What the CFO Needs to Know About the Convergence of ITO and BPO Services

Many organizations have turned to outsourcing to help with cost reduction and improve operating efficiency. Historically, we IT leaders thought of two types of outsourcing: IT Outsourcing (generally referred to as ITO) and Business Process Outsourcing (generally referred to as BPO).

Some organizations treat ITO and BPO as separate initiatives, with separate business owners. But a new generation of outsourcing—fueled by experience, technology trends, and economic factors—is causing a convergence of ITO and BPO services. The lines between process and technology are blurring, proving to be good news for CFOs and business executives alike.

Pioneers in leveraging the convergence of ITO and BPO services used to outsource IT and one or more business processes at the same time—for example, the company’s ERP, finance applications, and finance and accounting processes—and frequently from the same provider.

By doing this, they soon realized its many benefits:

• Contract structures could be identical
• Contracting ITO and BPO services together brought faster results
• Convergence resulted in less expensive and less complicated operations (i.e., one governance organization, one contract manager, one bill, and one provider to deal with if issues arise, meaning less finger-pointing, etc.)

The primary challenge, then, was getting IT, finance, procurement, HR, and other business organizations to agree to one provider, one contract structure, and one governance organization.

And aren’t those two priorities on any CFO’s agenda?

The simplification and standardization of outsourcing deal structures and ongoing outsourcing provider management leads to lower operational costs. For example, the standardization of outsourcing agreements reduces the cost of negotiating the contract and allows companies to leverage their experience in contract structuring across multiple agreements. Essentially, the more comfortable and experienced an organization gets with outsourcing, the easier it is for them to go through the process of outsourcing other areas of IT or business process.

This combined services approach also yields a different type of cost reduction – less labor oversight. Similarly-structured agreements need fewer employees to manage them. Better still, these now freed-up employees can conduct a more consistent analysis of agreement costs, service levels, and provider performance, and value to the organization.