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Business transformation outsourcing (BTO)

13 Comments · Business outsourcing

With years of outsourcing experience to bolster managerial courage to undertake even holder projects, many are now using what is called business transformation outsourcing (BTO) to dramatically affect their firm’s competitive strategies.

In fact, 12 percent at chief technology officers in charge of IT outsourcing report undertaking BTO projects.

As research has shown, firms in volatile industries are more likely than those in stable industries to use outsourcing to help improve operations.

Increasingly, these firms are turning to BTO to help them become more flexible and adaptable in a rapidly changing competitive arena.

Transformation outsourcing is defined as a long-term relationship through which an outsourcing vendor assists the buyer in stimulating continuous business change while also achieving operational effectiveness. BTO is generally distinguished from plain-old business process outsourcing (BPO) on several dimensions, as shown in the table below.

BC Hydro is a Canadian utility with a traditional structure and organizational culture. Management change is typically initiated and executed only with great difficulty at the 140-year-old company.

Nonetheless, in February 2003, Accenture and BC Hydro signed a ten-yean agreement, valued at nearly $1 billion, designed to transform the way BC Hydro serves its customers. The new deal is projected to save BC Hydro customers $195 million.

As part at the deal, Accenture formed Accenture Business Services of British Columbia LP, with more than 1,500 former BC Hydro employees.

BC Hydro became the first customer at Accenture Business Services, outsourcing its customer services (including the development at a new customer information system), IT services, network computing services, HR services, financial systems, purchasing, and building and office services.

The agreement marked the completion of a process begun with a Request for Expressions at Interest that BC Hydro solicited from the private sector in October 2001.

In April 2002, after BC Hydro reviewed 19 proposals, it announced to its employees that the discussions had narrowed to Accenture.

The final terms of the agreement were reached after a negotiation and due diligence process that began on July 18, 2002.

Accenture Business Services began operations in Spring 2003.

Table: Key Distinctions between BPO and BTO

BPO    BTO
Operational focus  Business focus
Focus an cost cutting  Focus an value creation
Impose tight controls  Manage uncertainty
Fixed bid fees   Performance-based fees
Offload noncore functions Create business change

Transformation outsourcing is a bold approach to organizational change. Rather than the incremental, go-it-slow approach that many firms use in outsourcing business processes, the transformation approach is based on a forthright recognition competitively disadvantageous processes within the company and a desire to eliminate them with the help at an experienced vendor.

BTO can be the fastest route to achieving operational parity with best-practices providers or to vault beyond them through creative synergies between BTO buyer and vendor.

In fact, it both panties are committed to leveraging the relationship beyond service provider and buyer, revenue opportunities may lie in reverse outsourcing the new competencies.

BC Hydro and Accenture have done this with their joint venture, which was launched primarily to transform BC Hydro’s outdated systems and service levels.

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