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Business Delivery For Rent

Published
  • July 01 2003, 1:00am EDT

Is going outside a method for improving business performance?

The economic downturn over the past few years has forced corporations to look for new and inventive means to drive down cost while providing faster, more innovative and efficient services. Adoption of new technologies such as enterprise resource management, customer relationship management, supply chain management, business intelligence, portals, and Web-enabled applications has provided a catalyst for progressing customer and business services. While these new technologies brought new process efficiencies, they also introduced new challenges to those who manage and support them. The cost, time and resources needed to implement, maintain and upgrade these new technologies, due to the complexities and interdependencies of their architectures, is a continuous challenge. This, coupled with issues related to market expansion and competition, has many corporations examining outsourcing options for business and information technology services.

This is the first portion of a two-part column exploring optional outsourcing approaches for an enterprise including business intelligence. This installment looks at the various business reasons for outsourcing and the types of services that are available. Next month, we will examine some of the criteria that can be used to differentiate an outsourcing alternative.

Today's outsourcing marketplace offers an ever-widening variety of single-point to full insourcing and outsourcing solutions. The composition of the services offered varies between providers, as do the acronyms used to describe their services. Outsourcing offerings include application service provider (ASP), business service provider (BSP) and business process outsourcing (BPO). Each outsourcing vendor offers their own unique approach and capabilities for corporations to excel in today's competitive arena.

ASPs provide firms with access to enterprise applications as an alternative to in-house management. The services are made available through private network delivery methods or the Internet. These applications are typically managed and maintained at the service provider's own data center(s) and connected back to the customer's site. Maintenance and support of the infrastructure and software is the service provider's responsibility for the hosted application (s). ASPs can be divided into two specific focal areas. The first focuses on support services around a particular software product for a specific enterprise function such as enterprise resource management, customer relationship management, supply chain management, decision support and a growing list of others. The second category concentrates on infrastructure (including hardware, operating systems, databases and storage) needed to support these enterprise applications. ASPs can provide clients with efficiencies and cost savings around infrastructure scalability, standardization and resources.

BSPs go beyond ASPs by also providing support and management of business process services. These services typically provide clients with access to consistent business processes and self-management through Web-based delivery. As with ASPs, maintenance and support of the infrastructure and software are the service provider's responsibility. Business processes typically found in a BSP offering include administration, human resources, accounting, financial and others. Business intelligence and analytical services around the business process offering can also be included. BSPs can provide clients with process efficiencies and cost savings around adoption of new business delivery models, business area infrastructure scalability and resource refocus.

BPOs take on the ownership of particular business processes for the client. The service provider becomes the steward of the business process for the company and is responsible for meeting service-level metrics. Resources, both employee and infrastructure, are typically transferred from the firm to the service provider. BPO offerings include customer support, sales, logistics, human resources and others. BPOs are expected to provide clients with increasing efficiencies and cost savings over time around business processes and infrastructure scalability.

Due to technological, economic and competitive pressures, many companies today are looking to drive corporate performance by incorporating outsourcing solutions into their business strategies. The potential for increased efficiency, reduced cycle time and standardization of processes are some of the reasons for exploring these options. Each outsourcing option offers varying amounts of business process management, software, infrastructure responsibility and risk, depending on the provider's ability to perform and meet expectations.

What outsourcing method does your firm use, if any? Send me an e-mail with the subject line "Our Outsourcing Method" and I will post the results of this unofficial survey in a future column (mike.jennings@hewitt.com).

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