BPO meets BPM
Maximum Benefits from a Combined Solution
Two dominant business management services, business process outsourcing (BPO) and business process management (BPM), are attracting attention from both industry analysts and consumers of these services—and for good reason. As organizations look to streamline business processes by focusing their resources and technology spending on core competencies, BPO and BPM solutions can be coupled to help management achieve their corporate objectives and attain exponential benefits.
Enter BPO
Coined in the mid-1990s, the term “BPO” has undergone some sweeping changes in recent years. Initially focused on processes in the finance and human resources departments, BPO has evolved to include many different types of outsourcing relationships including shared services. According to the industry analyst firm, Gartner, opportunities for BPO are even springing up in areas such as demand management on the customer acquisition side and supply management on the services/product delivery side. In the area of enterprise services, this may include those functions that are common across most organizations such as accounts receivable, accounts payable and human resources.
BPO can be defined as the delegation of some, part, or all of a business process to an external service provider who, in turn, owns, administrates and manages the selected processes based upon defined and measurable business performance metrics.
In a recent Gartner Dataquest report, Gartner estimated the BPO market will grow to $173 billion by 2007. Gartner also noted that BPO is growing faster than any other IT services segment. As the director responsible for DST Systems’ BPO services, Becky Stauffer has first-hand experience with this growth. “BPO facilities provide many advantages over their customers’ internal resources and operations, including economies of scale, business process efficiencies, business continuity planning (BCP), redundancy and critical domain expertise in areas that may not be core to a client’s operation,” Stauffer said. Both IT and non-IT business processes have been successfully outsourced to DST and our partners such as Computer Sciences Corporation (CSC). Non-IT related BPO services include prescription card administration, transfer agency services, accounting services, inbound/outbound call centers, claims processing and billing services.
IT-related BPO services include everything from IT development, to application hosting, integrated voice response (IVR) solutions and data center management. Organizations such as Blue Cross and Blue Shield of Kansas City (BCBSKC) are creating IT outsourcing strategies targeted to their unique needs. For example, BCBSKC relies on DST Technologies’ Automated Work Distributor™ (AWD®) BPM solution for claims processing and utilizes DST’s IT outsourcing services for data center hosting. “For our mission-critical project, DST’s experience, disaster recovery capabilities, and cost structure minimize our risk and resource allocation and allow us to focus on our core areas of business,” said David Gentile, senior vice president of operations for BCBSKC.
While some organizations look to outsourcing providers to manage complete, soup-to-nuts business processes, more clients of outsourced services are looking to adopt BPO on a task-by-task basis. DST refers to this as a “shared service model,” which employs a combination of in-house and outsourced resources to complete the business process value chain.
Selective tasked-based outsourcing is different from the more traditional BPO model, where the whole business process is outsourced. The authority for managing the people, technology, and the processes is balanced between in-house and outsourced resources. In shared services BPO models, BPM technology allows management to easily integrate complex tasks and activities between the outsource provider and outsourcer, while retaining visibility to specific tasks, critical activities and performance metrics.
Enter BPM
While “BPM” has been around for several years, the current application of the term is relatively new. BPM represents the union of human-based workflow systems and data-centric application integration solutions. Despite the young age of this current incarnation, Aberdeen Group expects worldwide spending for BPM to increase from $2.26 billion in 2001 to $6.32 billion in 2005.
The foundation of a successful BPM implementation rests on two qualifications:
1. All tasks in a business process cannot be completely automated; and
2. Most business processes require some amount of human interaction, even if just for exception handling.
BPM provides the tools to automate those tasks that can be automated, while ensuring that key human-based tasks do not fall through the cracks.
Other BPM hallmarks, distinguishing it from other productivity-improving technologies, include rapid implementations (weeks, not months) and the ability for business users to maintain the underlying business processes. This business process “agility,” as Gartner calls it, is achieved via the incorporation of enabling technologies such as modeling and simulation applications. These allow the overall business process to be developed in a visual tool (think Microsoft® Visio® on steroids) and automatically loaded into the BPM engine when complete. Simulation capabilities allow users to test what bottlenecks and other issues may occur as parameters are altered. This allows these issues to be addressed before the solution is ever implemented into a production environment.
“Agility” also includes support for business rules engines (BREs), which allow process rules to be easily implemented for use by both human and automated users. AWD and other leading BPM suites include built-in BREs and/or provide the ability to easily integrate with external BREs, such as Fair Isaac® Blaze Advisor and CSC’s Visual Product Modeling System (VP/MS). One example of production-proven BREs is again BCBSKC. A key driver in BCBSKC’s search for a BPM solution was that it had to manage complex claims processing tasks involving both internal associates and multiple third-party service providers. “AWD has allowed us to better manage our relationship with our third-party outsourcer for claims processing,” Gentile said. “With its business rules capabilities, we can set up rule-driven criteria that can automatically determine what work stays internally and what is sent to our outsourcer for processing. Exceptions to the work performed by our outsourcer can be routed back to one of our internal resources for resolution.”
In addition to cost savings, three other drivers are accelerating the adoption of both BPO and BPM. These include a shift from capital to expense spending, a greater focus on core competencies, and an increase in regulatory complexities. However, I suggest that these drivers shouldn’t be the only metrics used to justify and measure the success of BPO/BPM initiatives. Business activity monitoring (BAM) is another key component of BPM. BAM tracks process or event-level information and presents it graphically, allowing management to make real-time changes to the process flow. In a fully automated environment, these changes can occur without human intervention based on pre-defined business rules to ensure processing accuracy and productivity.
BPO and BPM Improvement Strategies
Enlisting a vendor with broad industry expertise who can commit significant resources to drive BPO operations and BPM technologies is essential for a successful combined solution. Drawing from experience in financial services, healthcare, insurance, banking, and video/broadband, DST continues to invest heavily in AWD BPM solutions to drive its own BPO operations. In fact, DST is one of the largest users of the technology. Experienced BPO and BPM providers such as DST and AWD offer technology and operational expertise, established benchmarks, alliances and partnering skills, financial stability, change management skills, the ability to renovate/innovate solution offerings—and continuous process improvement (CPI).
CPI strategies are not new. Beginning with the time and motion studies of the 1940s, they have helped management increase operational productivity. CPI accomplishes this by using small-step improvements, rather than implementing one gigantic improvement. The Japanese have a term for this—kaizen—stressing the benefit of steady, methodical improvements over large improvement projects.
Over the past 60 years, various other methodologies have emerged to address process improvement. CPI strategies such as Six Sigma, Lean Manufacturing and the balanced scorecard have stressed the importance of both the analysis and execution of these improvement opportunities. BPO and BPM solutions can be integrated with most of the CPI methodologies that exist within organizations. Where most CPI methodologies break down—integration and execution—BPO and BPM can fill an important function in process improvement by ensuring that what is modeled is implemented and, more importantly, performed correctly.
The Power of Two
As in any vital relationship, BPO and BPM are at their best when together. Coupling the control and concentration of BPO services with the power and flexibility of BPM solutions, management can model their tasks and processes to determine where to automate and how to manage key business activities. If specific activities are determined to be “non-core,” experienced BPO providers such as DST have the infrastructure and resources for outsourcing resource-intensive tasks or processes. The combined effect of BPO and BPM ensures that an organization’s technology investments are effective in continual process improvement and reflective of enterprise business objectives.
DST Technologies, Inc. is a wholly owned subsidiary of DST Systems, Inc. Through sophisticated information processing and computer software services and products, DST helps clients improve productivity, increase efficiencies and provide higher levels of customer service. For clients in a variety of industries, including financial services, healthcare, insurance, banking and video/broadband, Automated Work Distributor™ (AWD®) provides business process management, imaging, workflow and customer service solutions.
Please visit for more information on DST and AWD
KMWorld Special Advertisement Section