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BPO: There may be trouble ahead
Half of deals face cost overruns and poor service, Gartner warns

By Andy McCue

Published: Wednesday 23 August 2006

Half of business process outsourcing (BPO) deals over the next three years will run into trouble with cost overruns and unacceptable service, according to a report by analyst Gartner.

According to the report, organisations are being lured by the hype around some BPO options that are not yet mature.

Lisa Stone, research VP at Gartner, said in the report: "It's clear that buyers across the market are experiencing consistent and pervasive hype concerning which processes and service providers can truly deliver on the promise of BPO."

Gartner warns that while finance and accounting (F&A) and core banking are two of the most attractive BPO options for their transformational impact, they are both far from mature.

In the short-term it is call centre BPO services that are predicted to plateau, reach maturity and provide high-level impact within the next two years.

Other BPO services approaching maturity include payroll outsourcing, benefits administration, card processing and telesales, according to Gartner.

Stone said companies need to set up an internal BPO strategy to block out the hype and determine the best offering for them.

She said: "This consists of measuring the environment, identifying the drivers behind why BPO is being considered and deciding which approach is best for entering into a BPO relationship."