Large Corporations Report Lack of Consensus on Evaluating Applications Software in Business Process Outsourcing, According to an EquaTerra Study

Report Identifies Struggle to Adequately Understand Providers’ Capabilities, Software Licensing and BPO Technology Requirements

(Houston and London, May 3, 2006) – Corporations demonstrated a lack of clarity in understanding the importance of enterprise software and limited ability to translate that into actionable business process outsourcing (BPO) strategies according to a study released today by EquaTerra, a leading advisor for organizations seeking more efficient IT and business processes.  Respondents identified a struggle to adequately assess IT needs and requirements in BPO and how to account for the role of technology, vet service providers’ IT capabilities, and manage enterprise software licenses.

The study, “Assessing the Role of Enterprise Software Applications in BPO,” was conducted with 126 executives (director-level and above) of large corporations (70 percent with revenues in excess of US$5 billion) and explores the buying patterns and preferences for enterprise software in BPO engagements.  Specifically, the report details process and geography comparisons of the following:

• Enterprise software preferences for BPO                 
• Enterprise software license preferences for BPO           
• Key enablers of BPO success                             
• The value of IT and governance to BPO success
• The value of governance in BPO success and the role of information technology in supporting governance     

A few key findings of the report include:

1. SAP and Oracle were the preferred applications in BPO: Opinions among respondents varied.  Europeans preferred SAP to Oracle (48 percent to 25 percent) and Finance and Accounting (F&A) executives felt SAP had a stronger BPO value proposition than Oracle (71 percent to 52 percent).
2. Ownership of software licenses in BPO:  More HR executives preferred that the provider own the license (35 percent) compared to F&A executives (21 percent); Europeans had limited preference (33 percent had no preference and 18 percent did not know).
3. BPO expansion plans:  Fifty-three percent of the HR executives plan to expand their current outsourcing initiatives in HR, and 40 percent of the F&A executives plan to expand scope within F&A.
4. F&A executives prioritized:  a) Quality of the provider; b) Cost reduction; and c) Process improvement as the three critical areas contributing to BPO success.
5. HR executives prioritized: a) Quality of the provider; b) Cultural fit; and c) Collaborative win-win relationship as the three critical areas contributing to BPO success.
6. Divergent opinions in North America and Europe:  Information technology is recognized as being central to North American BPO success (51 percent), yet a small number of European respondents (14 percent) ranked it as critical.  

“The current and future state of IT systems and application environments is one critical area to address when assessing BPO opportunities. Yet, as identified in the data above, IT applications are rarely cited as one of the top three enablers to BPO success.  Many are under the impression that IT receives critical evaluation, and our data suggests the contrary. Neglecting the IT dimensions of BPO can lead to problems and make achieving expected process improvement and cost reduction goals less likely,” said Stan Lepeak, managing director of research at EquaTerra.

Copy of Report