Delving into the Nuances of BPO and Hosting — SAP, Hubwoo and Beyond

I recently had a thought provoking discussion with Gianni Giacomelli, who runs strategy and marketing for SAP's BPO business unit. One of the major focuses of our discussion was how some providers appear to be succeeding more than others in the still nascent procurement BPO, hosting and technology market. As an example, I've known for some time that Hubwoo was having a banner year providing services and technology hosting/BPO around SAP's SRM solutions. Obviously a big part of this has been their ability to capitalize on the missed SRM 6.0 launch and the marketing and product uncertainty surrounding emerging product launches. By hosting older versions of the product and offering enabling services around it, Hubwoo has been in a good position to provide a reliable and proven offering to procurement organizations that have been skeptical about SAP.

I have my own opinions about why Hubwoo has been succeeding, but I was curious to get another take on why. One of Gianni's theories, which I agree with, is that there are segments of the BPO market that focus on "one to many" services that are highly replicable across a customer base. In an earlier comment to a post, Gianni wrote that, "Hubwoo, and in the near future Quadrem, operate a one-to-many BPO model where the service provision is based on a multi-tenant architecture, where the provider brings to the table a substantially standardized model, but does not engage in massive re-engineering and change management of the client. In this model the provider provides a more limited scope of "labor-based" heavy lifting [compared with traditional complete solution outsourcing models from the likes of Accenture, IBM, etc.], leaving the rest of the actual running of the procurement process to the client. These providers indeed benefit from the usage of their own network."

What types of scalable services can a provider offer on such a network? They can offer, for example, productized services such as catalog management, help-desk support, applications management, hosting, etc -- all of the areas Hubwoo has chosen to focus on. Other areas of outsourcing such as procurement strategy and sourcing consulting, implementation, category management, and managed procurement all require customer solutions and custom sales. These make them harder to sell -- especially for firms and outsourcers that don't have the big consulting partner-sales guns as Accenture, IBM, Deloitte and others.

Because Hubwoo, in contrast, is focused primarily on selling one-to-many services that are easily replicable across different customer deployments -- and because of their singular focus on core areas rather than venturing off into the Spend Management services abyss -- they've been able to gain significant traction with their SAP offerings in contrast to some of the other providers SAP is partnered with. But the big question will be, once SAP turns the marketing and product crank and comes out with a coherent view of its strategy, products, and procurement direction (something customers are still waiting for), whether Hubwoo's services will still be in demand.

I'm guessing they will primarily because in a recession, SAP is likely to see lower uptake in capital investments for procurement technology. But customers are more than happy to pay as they go. Which as we all know, is a boon for On-Demand software, services and BPO models. Especially those that are only a partial "shift" rather than the wholesale outsourcing of the application and support stack and all the pain, sales challenges and implementation heartburn that comes with it.

- Jason Busch

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