We’re in the BPO industry, not the ICT industry

Quick note: When I wrote this, I was thinking of ICT firms that cater to business markets (as opposed to ICT firms that cater to consumer markets).

In my previous entry, I wrote about how information technology can “explode” the value chain such that the value-adding activities of a firm need not be housed under one roof. The beauty of this is that firms now have more flexible options in terms of choosing which parts of the business it wants to concentrate on. While many regions have realised this fact for some time now, I’m not entirely sure if we’re seeing this phenomenon for what it really is: the outsourcing of business services and activities.

The reason I say this is that even now I still observe a largely supply-side driven industry in Davao City. That is, we see the technology first before we see the needs of the market. There’s nothing wrong with that kind of thought process per se, (one might argue that that’s how some breakthroughs were born) but if done on a large scale, I fear we might run the risk of alienating ourselves from those whom we’re trying to sell our products or services to. Even worse, we might run out of resources long before we can even begin selling our products and services!

Just as firms nowadays need to focus while remaining agile (by outsourcing its non-core processes), perhaps so must regions such as Davao City. I question whether it is a good idea to concentrate on building new technology when other regions around the world are already good at that and we already have access (free or otherwise) to those technologies. I wonder if it would be more feasible for an I.T. firm in Davao City to evolve from a “technology manufacturer” to an I.T.-enabled service provider. Many would call this business process outsourcing (see footnote 1) and I would agree since that is what it really is: the outsourcing of business processes in the value chain. However, one must tread carefully here. At this stage, I find it’s very easy for firms in the business process outsourcing (BPO) industry to erroneously think like technologists rather than service providers. At this stage, one must continuously remind himself or herself that the real value of BPO firms is not in the fact that they are using I.T. but in the fact that they deliver service to client firms as efficiently and effectively as if the service was housed under the client firm’s roof. I must admit, I’ve made the same mistake before. Previously I would make the distinction that call centres are not really I.T. firms in the strictest sense and although I still agree with that, I now find that making such a distinction is pointless.

As I’ve said before, we must not approach things from the supply side (i.e. thinking up the technology and then looking for a problem it might solve) because that is too costly and we don’t have the resources to support that kind of strategy, at least not yet. What we need to do is be market-driven. That is, to first identify the needs of the market before looking at what we already have that can cater to those needs.

It’s time we truly realise that we’re in the BPO industry, not the ICT industry.


  1. I’m aware that some groups have come up with a new term: Knowledge Process Outsourcing. KPO is supposed to refer to something that is a step above BPO. I’m not entirely convinced that there is a difference between the two though. The definitions of KPO remain quite vague and I suspect that it’s really just a new label for the same thing.

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Filed under General Management, Value Chain

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