LONDON, UK: With the cost reduction benefits from staff offshoring beginning to fade, software development expertise is becoming more important for Business Process Outsourcing (BPO) services providers. This is according to a new report from Ovum, the global analyst and consulting company.

The report, "The role of proprietary software in BPO", highlights the increased use of software development in support of BPO services provision. It provides examples of BPO services providers including Capita, Atos Origin, and Tata Consultancy Services' use of software development to enhance their BPO service delivery.

"The extensive use of low-cost offshore resources by all BPO providers is serving to level the playing field across the market. Software development is the new battleground for BPO services providers who wish to differentiate their services", says Samad Masood, IT Services senior analyst and author of the report.

Ovum's research reveals how both IT services and BPO services providers are using software development within the "process layer" in order to improve delivery efficiencies without having to significantly modify their client's underlying enterprise software platform.

In the same way, software development expertise is also key to vendors ability to use "cloud computing" technologies to offer their BPO services on a modular basis. This is giving rise to new models of BPO provision and serving to shift the competitive landscape between software, IT services and BPO services vendors.

"Proprietary software development is key for BPO services providers to future-proof their business, and provide ongoing cost efficiencies above and beyond the standard 'labour arbitrage' provided by offshoring", says Masood.

"Most importantly, the use of proprietary software is also shifting the model of BPO services delivery, as it can significantly reduce the cost and/or requirement for significant technology platform transformation when transitioning to a BPO services provider," concluded Masood.