NEW ZEALAND could cash in from an impending boom in business process outsourcing, claims Gartner research. But consultancy businesses will have to change their business models.
Sydney-based analyst Rolf Jester says the country has several successful BPO providers such as Datamail and Oxygen Business Solutions, who are starting to move into Australia before heading into the wider Asia-Pacific.
The Kiwi potential and the threats to services firms will be raised as Gartner hosts a major regional Outsourcing Summit in Sydney from July 27-28.
The event will look at outsourcing over the next ten years, during which Gartner expects more than 100 changing facets by 2013.
However, Jester, the event’s keynote speaker, says there will be two overriding factors that will influence IT in an enterprise.
One is how committed firms will be committed to adopt a “real-time enterprise strategy” and use information to adapt quickly to a constantly changing business environment.
The second, is the types of services they will outsource over the next ten years and whether they outsource the whole business processes or just the underlying functions.
Jester says these two factors will determine one of four future scenarios for an IT department. The scenarios are:
IT inertia — a scenario in which the existing IT investments serve to slow down the ability of the business to change quickly enough.
Process islands — a sub-optimal state in which departments inside an enterprise look after their own business processes, diminishing the relevance of the CIO and IT staff.
IT-centric real-time enterprises — in which businesses have become agile through a strong focus on IT.
Virtual enterprise — organisations that are “real time” by nature, they stick to their core business and buy external services for all non-core activities.
Jester expects the world the move to either it IT-centric or virtual model, saying service companies need to plan and prepare for it.
Such a high degree of business process outsourcing may suit New Zealand, he continues, noting Telecom New Zealand’s takeover of Geni and their push into the Australian IT services market, where returns are greater.
However, while some businesses may benefit from BPO, Jester warns IT consultancies will suffer if the services market consolidates to just providing services to the business process outsourcers. Such consultancies will need new channels, new sales forces and new marketing strategies.
While offshore outsourcing and its related job implications has been a source of recent controversy, Gartner says the impact of offshore outsourcing is currently “minor”, estimating that only just seven per cent of an estimated $US728 billion of global outsourcing contracts will be spent offshore by 2007.
Whether offshoring is a good thing, depends on the deal.
“Trade as a whole benefits both parties and trade in services is still just trade. But buyers need to buy carefully and find reputable suppliers. The relationships, contracts, delivery and quality will need to be managed, which increases the management cost.
“Some people have done well dealing with service providers in other countries, while others haven’t because they haven’t followed the guidelines on how to do it well,” Jester adds.