BPO poised for takeoff

Business Process Outsourcing (BPO) is grabbing boardroom attention now that the pressures are on - particularly in the financial services industry - to conform to new stringent corporate governance regulations and better manage costs, says Peter Drube, BPO director for Computer Sciences Corporation`s South African operations.

CSC, which was recently named North American insurance BPO market leader by researchers Celent Communications, defines BPO as a strategic decision to allocate the management and optimisation of a business function - such as claims processing, invoicing, payroll and customer support - to a third party that conducts the activity based on a set of predetermined performance metrics.

Through years of experience refining its BPO service, CSC delivers results to its clients. Contributing to these results is the belief that successful outsourcing is based on leveraging the mutual dependency and trust between supplier and client.

A major advantage BPO offers is quality standardisation and automation of processing, reducing the costs associated with managing diverse processes.

Drube says that while CSC has been active in BPO in both North America and Europe for the past 10 years, there is renewed impetus in the market.

"Companies look to BPO for a variety of reasons, including keeping the basic back-office functions operational while legacy systems are replaced, and focusing on core activities, such as winning new business and managing shareholder value," he says.

"During the past two years the BPO market was a slumbering giant. Nine months ago things started to pick up, firstly in the U.S., and now interest in BPO has exploded in Europe as well as companies look for ways to better manage costs and boost shareholder value."

Drube expects the South African BPO market to soon follow suit as local insurance firms seek ways to transform their information technology (IT) operations by investing in new applications that help them better manage risk, and data protection and privacy issues.

"Within the next 12-to-18 months I expect to see major changes in the information technology strategies in the South African financial services sector," he adds. "The move from mutualisation to becoming listed companies has turned their attention to giving shareholders better returns and being accountable to them on corporate governance.

"By outsourcing the basic back office processes, companies give themselves space in which to upgrade their applications systems to cater to the new regulatory and corporate governance environment, and to position themselves to be more competitive in local and global markets."

In recent years, financial services firms did not see stringent cost management as a priority because the vibrant equity markets gave handsome returns on their investments. With the downturn in the markets and increasing investor criticism on poor returns, the pressure is on to better manage costs and leverage assets.