BPM and Outsourcing

Intelligent Enterprise’s Doug Henschen provides a cogent overview of the current BPM space, particularly on the topic of how the "smaller" vendors are adapting to the arrival of big players IBM, Microsoft, Oracle and SAP into their arena.

To me, the most interesting paragraph of the column was this one:

...Late last month, Savvion released version 6.8 of its BusinessManager software, and President and CEO Shawn Price announced the company’s intention to build an open "ProcessXchange" community with more than 1,000 prebuilt process models by year end. In a one-on-one interview he told me the next step after streamlining processes will naturally be outsourcing them. To that end, he said Savvion has wracked up deals with four of the top five business process outsourcing firms, including India’s Satyam and Infosys, whereby those firms will be ready to run processes built on BusinessManager.

Since I also edit the site Sourcingmag.com, I perk up my ears at anything outsourcing-related.

But if I follow Henschen correctly, he’s saying that service providers are writing up partnerships with companies like Savvion in order to be ready to take on process management work for their clients -- using the tools their clients would choose to use.

I have no doubt that finding additional work in those pockets of the enterprise where BPM is gaining a toehold has great appeal to the Satyams and Infosyses of the world.

But my guess is that this work would be a dead-end for Indian providers. As process oriented as India firms are (the majority of CMMi level 5 holders are based in India), their strategy is still founded on the presumption of cheap labor. Since most deals are structured on a time and materials basis, the more people applied to a project, the greater the monetary haul. (Yet the savings are still great enough to make client CFOs weep with joy.)

To get new business, they go into the marketplace and emulate processes as they exist. Why shouldn’t they? They can still make their margin through labor arbitrage -- even if they need to have more people doing the work than the client did.

The process focus frequently is a substitute for cross-cultural communication differences. If you write everything down, surely the information you need and the answers to your questions are in the docs somewhere. That, and it gives US and European business leaders a great deal of comfort to think there’s some method to the madness of IT.

Client firms don’t need to streamline the processes before outsourcing them (though there are major business advantages in doing so).

Savvion and those service providers are simply taking this tack because it provides additional sales and service channels -- not because there’s some alchemy to mixing BPM and outsourcing.