Nearshore Americas

BPO 3.0 Changing the Face of the Global Industry

Source: CIOL

Driven by platform play, IT-BPO integration, smartshoring, and outcome-based pricing models, today’s outsourcing industry is undergoing another wave of transformation, says Sanjiv Kapur of Patni BPO. He elaborates on the ground realities that are heralding a new era for the industry.

The turbulent times over the last 2 years have indeed been a game changer for most industries – the $100 billion global BPO industry is no exception. The dynamics of the business have changed reflecting in the way customer and vendors interact and partner with each other. The recessionary pressures and resultant tightening of belt have made our industry more resilient and enabled adoption of innovative and scalable models that can respond to the realities of changing industry and customer requirements.

Let’s start by discussing platform-based BPO that is increasingly witnessing interest from customers worldwide. It has emerged as an innovative delivery and cost model amalgamating BPO, Technology (Software / ERP), People and Process expertise.

Delivering end-to-end business function such as Claims Administration and Policy Administration et al on a standardized platform, BPO providers are able to offer customers variable pricing in a “Cost per Transaction” construct that helps large companies to gain competitive advantage and mid tier companies to scale business on a variable cost basis. Horizontal processes like Accounts Payables are also delivered using platforms.

In addition, this gives BPO suppliers a more scalable solution and they are able to implement robust industry-leading platforms, continuously reduce costs, improve process efficiency and bring automation for clients. BPO companies having IT expertise are leveraging inherent development capabilities to create a platform-based play while some are leveraging partnerships with software vendors to provide Platform BPO services. Acquisitions of companies with proprietary platforms are also on the rise.

IT and BPO have never been more integrated than it is today. The lines between BPO and ITO are rapidly blurring and the industry is moving towards “Managed Services” which includes IT, BPO, Applications, Infrastructure. However, an interesting trend in this is that several of these deals are BPO led. This does pose a challenge for pure-play BPOs who are trying to address it through partnerships.

Changing Models

With the emergence of Platform BPO and integration of IT and BPO, the outsourcing industry is witnessing the shift from traditional T&M based pricing models to variable cost models including outcome/output-based pricing models. The new pricing models include “Cost Per Transaction” like “Cost Per Policy or Invoice” and PMPM (Per Member, Per Month) pricing model which is fully loaded price on a per-member/subscriber per-month basis encapsulating cost of IT applications, infrastructure, BPO and customer service.

The change from T&M to fixed price contracts allows outsourcing vendors also to work on smart resource allocation and apply levers of automation, process standardization et al.

Another evolution in today’s outsourcing scenario is the rising importance of customer proximity from a delivery model standpoint.

While the earlier delivery models were 90-95 per cent offshore and 10-5 per cent onshore, the changing dynamics driven by protectionist sentiments in countries like US and regulatory and compliance requirements as well as customer preference in some cases for specific functions to be delivered from onshore, there has been significant focus towards strengthening onshore and nearshore capabilities

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Destinations like El Paso in US provide state-of-the-art infrastructure, cost advantages, a positive business climate and support from the local government and a highly skilled workforce. Nearshore locations such as Latin America, Mexico, China have also gained importance with several IT and BPO companies setting up their centres in these regions.

The BPO delivery model is now evolving to 65:25 ratio where 65 per cent delivery would happen from offshore and 25 per cent from onshore or nearshore locations.

The winds of change that began two years ago have transformed the industry for years to come. BPO companies that wake up to these realities and embrace the new industry strategies will be able to adapt and flourish in the new outsourcing market place. Those that are unable to re-architect their strategies will perish.

Sanjiv Kapur is senior vice president and global head, Patni BPO.

 

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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