IncognitoNet
Joined: 20 Aug 2004
Posts: 69
|
| Business Process Outsourcing Challenges Web Hosting |
|
|
Business Process Outsourcing Challenges Web Hosting
By Rawlson O'Neil King
August 20, 2004 -- (WEB HOST INDUSTRY REVIEW) -- Business process outsourcing, the delegation of IT-intensive business processes to an external service provider, has emerged as a challenge to the traditional Web hosting paradigm. Service providers manage selected processes, based on defined and measurable performance criteria.
BPO providers can offer a wide range of end-to-end solutions including customer interaction, payment services, supply chain management, finance and accounting services, human resources and data mining services. Many offer these services through their own data center facilities, which also offer typical Web hosting services.
Large enterprises stand to gain from outsourcing business processes on a number of fronts, including cost advantage, economy of scale and business risk mitigation. The approach is particularly appealing to Fortune 500 firms since it facilitates the management of an entire business process, rather than a single component.
The BPO model can be seen as a challenge to Web hosting providers, since a competing BPO provider could easily handle all aspects of a large customer’s e-business operation: from programming, product fulfillment, payment processing and live call center support, in addition to management of the technical infrastructure. Many hosting firms, however, are limited to providing their customers with only Web design and server management. As a result, traditional hosting firms and other IT outsourcers are facing new challenges from BPO providers, many of which are located offshore.
The business process outsourcing industry in India has been growing at 70 percent a year and is now worth $1.6 billion, employing 100,000 people. According to McKinsey & Company (mckinsey.com) projections, BPO has to only grow 27 percent until 2008 to reach $17 billion in revenue and employ a million people.
BPO providers based in India pose an added threat to North American-based service providers due to low labor costs and the increasing availability of broadband-intensive telecom and broadband infrastructure on the subcontinent.
"Competition in the services marketplace has never been so intense," says Sophie Mayo, director of worldwide services research at market research firm IDC. "With new entrants from offshore locations, new delivery models being developed, the convergence of software, hardware, and services, and ever more demanding customers, services firms are faced with a multitude of challenges. Those firms that are able to anticipate the changes and execute on their vision will stay on the top of the market."
A new report released by IDC (idc.com) reveals the services market is highly fragmented, with the top 20 providers representing just over a third of the market opportunity in 2003.
While IDC expects that the top companies will become increasingly dominant as acquisitions continue to play an important part in their growth strategies, new entrants will continue to put competitive pressure on the major incumbents.
Indian firms such as Tata Consulting Services (tcs.com) and Wipro Technologies (wipro.com) are some of the most notable emerging players that are challenging established top-tier, complex Web hosting and IT services providers such as EDS (eds.com) and IBM Global Services (ibm.com).
The IDC study, Worldwide Services 2004 Vendor Analysis: Winning in the Global Services Marketplace, Lessons Learned from the Top 20 Players, argues that the firms that can demonstrate their ability to integrate technology, data, and business processes, with an explicit measurement of cost savings and value creation will win the battle for the growing BPO and transformational outsourcing opportunity.
So far, BPO providers have been successful at targeting vertical industries such as insurance, telecom, banking, pharmaceuticals and airlines. Many of these early adopters, insurance and banking in particular, have been able to generate huge savings purely because a large number of their business processes, such as claims processing, loan processing and call center client services can be outsourced.
As the BPO market evolves however, small to medium-sized business will comprise a greater share of the purchasing market for BPO services with demand for low cost and rapid implementations. BPO providers will directly challenge current hosting services by offering affordable full-service, transactional e-business and hosting infrastructure.
Source: http://www.webhostingzine.com
|
