Ads by TechWords

See your link here
Receive the latest technology news and information.
CareerMail
Computerworld Daily News (First Look and Wrap-Up)
Computerworld Blogs Newsletter
The Weekly Top 10
Cloud Computing
View all newsletters




Privacy Policy
 

Blazing a BPO trail

Early adopters of business process outsourcing services cite successes, challenges

April 20, 2004 12:00 PM ET

Computerworld - NEW YORK -- Early adopters of business process outsourcing (BPO) services said they have been able to save money and improve productivity for functions such as human resources and finance.
Nevertheless, several BPO adopters who spoke yesterday and today at a conference presented here by market research company IDC said they have had to go through a steep learning curve and tackle tricky personnel and contractual issues under agreements where there's little historical context to draw upon.
"Ten years ago, the solution was the hiring of arms and legs," said Donna Kinnaird, executive vice president at Swiss Re Life & Health North America Inc. She was referring to an agreement the Stamford, Conn.-based reinsurance company entered into with El Segundo, Calif.-based Computer Sciences Corp. in 1994 to manage more than 2 million life-insurance policies.
"Now, it's much more of a value and knowledge proposition" where more specific performance metrics have been worked into a recent 10-year, $700 million contract renewal, said Kinnaird.
Still, establishing reasonable performance metrics continues to be a problem for BPO customers and vendors, according to John K. Halvey, a partner in the technology finance and outsourcing group at Milbank, Tweed, Hadley & McCloy LLP, a New York-based law firm. Plus, intellectual property ownership and liability issues in these deals are "becoming much harder to define," he said.
BPO clients have also had to contend with thorny personnel-transfer issues. For instance, in late 2001, Hydro One Inc. entered into a 10-year, $730 million pact to outsource its finance and accounting, supply chain management, CRM and settlement services to Capgemini. But before the deal could be signed, the Toronto-based electric utility had to reach a precontract accord with two labor unions on a staff-reduction plan that allowed it to achieve its 30% cost-savings target, said Jeffrey Smith, Hydro One's director of finance.
Hydro One and Capgemini gave the two unions a two-year job guarantee and are now working with the unions to reduce the head count for some of the 900 workers who were transferred from Hydro One to Capgemini, said Capgemini account manager Dale Rooney.
The staffing issues didn't end there. During the first year of the contract, Paris-based Capgemini was pressured by the unions to return roughly 40 workers in waste management and warehousing to Hydro One to ensure their job stability, said Rooney. "We didn't want to do this, but we did it in the spirit of collaboration with Hydro One."
While most companies outsource business processes to cut costs, Canadian Imperial Bank of Commerce



Jump to comments

Outsourcing

Additional Resources

WHITE PAPER
Approximately 60 percent of data migration projects overrun time or budget, while some fail completely. Download this white paper, "Enhancing Your Chance for Successful Data Migration," to learn the critical steps you need to take to execute a data migration project with minimum cost and risk to your business.
WHITE PAPER
Read the Gartner research note to learn why the TCO of a server-based computing deployment used to deliver all applications to users is around 50% lower than that of an unmanaged desktop deployment.
WHITE PAPER
Economic downturns have a tendency to accelerate emerging technologies, boost the adoption of effective solutions, and punish solutions that are not cost competitive or that are out of synch with industry trends. This IDC White Paper presents the results of an IDC survey of 330 companies in Western Europe, Asia/Pacific and the Americas that measures the receptiveness to Linux and takes into consideration changing views driven by the disruptive economic environment that businesses face today.