in Silver Spring,
MD in 1983 and has grown to offer diverse services across to many industries throughout the United
EXTEND INVOICE Our Extend Invoice solution optimizes process performance in financial departments
and business units, enabling your organization to focus on creating added value for your clients. With
Extend your business can automate the entire invoice‐handling process, including paper‐based and e‐
invoicing data capture, invoice‐purchase order matching, review and approval workflow, and payment
EXTEND REMIT Our Extend Remit solution leverages our payment‐processing economies of scale to
eliminate the high costs of paper check processing, reduces labor, alleviates check fraud and facilitates
positive cash management. Additionally Extend makes it easier to transition your vendors to ACH
payments, provide detail remittance information and issue secure positive pay files.
EXTEND UTILITY Our Extend Utility solution enables your organization to optimize energy costs with
extensive invoice audits, line‐item utility usage capture and robust reporting and analysis. Establishing
an energy management plan and implementing cost‐effective energy conservation opportunities can
contribute significantly to your bottom line.
EXTEND DOCUMENT Our Extend Document solution eliminates your paper management hassles on
Day 1. Our solution provides your organization with a transactional audit trail and rapid access to
documents and their histories. Its focus on efficiency enables you to comply with mandatory legislation
and achieve a return on investment.
EXTEND PURCHASE Our Extend Purchase solution enables your organization to optimize the buying
process, saving time and money. By introducing organized procurement processes, you’ll have a solid
foundation in place for improving the rest of the purchase process relating to receiving goods and
EXTEND SUPPLIER Our Extend Supplier solution is an information portal for the receipt, processing and
recording of supplier invoices. The system enables suppliers to enter invoices directly into the portal (as
applicable) and follow the status of invoices throughout the entire process. The portal allows for more
efficient communication between supplier and buyer and simplifies the entire process for your AP staff
as well as for your suppliers.
EXTEND PROFESSIONAL SERVICES Our Extend Professional Services team provides design and
implementation know‐how utilizing over 25 years of experience . This experience provides value add
throughout the implementation process with key significance during the design stage leveraging in‐
depth knowledge of Procure to Pay systems and processes. As operators it is our business to build and
operate the most efficient systems and solutions.
EXTEND ANALYSIS Our Extend Analysis solution provides financial and non‐financial metrics to quantify
objectives and reflect the strategic performance of your organization. These metrics serve as the active
link between strategy and operational performance. Extend enables you to gain real improvements in
quality, productivity and customer service.
EXTEND FULL SERVICE Our Extend Accounting Full‐Service solution allows organizations to benefit
from best‐in class service solutions and extensive process expertise. Our shared service/outsourced
business model has demonstrated that organizations can lower their accounting costs while
maintaining—if not improving—quality and customer service. Our Extend team will work with your
organization to identify a service package best suited to your business needs.
11911 Tech Road
Silver Spring, MD 20904