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May 2, 2008updated 06 Sep 2016 3:10pm

One in three BPO deals ends early

Roughly one in three organizations pulled the plug on business process outsourcing onshore and offshore deals last year.

By CBR Staff Writer

This was one of the findings in a recent BPO white paper by Diamond Management & Technology Consultants. The main reason cited by organizations for abandoning BPO in 2007 was a lack of cost savings. But service providers said that a change of strategic vision or moving functions back in-house were the key reasons for terminations.

A disconnect exists between buyers and providers regarding why organizations are prematurely ending contracts, and this can lead to a lot of finger-pointing, said Tom Weakland, managing partner of Diamond’s global sourcing practice.

Just over half of buyers were satisfied with their BPO initiatives, though there was a wide range of views. Happiest were the organizations which outsourced customer service to onshore providers (64%) and this was predicted as the area with the biggest growth potential in the year ahead. But this was contrasted with only 18% who were happy with an offshored HR function.

BPO has been following in the footsteps of IT outsourcing with customers increasingly using BPO as a competitive weapon and more than just a cost cutting measure, found the report. Already buyers had ranked freed up internal resource and improved efficiency and productivity ahead of cost savings among BPO benefits.

Overall, Diamond’s survey predicted moderate growth ahead. Buyers are struggling to learn from the past, and providers are missing the mark in meeting buyers’ specific needs, said Brian Tumpowsky, principal at Diamond Management and Technology Consultants. Rather than swim against the current, buyers of BPO services could benefit from candid conversations with their CIOs and IT departments about their past experiences.

The survey was based on responses form 185 buyers of BPO services and 25 service providers.

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