Friday Rant — Outsourcing and Pornography: We Know It When We See It

Perhaps the most famous Supreme Court quip to be quoted out of context is Associate Justice Potter Stewart's commentary on hard-core pornography: "I know it when I see it." Such a line could be applied to outsourcing, including procurement BPO, despite the fact that the industry has now "voted out the 'O'-word" according to the results of an informal poll conducted by my colleague Phil Fersht's firm HfS Research. According to HfS' blog, two-thirds of the providers and buyers at a recent NASSCOM event decided to banish the O-word to the rubbish bin. Yet they couldn't think of an alternative.

What are alternatives, you ask? "Buyers are so at a loss for alternatives, they couldn't think of much else and 'Outsourcing/BPO' actually came top. Most of the providers just want to swap out "outsourcing" for "services," while most advisors stuck with BPO, with a growing number, mainly the management consultants, pushing the Global Business Services badge." I actually like Phil's cynical yet accurate suggestion to call it what it is (when it involves Indian labor): "offshoring outsourcing ... dependent on offshore labor to make the economics work."

In the procurement area, BPO has deservedly come to mean different things to different firms (and people). Is it what Procurian, Accenture, Proxima and IBM do when bringing particular expertise in category-focused outsourcing? Absolutely. Is it what Achilles does when delivering supplier audits and reporting as a shared service? We think so. Is taking on catalog management as a service like SciQuest does in certain verticals a form of P2P BPO? You bet it is. Is managing the supplier on-boarding and enablement process that OB10 and SAP/Ariba do for customers? Without a doubt. Is the type of category research and forecasting that Smart Cube performs for clients? You betcha.

You see, within the purchasing and operations areas, procurement BPO can take many forms. It's certainly not just the offshoring of labor for cost's sake. This is precisely why, we believe, many of the traditional Indian BPOs are struggling to build scale, let alone an acceptable cachet. Within procurement, I can personally say that the offshore-driven outsourcing industry has brought a brand problem onto itself by attempting to put a tidy wrapper advertising what it isn't necessarily (better processes, better systems, greater efficiency, economies of scale) on top of what it most certainly is (cheaper labor with a slightly greater appreciation for technology and inconsistent levels of process knowledge and depth).

If Indian firms branded their procurement BPO strengths for what they really are (e.g., "cheaper people as smart as your team") rather than trying to build ridiculous brand identities around something they aren't in comparison to less labor-driven procurement BPO plays, the analysis over the broader question of whether we should call it outsourcing would be silly to have. Ask Smart Cube. Do they compete against US-based intelligence firms on a broader category basis? Not really -- many are outsourcing to them -- because they bring the right, less expensive resources to bear and can do it as or more effectively than here, much cheaper. And there's nothing wrong with that!

With apologies to late Justice Stewart, call it "hard-core outsourcing." Call it what you will. But I know it when I see it.

- Jason Busch

First Voice

  1. too much marathon training?:

    Only you could link outsourcing and p*rn, Mr Bush… is it all that marathon training? What I like about procurement BPO is that most procurement department have been cut to the bone and "labor arbitrate" cost benefits are practically impossible for most firms. It’s taken 20 years, but we’re finally seeing a raft of procurement "outsourcing" deals that are based (and priced) on managed spend efficiencies and not simply lumping the bodies offshore. So, it’s not really "outsourcing" per se, but "expertise augmentation". What we are still lacking is procurement BPO providers developing their own proprietary technology to differentiate their value, in addition to providing good category managers…. something you can rant more about JB 🙂

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