IT Outsourcing and Business Process Optimization – Two Sides of the Same Coin
Information Technology Outsourcing (ITO) has become an accepted management practice across most companies and throughout all industries. However, ITO is now more complex than ever before as it penetrates deeper into the value chains of companies. This means that standards are being raised in terms of the benefits ITO providers are expected to contribute to their customers’ success.
Today ITO is frequently an enabler of Business Process Optimization (BPO). As the name implies, companies are optimizing and outsourcing both their back office and front office processes, which means they are relying on third parties to handle such important functions as accounting, sales, human resources, or customer relationship management. Because these and other processes have a heavy reliance on IT to provide key applications, tools, and other systems; BPO regularly incorporates ITO into its tactical plans.
In the recent past, many companies were looking for something uncomplicated and straightforward from an ITO partnership. They wanted greater efficiency, streamlined operations and, most of all – lower costs.
Companies expect much more than that today!
With ITO and BPO together, companies now look for business insight, industry expertise, product/service innovation, a clear focus on corporate goals, measurable outcomes and a commitment to continuous improvement. Of course, reducing costs and increasing revenue are still paramount to the overall goals
In enterprise-level BPO relationships, IT is not just the infrastructure mechanism for delivering computing power; it is a source of innovation and strategic advantage. For example, 40 percent of high performing businesses consider technology provided by their service provider to be a very important component in the BPO relationship. Even greater numbers of high-performing businesses, 56 percent, believe it is important to outsource technology in a BPO relationship.
Flexibility Means More Growth Options
One of the biggest advantages BPO and ITO offer is they help companies increase their flexibility to focus on growing the company more than on maintaining internal systems. In the early 2000s BPO and ITO, as mentioned, were mostly about cost containment, which allowed a certain level of flexibility. Due to technological advances, companies who now choose to outsource their systems and processes, increasingly look for the added flexibility they receive from saving time, reducing costs, and obtaining clear competitive advantages.
Flexibility ultimately allows a company to focus more attention and resources on its core competencies, without being encumbered by the demands of non-core processes or situations. Employees are able to invest significantly more time and energy in growing their company by concentrating on the primary drivers of any company’s success: building customer intimacy, establishing product leadership, and creating operational excellence.
Since business processes are usually enabled and coordinated by technology (e.g. finance depends on IT to maintain the ERP application), Information Technology Outsourcing has become a critical part of BPO. ITO and BPO, although different, are not mutually exclusive and the lines separating the two are often blurred. In fact, it is very common to leverage ITO services without formally outsourcing business processes.
ITO and BPO on Global Growth Track
According to KPMG’s Annual Analysis of Global IT-BPO Outsourcing Deals for 2012, worldwide 1,244 ITO contracts worth $118.3 billion and 226 BPO contracts worth $19.5 billion were signed. Globally, 120 IT-BPO bundled deals were signed with a contract value of $12.7 billion. IT Infrastructure Outsourcing and Human Resource Outsourcing contributed $34.3 billion and $3.8 billion respectively and were the largest procured services globally within ITO and BPO services in 2012.
KPMG cites that the clear top initiative for organizations in 2013 remains driving down operating costs. This is done through ongoing redesign and reengineering of core business models and processes, which includes leveraging ITO and BPO. Organizations will also invest heavily in expanding their operations by creating greater efficiencies in their processes and freeing up resources to explore growth opportunities.
Information Technology Outsourcing is easily on track to become as ubiquitous as other outsourced functions like legal services, financial auditing, or customer contact centers. As the technology continues to evolve to meet the needs of firms requiring secure, fast, and reliable computing power, the limitations and issues with outsourcing fall away. Companies can grow at a faster pace when they utilize ITO, with or without BPO. They will be less constrained by large capital outlays for resources and equipment that may take years to amortize, and will most certainly become outdated at some point. Further, ill-informed purchase decisions made for equipment can lock a company into long term contracts that are a poor match to support the company’s growth needs.
Business Leadership Making Smart Choices
CIOs and CEOs are challenged to run incident-free daily IT operations that meet the needs of their business across the entire organization, including suppliers and customers. They are also challenged to find innovative solutions to market fluctuations, explore new opportunities and work within budgetary limitations. Whether they decide to insource their IT functions, outsource IT to a third party provider, or opt for a full BPO program, executives need to reconcile their business objectives against realistic cost models. If IT optimization, including speed, availability, security, and compliance is improved by outsourcing, then ITO is an easy decision. Additionally, if ITO can free up resources to focus more attention on core business drivers and less time on internal maintenance, then ITO will provide a significant bonus that could reward the company very handsomely over time.
Choosing a Strategic Partner
The best outsourcing providers act like partners. They consider their clients’ business needs to be as important as their own. They look at the world strategically, but act tactically and are constantly seeking to find better, faster, and more cost effective ways to deliver their services.
High-performance businesses need to respond quickly to market changes, improve operational efficiency and excellence, and accelerate growth. To do that, they are increasingly looking at outsourcing partners to deliver cost-effective, flexible, and scalable IT outsourcing options.
Secure-24 is positioned to help organizations maximize their business value by optimizing their IT capabilities. Secure-24 offers a wide range of IT operations, infrastructure and application outsourcing services for businesses of any size. To learn more about how outsourcing your applications and infrastructure to Secure-24 can help your organization achieve its goals, please contact us at 800-332-0076.