BPOs
Evolution from cost saving to innovation
Wednesday, March 19, 2008
In an article on Innovation in BPO Professor Reynaldo Lugtu says that
BPOs have entered the third phase in their evolution and that is the
phase of innovation.
Phase 1 of global BPO development took place in the 90’s
through the early 2000’s and focus was primarily on on cost,
efficiency and productivity. Clients in the US and Europe searched for
ways to bring down cost further, they turned to providers in India,
Philippines, and others to provide low labor costs to perform customer
care, HR, and accounting BPO services.
In Phase 2 the focus was on quality was. Established BPO providers are
besieged by new entrants from China, Latin America, and other
relatively lower cost countries, new sources of service differentiation
become crucial to maintain and get more clients. This is when the
second phase of BPO development took place starting in the early 2000,
which is characterized by the focus on quality.
Adoption of quality standards is the direction of local BPO players now
through the implementation of quality standards and practices such as
Six Sigma, Total Quality Management, ISO 9000, and Capability Maturity
Model. To survive in the long run, it is a must for BPOs to adopt any
or a combination of these quality programs.
In Phase 3 BPO providers set the stage for their next phase of
evolution and momentum - the third phase of BPO development which
focuses on innovation. In fact, a 2005 IDC survey among BPO clients in
the US suggested that 35 percent of the respondents look for BPO
providers to drive innovation.
Professor Lugtu also talks about the three fronts from where innovation
can come about.
Innovation in BPO may come from three fronts:
1. Business model innovation which entails significantly changing the
structure and/or financial model of the business.
2. Services/markets innovation which entails creating new or
significantly differentiated services or go-to-market.
3. Operations innovation which involves improving the effectiveness and
efficiency of business
processes.
