Gartner charts offshoring growth

20 May 2004

The market for business process outsourcing (BPO) to offshore service providers is forecast to be worth US$3bn this year, according to new findings from the industry analyst Gartner. The growth represents a 65pc increase from last year’s total of US$1.3bn but Gartner has said that such high jumps in revenue won’t be seen in the future.

In 2004, offshore BPO is expected to represent 2.3pc of the total BPO market, Gartner said.

“Offshore BPO is an emerging, but immature, opportunity,” said Robert H. Brown, principal analyst for Gartner’s sourcing group. “There will be slower adoption of offshore BPO through 2007. As the service delivery matures, and as users and service providers overcome various operational, cultural and sociopolitical issues, growth will resume toward the end of the decade and will synchronize more with overall BPO growth.”

BPO involves organisations delegating one or more technology-intensive business processes to an external service provider that owns, administers and manages the selected processes, based on defined and measurable performance metrics such as service level agreements.

Typically, the kinds of business processes that are outsourced to an ESP include logistics, procurement, HR, finance and accounting, CRM, or other administrative or customer-facing business functions. With offshore BPO, the ESP is based in a country that is geographically remote from the customer’s own enterprises.

Offshore BPO can be a controversial activity as it raises the prospect of jobs being lost to overseas firms that are able to provide services more efficiently and crucially, at a lower cost.

Gartner analysts found that the vast majority of offshore BPO is around contact centres, including voice, e-mail and chat, and the remainder for back-office transaction processing services. The company warned that organisations must not neglect to map out the entire customer process – especially the intersection between the parts that are outsourced and the functions that are retained.

“The recommended plan for a successful outsourcing relationship is careful planning, integration, and management of outsourced channels, functions or processes, where they remain part of the enterprise-wide strategy for customer service,” Brown said. “To build successful service delivery, clients and outsourcers must understand the entire process and clearly articulate who is responsible for which piece to ensure that nothing falls through the cracks.”

By Gordon Smith