BPOs now offer comprehensive value and also save costs

Words like labour arbitrage, productivity, process streamlining, and standardisation are among the first that strike one’s mind when talking about business process management. However, over the past 15 years, the global BPO industry has come of age with more than 200 players vying for a $200 billion total contract value (TCV).

Although the tenets of outsourcing–cost advantage, noiseless delivery and process standardisation–remain the same, the core ingredients are maturing.

Clients today expect BPO service providers to truly own and transform processes, and not just remain efficient order-takers. Innovation on two key fronts–technology and deal structuring–is what will decide tomorrow’s BPO players.

Technology Earlier, BPOs used technology as a differentiator to demonstrate their edge over competition. However, recent advancements have placed technology at the core of their offerings.

Extreme Automation using Robotics
The BPO industry is attempting to replicate what the high-end manufacturing industry has perfected–using robots for high-tech repetitive processes. Savvy BPO companies are steadily enhancing their capabilities to perform extreme automation and eliminate non-core jobs by 50-60 percent. Today, robotics allows automation of functions such as routine query handling, data entry, OCR enhancement, pattern recognition, rule-based decision-making, broadcasting MIS with comments to internal and external audience, and much more. BPO organisations are trying to stay relevant either by investing in proprietary robotics technology or by making smart acquisitions and alliances. The kind of resources needed to manage these automated processes would involve the emergence of a new breed of “knowledge workers”– who have both strong domain and technical expertise.

All-in-one with BPaaS
What started as a trickle in 2011–12 is slowly becoming a flood. Today’s CFOs and CIOs are questioning the viability of huge in-house IT teams to maintain, develop, and upgrade systems when BPO solution providers (with a strong IT backbone) are providing a lethal combination of process ownership, process platform, maintenance and upgradation, and hosting. And these models are not just for ancillary systems like T&E, claims management, order processing, or invoice processing. They have made inroads into core systems like billing, general ledger, and financial reporting.

The message from a CFO to a CIO is loud and clear–“Adopt standard technology and solutions to make our processes best in class; do not invest in developing custom/in-house solutions that only make us become obsolete at a fast rate.”

Process accelerators/bundled point solutions
Forward-looking BPO firms have invested in point solutions/ process accelerators by smartly integrating their IT and domain capabilities to address last-mile connectivity challenges of clients. Some common examples are reconciliations, General Ledger period close dashboards, customer help desk, AP invoice processing etc. Global enterprises have found it beneficial to let BPO service providers come with enabling solutions, and make the transitions smooth and service delivery predictable and transparent. Future BPO transitions will see such solutions playing a much larger role with BPO-specific process designs embedded in them.

Decision insights for new kinds of business outcomes
Gone are the days of dense, detailed, PowerPoint presentations and charts that showed how providers achieved committed SLAs, met performance targets, and the next focus areas. Today, top service providers are leveraging big data analytics and powerful visual solutions to aid decision-making; and to extract insights from the massive transactional data that they amass. Some real world examples include:
•    Digital command centres that offer air traffic controller’s view of the health of global service operations
•    Red-amber-green heat maps that cover all relevant variables–technology, people, process volumes, status of activities, changing business priorities, local disturbances, etc, and enable clients to respond to situations faster
•    Operations managers stay connected on mobiles, tablets, and wearable devices–getting relevant operational insights–helping them to plan responses, divert resources, handle peaks, etc

Innovative deal structuring
Lame numbers are passé. It’s time for benchmarks
Providing detailed headcount information and letting service providers decide how much to offer as immediate productivity, deal lifecycle productivity, etc is now passé. Mature BPO players provide global solutions relying on sophisticated solution models, knowledge of benchmarks, as-is technology maturity, functions mix, etc. This is akin to ‘zero-based budgeting’–clients are not expecting BPO service providers to be incrementally efficient but truly transformational.

Own the outcome
What used to be a trend earlier is fast becoming mainstream. Especially for processes such as receivable collections and duplicate audits, where clients see tremendous value in letting BPO solution providers own the outcome. Solution providers come to the table with data analysts and domain experts, sophisticated tools to understand client’s performance, predict trends based on past performance with which they are able to offer powerful insights and own the action plan. As per a 2013 study by leading Research firm HfS, 37 percent of the finance and accounting BPO contracts had a transactional/hybrid/gain share components embedded in them.

Conclusion
While cost is the ‘talk’ in BPO conversations, what differentiates tomorrow’s leaders is their ability to deliver comprehensive value. Not all providers have the global reach, technology backbone, and industry specialisation to sharpen their offerings. While entry barriers to outsourcing remain almost non-existent (Bangalore alone has more than 100 BPOs servicing less than 100 FTEs each), the room at the top is unmistakably limited.

- By Ramachandran Guruswamy, Head–Technology Solutions Practice for F&A, Infosys BPO 

The thoughts and opinions shared here are of the author.