BP fuels business transformation outsourcing market

One of the country’s biggest natural gas producers says there’s no hot air behind one of the IT industry’s newest buzzwords: business transformation outsourcing.

BTO is a merger of business process outsourcing and business process re-engineering touted by giant international technology and consulting

companies such as IBM, Accenture and Cap Gemini Ernst & Young.

Called by one Meta Group analyst an “”appealing, albeit somewhat nebulous concept,”” the providers go beyond traditional outsourcing of a service, such as hosting a call centre, to offer guarantees of improving a customer’s business processes.

So far it’s a young field, but one which Don Brilz, a vice-president of BP Canada Energy Co. who oversees the company’s business transformation outsourcing arrangement with IBM, says could have a huge impact on the multinational company.

“”In terms of efficiency it could be monstrous,”” he said in an interview. “”Radical is a better word.””

IBM Canada hosted Brilz as part of a briefing Wednesday as a customer reference for its BTO services.

The arrangement started out three years ago as a traditional outsourcing deal with British -based BP PLC for services, with IBM operating a three-floor data centre in BP’s Calgary office. Since then the relationship has turned what Brilz called a “”journey”” into business transformation.

“”We are beginning to discover areas of opportunity where IBM can add value by doing things differently,”” he said.

For example, IBM told BP Canada its process for recovering losses from partners (Brilz wouldn’t be specific) wasn’t good and suggested a revenue sharing project within their existing contract.

Getting a handle on BTO can be a challenge. “”You don’t write a business transformation outsourcing contract,”” said Brilz. “”Your write a relationship contract for a provision of service which has an incentivization business.””

BTO is not without its risks, he adds. BP has realized contract management could have been done better, and it lost some skills needed to keep an eye on IBM’s work.

“”We lost expertise maybe deeper than we should have,”” he said.

There’s also the vulnerability of being one of IBM’s earliest and biggest BTO customers. That IBM data centre at BP Canada has since expanded into being one of IBM delivery points for outsourced finance and accounting services to North American companies.

IBM has a number of delivery centres around the world focusing on specialties such as customer relationship management, human resource and procurement applications, centres which it says helps drive down the IT cost of outsourcing.

BP is looking for the centre to have more customers so it can share in those savings. “”The economies of scale haven’t materialized to the level we expect,”” he said.

Meta Group analyst Stan Lepeak calls business transformation outsourcing “”an immature work in progress.””

“”The history of business process re-engineering has never been great,”” he said in a telephone interview.”” Combined with business process engineering, the mix could be too much for some companies.

“”I buy into the concept,”” he added, “”but there’s a lot IBM and others have to learn about what is process excellence. They’re going in the right direction, but the marketing and messaging is running far head of the actual capabilities.””

B.C. Hydro recently said is undergoing a 10 year, $1 billion BTO deal with Accenture covering IT, CRM and human resources.

Comment: info@itbusiness.ca

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Howard Solomon
Howard Solomon
Currently a freelance writer. Former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, Howard has written for several of ITWC's sister publications, including ITBusiness.ca. Before arriving at ITWC he served as a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times.

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