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The Way Business Is Moving

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Issue Date: February 2005

BPO: a misunderstood phenomenon in SA

1 February 2005

Keith Fairhurst, director, EOH KPMG Consulting believes that business process outsourcing (BPO) is largely misunderstood and undervalued in South Africa. According to Fairhurst there are three fundamental reasons for the misconceptions. The first is that an organisation has to relinquish its control over the process; the second is that BPO reduces your costs immediately and finally that it is a quick fix.
EOH views BPO as an extension of traditional IT outsourcing but one where the measure of success is the output from the process and not one where the client has to contend with executing the process themselves. To ensure BPO is successful, clients need to agree on a well defined service level agreement. It is this agreement that will always ensure that the client retains control of the process and the outsource team executes accordingly.
"It simply removes the headache for the client and allows the outsourced team to deal with the non-core activities whilst the client focuses on what he does best," says Fairhurst.
BPO is a medium term investment with significant cost reductions likely after a few years. According to Fairhurst, it is rare that an organisation will engage in BPO and realise immediate cost reductions: "What they will achieve is reduced risk, continuity of business, reputation management and availability of skills. The outsourcing of non-core business processes frees up scarce resources, such as capital and management attention, ensuring that the focus remains on core competencies and core value adding activities.
Unfortunately, there is a tendency for organisations to look toward BPO when they are in distress and want not only a quick return on investment, reduction in costs at the same time but also an immediate improvement in service levels. These expectations are often contradictory and result in unachievable targets. "A more strategic view needs to be taken and three to five years is a reasonable timeframe within which to gain full value from BPO," says Fairhurst.
BPO is in its infancy in South Africa. There is huge potential, particularly in the public sector where shared service centres are rapidly gaining momentum. But until the process is understood completely, BPO remains another best kept secret well hidden within the confines of the IT industry.
For more information contact Rentia Tutton, group marketing manager for EOH, 011 607 8100, 082 929 6588, rentiat@eoh.co.za


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