March 3, 2006

An IT and BPO (business process outsourcing) company based in India, Patni Computer Systems just completed a study among its users around the globe and found that 89.1 percent of companies planned on increasing their outsourcing budget for 2006 and 2007.

Of that number, close to 40 percent of companies want to boost their budgets by 20 percent or more over current levels. All in all, about 10 percent of all respondents were targeting a 50 percent or more increase in their BPO budgets in their B2B segments of the market.

The value of this survey is limited by its sample space, but it is still worth noting the enthusiasm of existing customers of India, Inc. to pass more business to that geography.

Not remarkably, 61 percent of respondents said that their leading expectation from an outsourcing relationship was "better quality resources and enhanced services at a lower cost."

While respondents want cost savings, they choose vendors based more on cultural fit (the leading factor to 24 percent of respondents) and quality of service (also 24 percent) than on cost (14 percent). One way to think about this result is that, since there is no shortage of lower-cost Indian vendors, cost as a closing factor is commoditized and companies are freed up to seek vendors based on other desiderata.

This is a newer phenomenon, as last year's Patni survey found only 10 percent of respondents putting cultural fit in first place.

Given what is at stake, it was disturbing to find that 34 percent of respondents admitted to having no formal change management process for outsourcing. Meanwhile, 41 percent have an in-house team, 12 percent go through their service vendor, and 12 percent use outside consultancies.

These numbers indicate that companies believe that outsourcing is easily accomplished and managed. That's a dangerous attitude to take given the managerial and process complexity of outsourcing, and it should be interesting to see if future Patni surveys show customers moving towards more outside help.

Source: Line 56