The twentieth century dawned with the advent of the Industrial Revolution. It closed with the arrival of the Internet Revolution. Both events radically altered the path of commerce and spawned new ways of doing business that had been unthinkable before.
This fertile environment has changed the face of outsourcing, too. One major development has been the evolution of the Business Service Provider† (BSP). In my opinion, the BSP has appeared on the scene because of the demands of the marketplace. More and more outsourcing buyers have become monomaniacal about concentrating on their core competencies.
In a business world that’s now moving near mach speed, they have discovered today’s scarcity of talent makes it near impossible to find the employees they need in non-core areas. And in the warp speed world of the Web, they can’t afford the time it takes to search for the people they need to make it happen. Speed to market is the new mantra for success in the Internet economy.
These companies look to outsourcing for the total solution. They are not brand conscious. They don’t care whose applications they are using. They just want the job completed quickly, efficiently and cost effectively.
The typical BPO can’t provide a total solution because these companies don’t host applications or have the technical qualifications to keep that sophisticated software running and updated 24/7. Heretofore, that was the province of the Application Service Provider (ASP). Of course, the ASPs have no experience in the business process itself. So, the only answer is for the two divergent disciplines to merge so they can provide their customers a total solution.
Do the BPOs Really Have an Advantage?
In my travels speaking at conferences around the world, I have spoken with many BPO providers who believe they have the advantage in evolving to the BSP state. Indeed, they are the ones who truly understand the responsibilities of owning a business process. However, it remains to be seen if process ownership in the Internet age is the deciding factor in the make up of a successful BSP.
The ASPs, on the other hand, have their own advantage: scalability. It is much more difficult to grow a BPO operation than it is to enlarge the ASP’s availability.
In my opinion, these two outsourcing forms have to find a way to meld each distinctive culture. A BSP has to retain the process ownership like all BPOs. Like the ASPs, they must be Net-enabled as well as scalable. ASPs are adept at leveraging technology to generate profitability.
The market for BSPs includes two different types of buyers. The first is the emerging and Internet-based companies. Their prime focus is speed to market. They are eager to outsource all their non-core processes from the beginning to get where they need to be faster. The other market is divisions of large corporations.
I believe the BSP will also create a new market segment. BSPs, since they are fleet of foot, can service smaller transactions than the large, traditional BPO providers have been unsuccessful at completing profitably. I also see them poised to grow into larger and larger transactions. As they solidify their place in the outsourcing constellation, I predict they will give today’s large BPO vendors some formidable competition.
One answer to that is to create a joint venture. The BPO links with application companies to offer BSP services to its clients. This is the path Cap Gemini Ernst & Young has taken. We have the details of that alliance in our sister ASP Journal this month.
There’s Room for Everyone
Of course, ASPs and BPOs who concentrate on their core competencies will also be able to not only survive, but thrive in this revolutionary world. I see room for all three outsourcing models. Because one thing is sure about this Revolution: There is no alternative for companies. They must outsource if they plan on withstanding the crushing pressures of global competition.
Since knowledge is power, I recommend companies interested in the arrival of the BSP also read our sister publication, the ASP Outsourcing Journal. This month we discussed the evolution of BSPs from each perspective. It never hurts to learn how the other side thinks.
Lessons from the Outsourcing Primer:
- The Internet Revolution has created a new outsourcing animal: The Business Service Provider. This company is an amalgam of an ASP and a BPO.
- The marketplace led to the melding of these two cultures because companies simply want a total solution.
- BPO companies understand the ownership of a process. But ASPs have scalability.
- The BSPs will create a new marketplace and probably will challenge the large BPOs because they will be able to handle ever larger transactions.