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BPO Partnering Models (#2): Introducing the models

By:  Bruno Stefanile, BPO EMEA Sales Support Director, Hewlett Packard Company

 

This is the second in a series of blogs discussing BPO partnering models.   Here we will describe the simplified framework that is the subject of this series.

 

Rubik cubes.jpgIn the first blog of this series, we introduced the concept of a simplified framework that can help BPO clients and vendors identify and implement the partnering that will best meet their needs.

 

We discussed the seven key elements that characterise partnering models: Scope, Dependencies, Business Outcomes, Value Drivers, Key Performance Indicators (KPIs), Pricing Models and Behaviours. The concept of a Partnering Model builds on the various sourcing options available in the BPO marketplace and helps customers select the “what” and “how” to outsource, not just “from whom” to select.

 

We have offered a dynamic view, whereby BPO partnering models do not evolve in a linear fashion (with one model taking over from the precedent), but rather gradually develop alongside others and still remain in use as other, more performing models have emerged.  The aim of this blog is to describe the simplified framework in greater detail.   

 

Service Layers and Interactions

Performing a client business process requires executing the entire stack by a dedicated staffThey perform business tasks and take business decisions by using business applications and generating/modifying data about the client’s internal organisation, its suppliers and/or its end-customers (in accordance with a set of agreed-to instructions). Business applications in turn need an enabling infrastructure.

 

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Figure 1.  Main BPO service layers and interactions

 

Interactions between the client and BPO vendor can take place at each of the various layers. A certain degree of responsibility is retained by the client at each layer in all outsources (see Figure 1 above):

 

  • Staff: the staff dedicated to the execution of the processes in scope. Delivery location can be on-shore, off-shore, near-shore, or a combination. Staff dedicated to the business function by the client or incumbent vendor can be retained or transitioned/seconded to the new vendor.

 

  • IT:  the design, development/deployment and on-going management of the client technical infrastructure, application and/or data that are required to execute the processes within the scope of the BPO outsource. Applications in scope can include, for examples, standard ERP or CRM modules when non-core functions are outsourced such as F&A or HR outsourcing. When core functions are outsourced, such as credit, collection or payment services, client legacy systems can be handed over to the vendor or substituted by vendor-owned applications.

 

  • Service configuration: the assembly of staff, IT, operating procedures and interfaces to ensure the end-to-end service fully meets the client requirements. A BPO taking responsibility at this layer typically delivers complete transactions throughout their various stages of execution with little or no client intervention in-between.

 

  • Third-Party Vendors: Acertain split of responsibility over third parties can take place between the BPO Client and Vendor at all the layers in Figure 1, although typically with an increasing degree of responsibility for the vendor in the higher layers.

 

BPO partnering models

At each layer, the boundaries between retained versus outsourced scope can be set in countless combinations, as in the Rubik cube we used as a paradigm in the first blog of this series. Typically though, it is at one layer of interaction that each partnership is defined. This is the layer that shapes the mutual dependencies, determines the business outcomes and value drivers, dictates the KPIs and pricing models and shapes the behaviours between the BPO client and vendor.  The four key Partnering Models of this simplified framework can be initially defined based on the layer at which the main interaction occurs:

 

Traditional BPO.  In traditional BPO, the BPO vendor provides and/or manages (on behalf of the client) the staff dedicated to the execution of the processes in scope.  The client mainly remains in control of the IT platform and the overall co-ordination of the service layers. Client benefits typically derive from labour arbitrage, access to critical skills and from vendor best practices in workforce management. Traditional BPO is a very mature model and the most widely used in some segments, such as F&A.

 

Platform BPO.  In Platform BPO, the BPO vendor provides the on-going management of the main client technical infrastructure, application and data dedicated to the execution of the processes in scope, as well as managing the dedicated staff. Client benefits derive from the vendor capabilities in IT and Application outsourcing in addition to those generated by the vendor in managing staff.

 

Transformational BPO.  Transformational BPO is an extension of Platform BPO whereby the BPO vendor also takes primary responsibility to re-design, develop and deploy the new IT platform that enables the provision of the business function being outsourced. While an element of transformation is present in all models, transformational BPO maximises the outcome of the outsource, as it typically optimizes the interaction between the BPO client and the service recipients (end customers, employees, suppliers).

 

Utility BPO.  In Utility BPO, the BPO Vendor takes end-to-end responsibility for the execution of a business function and provides all the service layers required. This is done by leveraging one or more of them via a multi-tenant service configuration. Staff, infrastructure and applications are mainly leveraged to provide a common set of services across multiple clients, thus optimising the outcomes and minimising the delivery cost for each client. It is important to note that this kind of interaction is not just defined by what the vendor “manages”, but rather by what the vendor “delivers” to the client. In our simplified framework, Business Process as a Service (BPaaS) is considered part of the Utility BPO model, as the seven fundamental characteristics do not fundamentally differ between the two.

 

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 Figure 2.  BPO Partnering Models

 

Partnering Models at the left of the diagram in Figure 2 above are very dependent on client-retained capabilities and thus heavily customised for each specific client. In contrast, Partnering Models on the right of the diagram allow the vendor to share key capabilities of the outsource among several clients and thus maximise scale and efficiency. By its definition, the layer of interaction that characterises the Partnering Model is the layer of maximum leverage that the vendor provides.

 

While the Framework is simple enough to be graphically represented, it provides a powerful reference scheme to compare different partnering models and related trends in the BPO marketplace.  It is important to note that the four Models described earlier only represent broad categories, each comprising a wide set of different arrangements. Each Model will be individually analysed and comparisons and trends will be explored in subsequent blogs.

 

Other blogs in the BPO Partnering Models series:

 

Previous blogs by Bruno Stefanile:

 

Related Links:

 

 

About the author

 

Bruno Stephanile.jpgBruno Stefanile, BPO EMEA Sales Support Director, Hewlett Packard Company

With 30 years of experience in the IT industry, Bruno has held a number of executive roles in Operations, Account & Program Management, Consulting and Sales Support. Since 2011, he has led Global Solutions Integration and Design, Delivery Assurance and New Business Support for HP BPO in EMEA.

Comments
Michael Bian(anon) | ‎02-13-2014 10:41 AM

nice post.

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