It seems like information technology and related software programs have been a part of corporations’ daily routines for ages now. However, according to a new study, many enterprises are still stumped about how to use IT to positively impact business proce
May 30, 2006
It seems like information technology and related software programs have been a part of corporations’ daily routines for ages now. However, according to a new study, many enterprises are still stumped about how to use IT to positively impact business processes.
According to a study release by EquaTerra, an advisor for organizations seeking more efficient IT and business processes, corporations demonstrated a lack of clarity in understanding the importance of enterprise software and limited ability to translate that into actionable business process outsourcing (BPO) strategies. Respondents identified a struggle to adequately assess IT needs and requirements in BPO and how to account for the role of technology, vet service providers’ IT capabilities and manage enterprise software licenses.
The study, “Assessing the Role of Enterprise Software Applications in BPO,” was conducted with 126 executives (director level and above) of large corporations (70 percent with revenues in excess of $5 billion) and explores the buying patterns and preferences for enterprise software in BPO engagements. Specifically, the report details process and geography comparisons of enterprise software preferences for BPO, enterprise software license preferences for BPO, key enablers of BPO success, the value of IT and governance to BPO success, the value of governance in BPO success and the role of information technology in supporting governance.
The study found that when it comes to ownership of software licenses in BPO, more HR executives prefer the provider own the license (35 percent). Only 21 percent of finance and accounting (F&A) executives hold the same preference.
In addition, the study found that 53 percent of the HR executives plan to expand their current outsourcing initiatives in HR, and 40 percent of the F&A executives plan to expand scope within F&A.
The differences between HR and F&A preferences extended to the prioritizations for IT applications. F&A executives prioritized quality of the provider, cost reduction and process improvement as the three critical areas contributing to BPO success. On the other hand, HR executives prioritized quality of the provider, cultural fit and collaborative win-win relationship as the three critical areas contributing to BPO success.
“The current and future state of IT systems and application environments is one critical area to address when assessing BPO opportunities,” said Stan Lepeak, managing director of research at EquaTerra. “Yet, IT applications are rarely cited as one of the top three enablers to BPO success. Many are under the impression that IT receives critical evaluation, and our data suggests the contrary. Neglecting the IT dimensions of BPO can lead to problems and make achieving expected process improvement and cost-reduction goals less likely.”
With all these differences of priorities, the results of a second EquaTerra study aren’t surprising. According to a survey of more than 250 qualified ITO and BPO decision makers in North America, there is a direct correlation between the investment organizations make in outsourcing management and governance (OM/G), and outsourcing engagement satisfaction. EquaTerra defines OM/G investment as the personnel, processes, software and tools, and external services (e.g., advisors, lawyers and auditors) required for outsourcing success.
According to the study, although satisfaction was greatest for companies that spend 4 to 7 percent on OM/G, more than 48 percent of respondents spend between 1 to 4 percent, and HR executives were the least satisfied at this 1-to-4-percent level of spending. In addition, the study found that executives who outsourced for process improvement versus cost savings tended to be more satisfied.
“While EquaTerra has long cited the value OM/G contributes to the success of outsourcing initiatives, this study confirms the clear connection between OM/G and outsourcing satisfaction,” said Stan Lepeak, EquaTerra’s managing director of research. “It highlights the need for organizations to focus, in any outsourcing engagement, on deploying skilled and adequate OM/G resources, policies, procedures and tools.”