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BPO in Australia and the Asia Pacific
In recent years, the market for business process outsourcing (BPO) has been growing rapidly. It has been driven not just by a desire to manage costs but also by a need to transform business processes in a way that offers a competitive advantage. Furthermore, today’s technology makes it much easier for companies to work with services suppliers. Internet technology enables partner and customer to be closely connected at all times and for many communications to occur in real time. An increasing proportion of business processes are also now dependent on technology. The management of the technology and the ability to leverage this technology to its full potential are often not strengths that exist within businesses. In other words, the management of these technology-supported processes is often not a core competence. Outsourcing vendors are often more capable of transforming and managing a wide variety of business processes more effectively and efficiently than other businesses.
There are many different types of business process outsourcing services. There are customer management services or front office services. Typical business processes to be outsourced in the front office are call centers or and other customer service related activities. Back office processes are typically horizontal activities that are common to most organizations such as human resources, finance and accounting, and procurement processes. Middle office processes tend to be those that are specific to particular industries. For example, loans processing is specific to the banking industry and closed book policy administration is specific to the insurance industry.
BPO in Australia
Business process outsourcing activity varies significantly by region. English speaking economies have tended to show the highest propensity to outsource their business processes. In the US and the UK, many of the largest organizations have outsourced front office, back office and industry specific processes. In the Asia Pacific region, such activity has been less common. However, Australia, perhaps due to its cultural similarities with its English speaking cousins, has embraced business process outsourcing in many industries. The world’s largest mortgage processing contract was in Australia. Westpac outsourced its mortgage processing to EDS in 2001 in a 10-year US$679 million deal. Other major Australian BPO contracts include Unisys’ mortgage processing contract with RAMS Home Loans, Unisys check processing contract with Westpac and CGEY’s finance and accounting contract with BlueScope Steel. Much BPO activity in Australia is focused on industry specific processes within the financial services sector. The Australian market for BPO in areas such as check processing and loans administration is comparatively mature. Other BPO markets, in particular the market for human resources outsourcing have yet to take off. Nevertheless, BPO vendors with a focus on multi process human resources outsourcing have established a presence in Australia. For example, ARINSO and ExcellerateHRO (a joint venture between EDS and Towers Perrin) are both targeting Australian companies with their offerings and have recently established a presence in the region. Front office outsourcing, often in the form of call centre outsourcing is also a comparatively mature market in Australia with vendors such as Teletech and Convergys having generated significant business in this area.
BPO in Asia Pacific
In the rest of the Asia Pacific region, BPO activity is focused to a much greater extent on delivery for multinational corporations. Many BPO companies with a focus on specific business process areas, such as HR outsourcer Hewitt, are currently focused on delivering HR services to their clients that have operations in the Asia Pacific region. Others such as Convergys focus significantly on labor arbitrage for their international human resources outsourcing clients. A major issue for many BPO service providers in the region is finding ways of encouraging companies with captive offshore facilities to use the facilities of a third party such as Convergys. For example, American Express currently has sizeable captive offshore facilities in India. Many outsourcing vendors with offshore capabilities are seeking ways of encouraging American Express to use third party facilities rather than their own. Japanese and Korean companies have long had captive facilities in countries where the cost of labor is lower but as yet, have not shown a significant propensity to outsource the management and operation of those activities to third parties.
The delivery of BPO in the Asia Pacific region is clearly a major business. However, few of these BPO contracts are signed in the region. Further demand within the region is likely to come from Australia and New Zealand in the short term, although rapid growth can be expected within other Asia Pacific countries as their economies mature and in others as the cultural barriers to outsourcing to third parties fall.
-- Andrew Milroy
Andrew Milroy is a Consulting Director at Frost & Sullivan
About Frost & Sullivan
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