Lift and Shift
There once was a time when there was significant value through an organization transferring staff work to a service provider. In this case, the service provider simply takes over staffing the work, not the actual business process or the underlying management of systems. The benefit an organization would receive, in theory, is lower costs through the service provider’s economies of scale associated with staffing and training workers, along with potential improvement in other areas such as process visibility or data accuracy. This is commonly referred to as “lift and shift”.
Turnkey Business Processing
Over time, service providers gradually developed best practices expertise associated with this outsourced work to a degree that they could also take over systems as well. Companies such as EDS (where I got my start) and Computer Sciences Corporation had big business taking over entire business processes, which included staff and systems.
Nowadays, these services providers, often referred to as Business Process Outsourcers (BPOs) have developed centers of excellence and can effectively offer complete turnkey business processing that is fast, efficient, low cost and highly adaptable. A fundamental prerequisite is that these BPOs had to created common platforms that can be used across their client base. This allows a very scalable shared service infrastructure that minimizes costs associated with staff training and service delivery.
However, many service providers have not gone this service delivery platform path, instead electing to procure technology on a project-by-project (a.k.a., client-by-client) basis. This means that each client has its own technology platforms, staffing, etc. The result is that there are less economies of scale to be had because there is no leverage across clients or business processes. Client A with an outsourced client onboarding process has different systems and staff from Client B. Enough time has passed, I think, to be able to share that many of these large client-specific outsourcing projects actually ended up losing money due to services fragmentation. Our recent research revealed that only 35 percent of BPO respondents have standardized document automation technologies across clients.
Embracing the Future
Even more shocking is that there are still quite a few “lift and shift” projects out there. BPOs providing a staff augmentation model such as this are at the highest risk of their clients price shopping or seeking to move to a higher-level of service that might include a transactional pricing model.
Service providers who do not address a shared infrastructure model face an existential threat from those that can offer highly customizable, adaptive and efficient business process services while simultaneously lowering costs, which improves their ability to compete on all levels.
If you found this article interesting, you may find the latest 100 Leaders in Capture AIIM survey results of interest: