Platform BPO - Platform for Growth

Contributed by: Omkar Kelkar (2012-2014), WeSchool

As the software industry is growing and it has matured to a great extent the thing that is worrying the IT Companies is “How to sustain the Growth” and how to find out ways to increase the revenue without increasing the workforce by the same rate. This is also called as non-linear growth.

Current situation is that if an IT company grows the revenue at 30 percent, it has to increase the workforce too by 30 percent which will not be sustainable in the long run. Thus the companies are looking at the non-linear growth models where revenue growth is faster than the workforce. The only thing that can make it possible is “Re-usability of applications and using Shared services”. One of the major area in which every IT company wants to invest for the long term is “Business Process as a Service (BPaaS)” or “Platform BPO” or “Technology cloud” which can improve the efficiency greatly and helps them to increase  revenue per employee and achieve a non-linear revenue trajectories.

What is Platform BPO?

Platform-based services can be defined as “hosted technology services delivered on a pay-as-you-use model.” When hosted technology services are offered on a managed services model, they are referred to as Business Process as a Service (BPaaS) or Platform BPO.

Platform BPO is basically a new business model in which the company uses Platform-based system as a service. This may be an ERP system such as SAP or Oracle. Not only is the Server managed by the vendor but the service delivery also is managed by the vendor. The company will get entire benefits of a full-fledged ERP system without actually owning them and without actually buying the license. The company simply has to pay for the implementation and maintenance according to the use.

Platform-based BPO is the new buzzword in the industry with most big players betting heavily on this segment. Though the concept of platform BPO has been around for some time, it is only now that they are picking up. Platform BPO marks a paradigm shift in the way outsourced business processes get delivered.

In Platform BPO, applications, infrastructure and BPO services are bundled into a single service framework where the vendor  takes complete ownership of customer’s non-core but critical activities, thus enabling them to focus on core and strategic functions. Platform BPO, a bundling of technology, consulting and BPO, helps synergistic value creation and delivers transformational value using strategies such as global sourcing, technology innovation, process optimization, scale and centralization.

Platform BPO is about providing ‘Business Processing’ services using a domain rich vertical or horizontal application (platform). Good examples for Horizontal application would be F&A, Human Resource Outsourcing, and Procurement etc. There are innumerable vertical platforms. Some examples are Mortgage Processing, Collection Management, Insurance Benefits Administration, Policy Administration, and Claims Processing.

The Evolution of Platform BPO

Platform BPO has evolved gradually over the years from Pure BPO.

Image source : http://www.sourcingnotes.com/

Why Platform BPO

Platform BPO is best suited for Small and Medium Businesses (SMBs). These are companies which are showing growth but typically don’t have the resources to adopt a full-fledged ERP system. Even though they may afford to use ERP, there businesses are small and hence the capacity of ERP is wasted.

Hence they can adopt the Platform Based ERP system such as SAP Platform which is owned by a third party vendor. Once the implementation is done, the company can use the ERP system on pay-per-use basis. Typically the company can make a implementation contract along with the Service delivery contract for certain period e.g. 5 or 10 years.

The vendor studies the business process of the client and implements the ERP system. The vendor basically customizes the standard processes according to the requirements. Even though there are more than one client using the same ERP hosted by the vendor, the client data is strictly safe from the other tenants in the platform. Only the client specific data is provided according to which client is using the ERP. So, for e.g. if 3 companies A, B, and C are using the same platform based SAP system owned by vendor V, the companies will A B and C's data will not interfere with one another.

Who are in the Game.

There are 3 players in this space

1. Pure Play BPO Providers : These companies have a strong capability for Service delivery operations but they do not have the experience to implement and transform the business process to the technology platform. E.g. Genpact, WNS

2. IT Services Companies: They have a strong implementation capability. Many IT companies also have BPO division and hence they are best suited to adopt Platform BPO. The only thing they may lag is the domain expertise. E.g. Infosys, TCS

E.g. certain project may require the experts in US Payroll process which the IT Company may not have.

3. Product (Application) Vendors: They already have the product ready but they cannot make so much customizations that the vendors are looking at. E.g. Ariba

The boundaries of pure play BPO providers and IT Services companies have been shaken in the last few years and are virtually non-existent.  The percentage of product vendors going the BPO route is very less. However, the distinction between pure play BPO and IT Services companies is gone.