The Business Process Management industry has been a competitive landscape with a fragmented market share. This has been primarily because of a low barrier to entry. The lack of differentiation has persisted, along with several small and niche players thriving in the industry.
BPMs have traditionally competed on labor arbitrage, driven by finding the lowest-cost locations from which to deliver services and driving more hours of productivity per person within legal boundaries. But the industry is undergoing massive changes; service providers, therefore, need to rethink business strategy to ensure they are still growing over the next decade.
What are the big changes the industry is witnessing?
- Labor arbitrage is but a short-term strategy
Labor arbitrage has been the hallmark of the BPM industry for several years. However, economics dictates that labor arbitrage can only provide a short-term cost reduction. Inflation and economic prosperity will increase costs in the low-cost locations over time and erode the cost advantages. The tactic of finding even cheaper locations, countries and smaller towns to keep milking the cost factor has limited potential and starts impacting process quality and other business outcomes due to the unavailability of good-quality skills in such locations.
The key is to be willing to fundamentally transform your customer service and business processes through solutions for smart channel optimization strategies, self-service investments, contact avoidance, defect elimination etc. The solutions not only help reduce cost but also improve customer satisfaction and business success.
- Technology advancements are driving automation
Artificial Intelligence (AI), robotics process automation (RPA) and bots are maturing fast and new use cases are being experimented with. Emboldened by the advancements in AI and RPA technologies, several back-office and low-complexity transactions could be eliminated and be managed by bots; these include transaction, email, chat and voice robots that mimic steps in the process). Driving these solutions is key to future improvements and staying ahead of competition.
- BPMs offer much more than just cost take-out
BPMs, long considered a cost center, have proven to transform into revenue centers and can drive your brand and customer experience as differentiators for your business. Every transaction is an opportunity to sell and generate revenue through upsell/cross-sell of products and services.
BPMs also have first-hand experience with these issues, as they handle thousands of transactions and contacts from your customers day in and day out. Much of this information is unstructured; an ability to synthesize it rationally from the people on the ground, coupled with technologies like data, text and speech analytics, will help generate ongoing insights and innovation ideas. This ensures you stay close to your customers and enable changes that drive customer satisfaction, retention, repeat business and greater share of wallet.
How does the industry need to evolve to take advantage of these changes?
- Look beyond price per FTE
Current pricing models are based on full-time equivalent (FTE) or transaction-based pricing, which disincentivize the outsourced partner to drive process efficiencies, as this leads to a lowering of headcount and revenue. Gain-sharing structures, where the BPM vendor gets a share in the gains from the productivity improvements they drive, is a good way to incentivize both investments and keep them well-aligned with your objectives. BPMs stand to gain in profitability what they lose out in revenue.
Outcome-linked performance incentives are another way to drive behavior and align with your objectives. Empower the BPMs with rewards linked to a balanced scorecard of key performance indicators to provide them with flexibility to invest and drive results.
- Redefine value
Treat your outsourced vendors as equal partners in driving your business outcomes. Leverage the best-practices BPMs have developed after working with several clients in your industry and across industries. There is tremendous value in learning from their experiences and shortening the learning cycle and return on investment (RoI).
Who is best-placed to support these emerging needs?
- Companies with multiple capabilities provide more value than smaller niche players
According to Everest Group , the share of broad-based companies is growing while the smaller niche players are declining. Acquisitions are causing some of this, but there are fundamental reasons that could be driving this behavior. The multitude of emerging technologies and niche players mushrooming the landscape makes it difficult to sift through and select the best-suited vendor for your needs. Multiple technologies also enable the outcomes you want for your use-cases.
Vertical and process specific knowledge and understanding is the key to better results
BPMs are always better placed than niche or pureplay technology providers. BPMs have a deep understanding of industry-specific business processes, are closer to the business process and customers and well understand the pain points and use cases for delivering the most impact. Players that can combine their knowledge of the client industry and customers with the capabilities of emerging technologies will be able to deliver much better results for their clients.
- Business outcome commitments and lowering investments will drive faster decision making
A major bottleneck still hinders faster adoption. That is, companies have apprehensions about the results that these emerging technology solutions can drive over time. Decision-making often slows down, given the reliance on hard numbers and RoI estimates. Investments can go astray despite good intentions. There’s a better way to approach this, though: Have a roadmap with the “Walk, Run, Leap, Fly” philosophy. Implement the low risk, low complexity elements first. Positive results from these implementations will bolster confidence and provide funds for investments in subsequent higher-complexity implementations.
BPMs worth their salt can further enable this journey by putting their money where their mouth is and committing to the gains and RoI upfront. What they can demand in return is a share in the gains from their efforts and implementations. Those who do this are the ones who will drive the uncertainty out, thrive in this disruptive world and quicken the pace of change.
In summary, BPMs have traditionally been an undifferentiated and highly competitive industry with price per FTE or per transaction being a key decision criterion. However, with major shifts in technology and players developing more broad-based capabilities, vendors have the opportunity to create more value and marketplace differentiation.
BPMs that can act as integrators with capabilities in process know-how, industry/ vertical depth and technology understanding will be best placed to succeed in these changing times. Companies partnering with BPMs need to redefine value and look beyond traditional pricing methodologies to select the partners best suited to succeed and drive value to them and their end customers. BPMs also need to enable this process of change by committing to outcomes and enabling a Walk, Run, Leap, Fly approach to gain greater and faster support for these shifts in the industry.
By Ashish Khullar, Director of Sales & Account Management