Article

Aberdeen: BPO isn't all about IT

Ed Parry, SearchCIO.com News Editor

SearchCIO.com has said it many times -- offshore outsourcing is hot.

But is some of that heat coming from hype? When it comes to offshoring IT services or infrastructure, there may be more talking than actual walking.

A recent report from Aberdeen Group Inc. threw a jug of cold water on what many believe is one of the hottest, if not most talked-about "megatrends" in IT. Its hook is baited with promises of high quality and hard-to-beat prices -- a desirable lure for companies looking to save money in a lousy economy. In fact, Stamford, Conn.-based Gartner Inc. predicts offshore business process outsourcing (BPO) will hit the $1.8 billion revenue mark in 2003 -- a cash cow 40% fatter than last year.

But while the bait is tempting, Aberdeen claims that only a small percentage of companies are actually sending their IT work overseas. Analysts with the Boston-based research firm claim that their studies of BPO show that only 11% of enterprises have outsourced IT development or management to offshore providers. By 2008, about 33% of enterprises will board the bandwagon.

"To be fair, our study focused on the transitioning of business processes to offshore BPO providers. So the total percentage of IT-related BPO deals could be higher," said Tim Minahan, vice president of supply chain research at Aberdeen, in an e-mail interview with SearchCIO.com.

"But even at 33% of companies, the penetration of IT-related BPO service consumption is still pretty

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impressive."

Aberdeen claims these figures prove that BPO isn't just about IT. In fact, manufacturing is stoking a lot of BPO's fire. That sector is seeing more benefits of offshoring with providers performing anything from light assembly to the more "heavy-lifting" tasks like full product manufacturing. Offshore providers will do more logistics, fulfillment, and warehouse management work over the next five years, analysts said.

BPO will be the hottest three letters in offshore spending, growing faster than any other category. If Aberdeen's survey data play out, enterprises will spend 333% more on claims-processing services from foreign suppliers between today and 2008, while returns management, call center support, payment processing, and product refurbishing will all see spikes of more than 200%, analysts said.

FOR MORE INFORMATION:

Aberdeen analyst Tim Minahan discusses the "BPO Myth" study with SearchCIO.com

Gartner: Offshore BPO market to grow 38% in 2003


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