Outsourcing Study Connects Enterprise Software and Success

Organizations that outsource business processes, such as HR or Finance and Accounting, fully realize the inextricable, critical role information technology (IT) and enterprise software applications play in their outsourcing success, according to the results of a just-released market assessment by EquaTerra. The market assessment also found that business process outsourcing (BPO) buyers cite the IT capabilities of external service providers as vital to BPO success, and that buyers have a strong proclivity for leveraging the applications from enterprise software vendors that possess a clear BPO vision.

Respondents to EquaTerra’s 2007 edition of the Role of Enterprise Software Applications in BPO market assessment study were BPO decision makers in 154 North American and European organizations, each with more than 5,000 employees and greater than $1 billion in annual revenue. All major industry groups were represented in the responses. This is the second year this annual market assessment has been conducted by EquaTerra.

Said Stan Lepeak, EquaTerra’s Managing Director of Research and study author, “Study respondents ranked IT at 4.2 on a scale of one to five as being key to BPO success. This clearly demonstrates that BPO buyers fully recognize what EquaTerra has advocated since its inception…that IT and BPO cannot and do not operate as islands. Further underscoring buyers’ understanding of this fact is the overwhelming number of study respondents who noted the IT solutions and capabilities offered by BPO service providers are also key to BPO success.”

Comparing North American to European Responses

While there was consensus among study respondents on the importance of IT and enterprise software applications to BPO success, there were some variations among responses from North America and Europe. For example:

--The majority of European and North American respondents agreed that SAP and Oracle were the leading enterprise software vendors when it came to possessing a clear BPO value proposition. This was also the case in the 2006 study findings
--When asked why they preferred the enterprise software vendor specified, 50 percent of those in North America and 62 percent of Europeans cited that the particular vendor’s software is part of their prescribed corporate IT strategy, and 41 percent of North Americans and 38 percent of those in Europe noted that the particular vendor’s software is already used. This highlights buyers’ preference for leveraging existing enterprise software investments in their BPO efforts
--On whether the client or the service provider should hold the enterprise software license, 41 percent of Europeans and 36 percent of North Americans preferred the BPO service provider hold the license as part of its BPO offering. 67 percent of those in both regions stated this preference was driven by the desire for “one-stop-shopping” with the BPO service provider
--When questioned on how important outsourcing management and governance was to the success of an outsourcing initiative, North Americans gave it a ranking of 4.04 on a scale of one to five, and Europeans ranked it at 4.57.

Lepeak concluded, “Given the importance of IT, organizations engaged in or pursuing BPO must ensure they have the skills and take the time to adequately assess their IT options when it comes to BPO. This involves understanding both the capabilities of their existing enterprise software environment in supporting BPO efforts and the technical capabilities of their strategic IT vendors. Buyers must also assess and understand candidate BPO providers’ IT application system capabilities as well as their individual ability to support the buyer’s strategic IT vendor platform and systems. Embedding IT requirements, needs, capabilities and key representatives from the IT group into BPO teams from the start will improve the likelihood of success. And finally, organizations undertaking BPO must strive to leverage existing investments and technologies not only from a cost standpoint but also to maintain comfort levels and familiarity with IT applications and systems used in the past.”

For a copy of the full study, send an e-mail to: research@equaterra.com.

To access a replay of a recent webcast covering study highlights, click here and use erp as the password.