Lack of BPO standards can mean higher IT costs

Business process outsourcing (BPO) is still so new that when Sharon Taylor, vice president of corporate human resources at Prudential Financial Inc., describes her experience, she has the authority of a veteran -- even though her company is just four years into a seven-year contract.

But four years of experience is 'about as mature as it gets in this space,' said Taylor, who helped build a business case for Prudential, which has some 40,000 employees, to outsource its human resources functions.

'There really wasn't much of a road map, but we knew the outcome that we needed to have,' she told attendees at an IDC outsourcing forum here today. Prudential outsourced HR to Exult Inc., which merged with Hewitt Associates Inc. in 2004.

Taylor, recently elected chairwoman of the Human Resources Outsourcing Association in Washington, is now helping to write a road map that may help other users. The group is developing a set of best practices and 'next practices' -- things that users are likely to need from service providers as the industry develops, she said.

BPO covers a galaxy of services, especially in finance, such as claims processing, reconciliation, collection, transaction services and tax preparation -- anything that can be delivered via the Internet -- and it's growing rapidly, according to IDC. Worldwide spending on BPO last year was about US$425 billion, and it's expected to grow 11 percent annually through 2009.

'It's definitely becoming a more accepted way of managing a business,' said Katrina Menzigian, vice president of business solutions for BPO services research at IDC. 'It's not quite mainstream, but it's on the path.'