BPO

The nature of business process outsourcing has evolved and changed. In the past, it was simply about reducing cost - shipping jobs abroad where skills were cheaper. And while that rather unsophisticated body shopping model is not yet entirely a thing of the past, it is unlikely to feature significantly in the future because alternative, better business models have emerged and matured that do much more than reduce the operational cost for business. They allow business to make a quantum leap to best practice.

The fortunes could be mixed for Europeans working in IT and finance according to new research by The Hackett Group. Large companies in Europe are now losing over 130,000 jobs each year in these disciplines as well as in other key business services areas. This, Hackett claims, is due to the combined impact of offshoring, technology-driven productivity improvements, and the low-growth business environment. While they reckon that the number of jobs being lost will decline over the next few years, they estimates that by 2017 nearly half of all back office jobs that existed at these companies in Europe in 2002 will have disappeared, a total loss of 1.9 million jobs. But the picture gets worse when you factor in the latest IMF growth assessment.

Outsourcing is not a bad thing. It allows companies to focus on their core competencies and let others do the rest. But there are some unintended consequences. When companies outsource processes to low-cost labor, they lose the motivation to modernize the process. Handcraft can be of value. You can argue that a handmade leather purse or a piece of pottery is nicer than a machine-made one. But a hand-processed invoice?! I don’t think you’d find much beauty there. When we outsource invoice processing, we settle for a short-term -fix rather than challenge ourselves to innovate. That’s when BPO becomes detrimental to long-term success. We are settling for cost reduction rather than process improvement.