Today’s blog comes from Peter Allen,
Partner and Managing Director, TPI.
“Forget about
spending LESS, how do we avoid spending ANYTHING?”
There’s no question about it: cash is king today. The
current global economic situation is motivating CFOs in companies across all
industries to focus foremost on preservation of liquidity. And that’ll drive more BPO.
My recent experience reinforces this truism. Budgets for 2009 are being drawn down to
levels that reflect a “no investment” mindset.
Cost avoidance is the phrase,
and this tendency is self-evident for prospective buyers of outsourced services.
But it’s weighing on the service provider
community. Outsourcing contracts are notoriously capital and cash flow intensive
on service providers, especially in the earlier periods of a contract. Both capital
and cash are put out early to acquire assets, establish the supporting infrastructure,
transition the work processes, and develop business solutions.
So let’s not forget: service providers aren’t banks.
They’re not a source of capital for core business operations.
The service provider universe looks to leverage its
investments for returns, which is no different from its clients. The magic word
is leveraging, that is, spreading costs among a portfolio of service buyers. And these tendencies will result in a convergence
of distinct, yet industry-specific BPO solutions between prospective buyers and
providers of services.
I think the current economic crisis is giving fuel
to the notion of leveraging offerings that will incubate within progressive
client-provider relationships. Executives
are looking at the cash drain of back office environments that are decentralized,
running non-standard processes on different platforms, or lagging in
productivity improvements. These organizations can greatly benefit from a
transformational type of structure that includes the labor arbitrage benefit
compounded by process and platform standardization.
The days of proprietary solutions for outsourced
services are numbered. It’s time to respond to the economic bell of disparate
business processes, loosely-integrated acquisitions, or just lack of
attention.
Cash preservation will drive
more BPO. Bank on it.
