WHAT IS BTO?
Business transformation outsourcing (BTO) is the next logical step for the big outsourcing vendors. In BTO a company’s entire business process is outsourced to the BTO vendor. The BTO vendors not just manage the business processes, instead they work closely with the company to transform and improve the business process to add strategic value to the shareholders of the company. BTO goes beyond the traditional outsourcing in which the external service provider will constantly transform and optimize the business process based on the changes in the marketplace and competition.
Outsourcing is a common accepted strategy in order to optimize companies costs and resources. Compass Business Consulting has developed a service line oriented to add value to organizations by outsource their collection of conciliation payment processes. Our most differentiation factor is the ability to confirm transactions online.
BPO Vs. BTO
In any BTO engagements there are significant risks associated for both the client and the BTO vendor. The BTO vendor needs to get full control of the business process so they can adjust and change it as needed. For client it may not be easy to give full ownership of the business process to the BTO vendor because of internal structure of the company. The IT systems and technologies of a company have to be properly aligned with their business processes.
The client has to give control to their IT systems and the corresponding business processes to the BTO vendor to succeed in their efforts. As the part of their business transformation strategy BTO vendors may change the client’s IT systems and this will be a significant risk to the client employees in managing their regular day today operations.
There are other challenges in BTO adoption, the policies and pricing models are complex and in most part it is untested. Managing BTO deals are complex and client companies must have proper tools and systems to adequately manage and measure the relationship.
For the client companies one of the greatest risks of BTO is the intellectual capital of their business processes that distinguishes it with their competitors. For example if a BTO vendor provides business process transformation services to an electronic retailer say Best Buy and to generic retailer say Target, how the BTO vendor will maintain the intellectual capital for the two clients? It is a known fact that both Target and Best Buy compete for customers and each has it’s own business strategies in attracting the customers. In this case how the BTO vendors will mange the relationship without compromising the trade secrets of Target and Best Buy?
FUTURE OF BTO
Unlike Business Process Outsourcing (BPO), Business Transformation Outsourcing (BTO) does not have a standard structure yet; each deal is unique in nature and there are significant risks associated with the BTO. But this does not stop companies in signing BTO contracts with major consulting firms like IBM, Accenture, EDS and BearingPoint. The big three Indian offshore consulting companies TCS, Infosys, and Wipro are also started offering BTO solutions, this will be a topic for a future blog.