BPO/IPT Forum: Total Cost of Ownership Strikes Again

I had a blast these past two days at the World Business Process Outsourcing/IT Outsourcing Forum (http://www.worldbpoforum.com).

I met some fascinating folks that have been on the bleeding edge of outsourcing.  Seems that IT has been on the forefront and consequently has taken the punches.  As outsourcing business functions/processes becomes more prevalent, those experiences will be invaluable (if they are consulted or heeded). Which leads to my first takeaway…

My favorite takeaway from the event was the story of a global energy company.  It is my favorite because it illustrates one of my passions (and peeves):  Total Cost of Ownership (TCO).  This company had operations in dozens of countries throughout the world, many in the typical “low labor cost” countries — the usual suspects.  Well, instead of jumping on the bandwagon, the CIO and his team looked at TCO which includes all costs to the company; not just labor.  Long story short, they found that it was substantially more profitable to consolidate operations in a particular Scandinavian county in lieu of a popular South East Asian one.  How?  Tax implications were one of the factors.  Counter intuitive? You bet.  But that’s TCO.  You don’t know the answer until you do your homework and look at the big picture.  Without TCO, its so easy to save a bundle in your department but cost an even bigger bundle to the company.

My second favorite takeaway — move fast.  Yep, I’m a proponent of pulling bandages off quickly.  Same goes for organizational change.  I have to admit that I did feel some sense of pleasure in hearing several highly successful leaders say the same. Their pitch to their Mgmt Committees and Boards was that moving quickly reduces flight risk of customers and suppliers. In the past, I’ve pitched for moving fast on the grounds of minimizing disruption of operations and impact on morale. For me, this is a new perspective and reason. I’ll be putting that one in my toolbox for future use.

It was reported that business process outsourcing is continuing to build momentum.  It will more than likely be as rampant as IT outsourcing; hopefully, this time with less pain and disappointment.  The danger is that these types of initiatives come into vague and become the fashion of the day.  So, every nabob that only interested in collecting a big bonus and get a juicy bullet on their resume will jump blindly onto the bandwagon.  In the end, they move on to their next job while the company and its shareholders (as well as the employees that remain) are left holding the bag and paying the price. Well, that’s why events like this one are important — so that one can see where it worked and where it didn’t and meet the players that are doing it right.

One final point… both the buyers and sellers at the forum agreed that there is a lot of work left to be done with the procurement process and governance.  So, we will all have plenty to discuss next year.

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