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01 June 2004
Future success of the maturing BPO model will be based on improving the client's business capability, not simply providing commodity transactional services
The market for offshore Business Process Outsourcing (BPO) may be developing rapidly, but nonetheless, the untapped market opportunity remains enormous for both buyers and sellers says Greg Baker, Xansa Business Development Director.
"India has all the right credentials to be the offshore location of choice. It has already established a solid foundation for delivering BPO services through a highly skilled but low cost resource base. To fully leverage further market opportunities however, the India model now needs to mature. The focus should shift to improving the business capability of clients, as well as providing the classic low cost, low-end transactional services upon which the current market has been founded" says Baker.
For clients and service providers alike, the delivery of low-end transactional services, such as call centres, from offshore will not optimise the very real business opportunities available through the offshore outsourcing of high-value, complex back-office processes.
Moving Up the Process Value Chain
"Our clients are becoming more sophisticated in the way that they buy and contract for BPO services," says Baker. "They want and expect service providers to understand what can be done and how it should best be done, whether offshore or through a combination of onshore and offshore services.
"They want us to step outside of the box of low-end transactional services, to be able to provide a range of services that are a part of their value proposition to their own customers."
"This means moving away from simple cost reduction models to ways that enhance revenues and profits. It will require tight integration with the client's business, helping to align both process and IT improvement models. More fundamentally, this approach should consider creating new ways of working and re-inventing the way work is done."
Offshoring model of the future
The differentiated India offshore model of the future is about improving the client's capability at an operational, business or enterprise level. It will focus on complex back-office processes, involving end-to-end process management responsibility. Rules based processing is likely to underpin much of this work, and it will involve more analysis and decision-making on the part of the offshore workforce who will therefore need to have a greater understanding of the client's business context.
"Processes will be re-designed rather than replicated," says Baker. "There is a huge opportunity to invent new ways of working rather than be burdened by the heritage of how work has been done in the past. Involvement in more complex processes will also most likely require that propositions and delivery models address compliance and regulatory issues facing the client."
"We are already seeing a greater convergence of BPO and IT service requirements," says Baker. "Clients want a more holistic view of how things might be changed for the better using both business process and IT models together under one service management banner."
All this requires a different delivery and commercial focus. "It is not about how much effort goes in but about how much benefit comes out," says Baker. "End-to-end accountability requires more sophisticated commercial frameworks with risk sharing contracts. Pricing should be based on what is delivered, not how many resources have been deployed to deliver it. Relevant gainshare arrangements will also motivate service providers to make real bottom-line improvements for their clients."
The maturing service model has three main components - cost reduction, process performance improvement and client capability improvement. Providers will tend to operate at one end of the spectrum of these services, though a hybrid model containing all three is feasible.
"Our belief in this more mature model for Indian BPO is backed up by our own experiences of delivering offshore BPO services for clients in the UK," says Baker. "Xansa has been operating in India since 1997 having pioneered the balancing of onshore and offshore delivery of IT services into the UK. We are now in our third year of delivering offshore BPO services and recognise that the untapped market opportunity remains enormous - for both the buyer and the seller of these services."