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.
