Half of BPO deals will sour by 2009

BPO buyers across the market are experiencing consistent and pervasive hype

Some 50 per cent of organisations involved in business process outsourcing (BPO) relationships will experience cost overruns and unacceptable service delivery quality during the next three years, industry experts warned today.

According to Gartner, these issues will be caused in the main by a lack of understanding of the specific BPO offerings available in terms of market hype versus true market maturity.

"It is clear that buyers across the market are experiencing consistent and pervasive hype concerning which processes and service providers can truly deliver on the promise of BPO," said Lisa Stone, research vice president at Gartner.

Stone added that firms must set up an internal BPO strategy to look beyond the hype and determine their own requirements.

"This consists of measuring the environment, identifying why BPO is being considered and deciding which approach is best for entering into a BPO relationship," the analyst explained.

"Firms should then use a structured sourcing process through vendor evaluation, contracting and negotiation, and create an internal management support team to ensure that all details are in place to support the service before signing a contract."
The Gartner report noted that two distinct BPO services stand out for their transformational impact: core banking; and comprehensive finance and accounting.

However, the analyst firm warned that these are both far from mature, and that each is more than five years away. When they mature, they will assert a pervasive influence on basic service delivery approaches for their sectors.

In the more immediate future Gartner predicts that demand for contact centre outsourcing will level off in under two years.

"Organisations that have adopted a multi-channel, multi-domain contact centre , and realised its effectiveness, should only investigate outsourcing those functions or channels that are not economically viable to maintain," said Matthew Goldman, research director at Gartner.

"Midsize and smaller organisations that need to appear bigger than they are should investigate contact centre outsourcing, or globally delivered offshore contact centre outsourcing, as a potential solution."