IBM Daksh News

In the tough economic climate prevalent currently, clients are increasingly expecting higher value from providers of BPO services, which go beyond mere transaction-based services. BPOs, on their part, are seeing the more sophisticated clients moving from usage outcome-based AND FTE – (Full time Equivalent) pricing models, top industry executives participating in the Nasscom Strategy Summit 2009 in Bangalore on Wednesday.

At a seminar on BPOs making the shift from traditional transaction-based services to transformational services, senior BPO industry executives agreed that strong domain skills, platform expertise and alignment of the BPO's strategies to the client's vision is necessary to gain competitive advantage in a tough market place.

"Transactional BPO service providers are more tactical and process-oriented, with a clearly defined business goal to achieve at the end of the tunnel. The focus is less on labour arbitrage, which was the goal of transaction-based pricing. Clients today are looking for providers who can share their business risk and deliver multiple value propositions," TCS e-Serve CEO and MD Rahul Singh said.

Underscoring the importance of BPOs becoming the client's partner in process, Singh said that the 'lift-and¬ shift' offshore model followed by BPOs in the early 2000s gave way to transformational outsourcing in the late 2000s, which is clearly output-based. IBM General Manager Randy Walker said that, while the customer has become highly price-sensitive, he is also looking for new growth areas in these trying times.

"More than ever before, all projects are now focussed on business outcome. Hence, domain focus will become more important. Domain focus will help BPOs marry process efficiency with technology prowess to service clients who look at reducing cash spends and keeping their inventories under check. Process innovation will be the key result for BPOs to achieve going forward," Walker observed. He felt that remote support of clients is becoming a crucial factor in building rapport and strengthening business relationships.

"When BPOs support clients remotely, it is an opportunity to become familiar with all client processes and drive further savings and process innovation on the way to delivering positive outcomes. Besides, BPOs need to sharpen their risk management skills, which can help push new models of business innovation from both the customer's and the client's point of view," Walker said.

According to Genpact's Senior Vice-President & Head Harpreet Duggal, the move towards transformational services has much to do with the evolution of globalisation itself. "Escalating pressures on enterprises during the economic slowdown has led to marked shifts in corporate outsourcing strategies. The focus is no more on just cost reduction; it's now more on the core of the business, more on a global sourcing model and variable cost modeling. BPOs serving more demanding clients will need to evolve into providers of multi-functional shared services, who can bundle various value-adds for diverse client needs," Duggal said.

Noting that BPOs need to frame unique roadmaps for each customer, he reminded his peers that technology is just one of the potential levers to pull when handling a complex client contract. "Process expertise, analytics and ability to derive positive customer behaviour are equally important, if not more crucial factors, in today's environment," Duggal said. Walker, on his part, felt that mutual agreements between companies and their service providers on project outcomes have become necessary to offset known and unknown business risks. "It is important to pin down the outcome well in advance. If the BPO services provider has more value to provide, deeper goals in mind, while the client company has none, a positive outcome would not happen," Walked added.

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