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An Extended Ramble About BPO

I decided to write my impressions about one particular part of its 2005 strategy, business processing outsourcing (BPO), as an extended blog entry, because in some ways I believe BPO is just an extension of the whole managed services dialogue.

The beehive analogy is probably the better one, because you can almost hear the buzzing of EDS employees reenergized by their company's much healthier balance sheet " and by the new go-to-market identity the No. 2 systems integrator is shaping for itself.

I decided to write my impressions about one particular part of its 2005 strategy, business processing outsourcing (BPO), as an extended blog entry, because in some ways I believe BPO is just an extension of the whole managed services dialogue that continues to grow louder daily among the greater channel community. Mainly, the managed services conversation centers on infrastructure management. But in essence, you are outsourcing a business process that happens to be related to technology. What makes BPO a little bit different, I suppose, is that the process takes precedence over the technology. But I believe they are fundamentally related. And that's why I'm trying to puzzle out what BPO means to the average CRN reader.

EDS' BPO effort, led by Vice President and General Manager Joe Eazor, actually had a tough year in 2004, when revenue slipped to $2.6 billion from $2.9 billion. But he believes the trend will be a whole lot sweeter by the end of the year. For one thing, Eazor claims EDS has improved the cost structure and margins for almost every single BPO account. For another, EDS has the scale " and the cash " to invest heavily in this area over the next 12 months. (You can read my news story from last week as background.)

"Alliances, acquisitions, ventures. They will all be part of building our own skill sets," he said.

The things that fall under EDS' BPO activities include various financial services functions, such as payment processing; contact center and CRM projects; government health-care administration initiatives; and human resources operational functions, such as benefits administration. This list is by no means inclusive. Steve Schuckenbrock, EDS' executive vice president of global sales and client solutions, says most BPO engagements are split 60 percent vs. 40 percent between functional expertise and technology expertise, respectively.

EDS' recent joint venture announced with Towers Perrin is one illustration of what the industry can expect this year as the integrator builds out its BPO services portfolio.

Interestingly, the company also is interested in transforming its procurement capabilities " it currently handles more than $8 billion in purchases on behalf of its clients in deals that are split across its different services lines " into a more comprehensive BPO offering, according to EDS executives. If you think about the company's alliances with the likes of Microsoft, Sun Microsystems, Oracle and so on, you get a sense of just how profound that sort of offering would be. You're likely to see EDS work with its A. T. Kearney subsidiary to pull this off. Remember. while EDS is building its own technology backbone to support new BPO engagements, it will need to appeal to domain experts through partnerships or acquisitions to make the whole thing work.

To build out its leveraged BPO services/technology, EDS has tapped Fariba Rawhani as vice president of its BPO Leveraged Services. What makes Rawhani intriguing is her no-nonsense approach to thinking about the technology part of the problem, which is perhaps not surprising since she used to live these problems in her former guise as a CIO.

To Rawhani, BPO is all about providing insurance that a company won't make like the Titanic and hit an iceberg caused by all its unseen challenges, including legacy systems, antiquated processes, a rigid business culture, and the lack of the courage or discipline that a company needs to make a dramatic change in direction. She's responsible for building the company's so-called Agile BPO backbone, upon which the company's BPO services will ride.

"Every company has it's own iceberg," she says. "Why not create a proposition for dealing with what's under the surface?"

What do you think of BPO? Is it a proposition only for larger companies? You can send me e-mail by clicking on the byline at the top of this entry!

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