Service Infrastructure and BPO

IT is increasingly playing a significant role in increasing the efficiency and effectiveness of outsourcing transactions. This is especially true as outsourcing becomes knowledge-intensive, is marked by extensive coordination and collaboration, and requires new ways of acquiring and managing computing and business processes. Not surprisingly, the industry sectors that spend maximum worldwide on IT (financial and information services at 36% and manufacturing at 20%) are also the ones that outsource the most business processes and functions.

Firms like IBM are responding with technology initiatives like On Demand Business and Services Sciences, Management and Engineering. These investments in service and coordination infrastructure help reduce the transaction costs of outsourcing and improve management focus on more strategic issues in management of the outsourcing relationship. This is exemplified by start-ups like Exterro. Given that outsourcing is largely driven by global communications, low cost labor and technology innovation, these technology innovations address all components of the value equation and help fuel outsourcing growth.

It would be interesting to examine the actual long-term savings, including order of cost reduction and improvement in relational quality, that accrue to firms on account of such embedded technology. For now, they're an indispensable mediator in the BPO relationship. Just like advisory consultants, law firms and market analysts. And heck, more proof that outsourcing creates jobs.