Adam Deane has once against sparked a discussion in his comments – this time about BPM and BPO – and he ends with the question: “So why are BPO and BPM not talking to each other?”

I might not have commented on the post, but for reading Neil Ward-Dutton’s response, and then Evan McDonnell’s response. Neil points out that CapGemini’s BPO offering uses IBM BPM (Lombardi), Steria’s F&A uses Nimbus/TIBCO.  And AWD from DST.  So it looks like there are a few examples – perhaps not getting much press.

Evan’s comments were even more interesting to me, crediting BPO providers with some foresight.   He rightly points out that BPO has largely been “lift and shift”, and that they’re running out of steam (but trust me, there are still low wage geographies and polutions for BPO providers to exploit).  Evan goes on to describe the BPOs with foresight and the great benefits they will achieve by adopting BPM.

I have no argument with that – clearly any company with scale, and customers, will benefit from good leverage on a BPM suite/system/solution.  BPO providers are, after all, just companies like yours and mine.

But I took some issue with the idea that we aren’t hearing about their success because they’re keeping it secret, and wrote:

I file this under “I could tell you about our successes, but then I’d have to kill you” (smiley face)

BPO organizations are/were not exactly known for being innovators. I didn’t notice any of them “anticipating” the lack of cheap labor – their whole business was typically based on the premise that the cheap labor pool was virtually limitless. It is no surprise that they are late to BPM, late to process improvement (for real). And a BPO’s process improvement is not for the customer’s benefit, it is for their own. As a customer to a BPO firm you have to own your own process improvement.

You might think I’m crazy or talking nonsense. Does Apple leave it to their suppliers to figure out how to improve their processes or their manufacturing? Or do they go in there and make it happen at a detailed level? Don’t think you can just hand off and walk away. If you do, you’ll find something that went from differentiator (when you made it a core competency) to commodity (when you stopped differentiating on it), eventually turn into a weakness and a cost center (after BPO has set in for a couple years). Only by then, you’ll have lost the critical internal organizational expertise to run that outsourced process…

There are benefits to BPO, but big risks as well. Handle with care.

Of course, many people would argue that most companies don’t do this investment in process and people – but whether companies do or do not invest, it is pretty clear that they should be investing.

As for BPOs, trust me, when a company’s whole business model assumes that individual people are not valuable nor interesting, it is hard for them to suddenly retread for the world where skilled labor is more expensive, and choosier.  Instead, they migrate down the experience ladder, or the education ladder, until they find people who meet the right cost structure (often regardless of the impact on customer outcomes).

To the BPOs out there: invest in people and process, it is the best way to add value for your customers.  But to the customers of BPO vendors – own your own processes.  Improve them.  Don’t let all the benefits of process improvement accrue to someone else.

Ok, no, Xerox isn’t a BPM company in the traditional sense – they’re not selling BPM software.  But, I think Xerox has reached the conclusion that the process is their product.  And once you realize that, how can you not argue in favor of the acquisition of ACS, which does a lot of BPO (business process outsourcing) leveraging Xerox equipment, software, and technology.

As Craig Le Clair of Forrester points out:

And speaking of capture, XGS would become the largest outsourced capture provider. Of all the ITO/BPO players, none did as much for that inbound channel as ACS. We estimate about 1B of ACS’s revenue could be classified as in-bound capture. But that’s just part of this story.  A strong ITO channel like ACS will help push XGS’s already fast growing Managed Print Services business.

This is a classic BPO play on managed print services, and getting bigger scale makes it more likely to work.  Back in the mid-90′s Xerox was a customer of my employer, and I worked on some very innovative projects for configuring extremely complex printing solutions (networked solutions) leveraging Docutech printers.  Even then, it was clear that the world of printing was going to change one way, or the other (or both):  either professional color printing would become dramatically less expensive (it did, or at least amateur color printing did), or professional printing would be increasingly outsourced.  Why the latter? As fewer companies could justify spending the capital to own the expensive print equipment during tight times, or because of smaller printing demands (more and more documents going online and onto CD’s), it would make more sense to buy printing services “on demand.”

This looks like a giant step in the direction of consolidation of managed print services, and other BPO services such as inbound capture.  I can’t speak to the pricing of the deal, but I feel like this is probably a very good business for Xerox to beef up.

After watching the market gyrate a bit over the last weeks, months… year?… and as a business owner, I get a lot of questions from friends about how the economy is affecting our business, or our customers.  I’d be lying if I said there was no effect.  Clearly, some of our customers are making tough business decisions, altering forecasts, and making plans to deal with a tougher financial environment.

But I’ve noticed something else.  The pace of process innovation and change hasn’t slowed.  If anything, it has increased.  This is entirely appropriate-  process improvement can save a company a lot of money, and typically it is money that goes straight to the bottom line (much like an improvement in pricing performance will go straight to the bottom line).

We see customers focusing on process innovation for the following ends:

1. Making a location-specific process global (applying best-of-breed across the enterprise)
2. Making a global process location-independent (no longer dependent on a single call-center location)
3. Extracting savings from commodity processes
4. Measuring performance of BPO (Business Process Outsourcing) contracts against SLAs through BPM.
5. Making it possible to utilize BPO companies in combination with internal staff on a single process
6. Improving on differentiated processes
7. Measuring adherence or increasing adherence to Risk Management processes

We’re seeing less focus on refactoring processes for growth, and more focus on refactoring for savings.  What’s the difference?  When you are building a process for growth, the concern is that the process that handles 1000 calls a day won’t handle 10,000.  That you need a process to help you scale that 10x growth curve, and to help people who are new to the process cope with the process.  Often this means taking a process suited for experts and making it accessible to new employees.  When you’re refactoring for cost, you’re looking for the defects.  In a call-center process that’s eliminating the need for call-backs, dropped calls, calls that finish without conclusion.  So you look for root causes and look for preventative measures, quality control on data entry, etc.  You look for elimination of non-value-adding steps in the process, and for eliminating bottle necks that cause one area or another to be overstaffed.

Not every company is making these investments, and the companies we work with are already narrowed to a select group that are already pursuing process excellence via BPM – but it feels as though most companies are not panicking and they are focused on these tried-and-true ways to improve their bottom line.

One of the reasons we offer bite-sized packages to customers (and prospective customers) is because there is an element of “you have to see it to believe it” with process improvement.  I’ve seen a few of our relationships go from a 1-hour session to a 2 day working session to a 4 week study to a 3 month roll-out.  Each piece a palatable risk-reward investment to move down the path toward process improvement, rather than signing up for a boil-the-ocean endeavor.

Now that the day is over, I’m happy to see the market ended up for the day.  But regardless of the market ups and downs, we see real value and real need for process improvement all around us.  And consistent investment in those activities will yield results in good times and bad.