BPO in Europe - offshore or nearshore?

Recent article by Alsbridge's BPO and shared services advisory practice in Sourcingmag.com discusses the opportunities of the development of Global BPO service market in Europe. Many experts see continental Europe as a next major business process outsourcing (BPO) growth area. But the question is - will Europe open its doors to leading Indian offshore providers, or will keep its short-sighted nearshore precedency.

One of they key aspects in determining the possible directions of BPO market movement in Europe is to look at the development of the sister ITO market which has been showing a clear signs towards homecoming for last decade. The panacea of outsourcing to nations such as India and China has proven illusory for many European companies. Latest reports confirms that long-distance offshoring does take its toll on the control of projects and erode program management and communication.

The lowering satisfaction levels combined with terrorist attacks, corruption scandals and rising attrition levels in India contributed to the shift in outsourcing delivery preferences towards nearshore and sameshore options. The survey being made by Black Book Research in 2009 confirmed this shift naming Central and Eastern Europe and Latin America top destinations for operating with lowest downstream risks for Western Europe and US respectively.


What is the relationship between ITO and BPO.

Although there are many differences between ITO and BPO, some relations are overt. The main objective of ITO is to improve IT infrastructure and reduce the cost of IT systems while BPO goes beyond that improving the performance, efficiency and productivity of a business. Nevertheless, most of the key core processes of a business require IT support whether its logistics management or financial management or customer care, all those processes will have a strong IT infrastructure to them.

That said both ITO and BPO come as a one strategic decision for the C-suite. The top management should co-ordinate IT strategy with the BPO strategy coherently. With this intimacy between two most European companies will be making sourcing decisions and determining best location choice based on their previous experiences and main drivers.


Current state of things

Global BPO is rather old hat in the UK and it remains Europe’s largest BPO market with Switzerland, Netherlands and Nordic countries showing high activity in these areas.

The largest European economies among which Germany and France show some signs of reluctance towards BPO though. That reluctance is explained by experts as a difference of world view - while cold-blooded Anglo-Saxons would outsource their grandmothers if they could, those conservative and consensus-driven Europeans prefer to keep the back offices close to home.

Many BPO suppliers - even a leading French supplier selling to French customers - complain of a crushing lack of interest in their outsourcing wares. It seems concerns about BPO's incompatibility with Europe have real currency at a local level, and as a result many local French, German or Italian organisations instinctively baulk at the prospect of externalisation. But the likes of Philips, Axa or American Express have proven that the barriers can be overcome.

They have experience with shared services and have accumulated the skills to know how to deploy them; they know that complex European language requirements can be handled well by low-cost east European locations.

In short they know that BPO works, and that there are only imagined barriers to it working well in Europe. More and more companies are finding that they can get it right, lowering operating costs and improving back-office quality and compliance as a result.

The question will global BPO works in Europe or it repeats failure of ITO.