Professor Wendy Currie from the Department of IS and Computing at Brunel University tackles the question:
Question: My organisation is interested in business process outsourcing (BPO) for some of its non-core activities. What role is web services tecnology likely to play in BPO services?
Business process outsourcing (BPO) promises organisations a new generation of outsourcing services that will allow them to hand over whole chunks of non-core activities to third-party specialists. But according to recent research conducted at Brunel University’s Department of Information Systems and Computing, BPO will only see widescale adoption when it is enabled by another recent technology trend – web services.
The reason is simple: organisations want web-based access to applications software that also offers them something extra – not more of the same functionality using a different delivery mechanism. In the case of BPO, this ‘something extra’ is integration capabilities. Up until recently, a lack of integration between software applications has meant that outsourcing is largely function- or task-focused (for example, offering companies payroll administration services or cheque processing services), rather than process-orientated.
So how will web services change this? In business terms, web services will be used to create a business function or service that can be accessed by other applications or services over the Internet using standard protocols. This service will typically be a core competency of the provider, which it sells on to other organisations, enabling them to concentrate on their own core competencies.
For example, an organisation will be able to outsource one or more of its IT-intensive business processes, such as supply chain management, to an external provider (even one based offshore) who will own, administer and manage the selected business processes for it, based on defined and measurable performance metrics. Web services will play a key part in ensuring this can happen: the technology’s integration capabilities will enable providers to build applications that span end-to-end business processes through aggregation of software components.
At present, the BPO market is focused primarily on relatively simple transaction processing services. But, enabled by web services, it will progress to offer ‘transformational outsourcing’ or ‘strategic BPO’. The difference between the present reality and the future possibilities is the degree of service provider ownership, responsibility and liability for a business process.
As web services technology increasingly provides the platform for increased uptake in BPO, there will be new challenges ahead for both vendors and customers. Vendors will have to provide solutions that offer proven business value: reduced costs, increased quality of service and integration of business processes. As Bruce Spicer, CEO of outsourcing provider Keystar Consultancy Services, told Brunel University researchers in his response to our recent survey: “Technology vendors need to learn that organisations are no longer impressed by the latest IT gimmick. They want real business solutions at an affordable price – not vendor hype.”
Moreover, the lessons of the application service provider (ASP) market must not be repeated: a ‘one-size-fits-all’ approach patently will not work. Small and medium-sized companies, in particular, do not have the purchasing power of their larger counterparts, but may still want to customise ebusiness solutions for their own business processes. This could present problems for providers who seek to profit from economies of scale. Finally, technology vendors will need to differentiate their products and services from those of rivals.
In turn, potential customers will need to benchmark their in-house business and IT departments against ‘best practice’ examples. This will help them better evaluate the product and service offerings from BPO providers. As BPO service provision matures, they will also need to enter into BPO deals with the aim of achieving wider business benefits than simply cost reduction and control.
Championed by industry giants such as Microsoft and Sun Microsystems, open, Internet-orientated web services platforms are increasingly becoming more established. But web services can facilitate the move to BPO only if BPO service providers don’t lose sight of customers’ needs. In short, they will need to provide those customers with cost-effective solutions that boost their efficiency and enable them to engineer – and transform – their businesses.