The New Avatar of BPO: A Partner in Risk, a Financial Engineer and a Trusted Executer
Change is accelerating. Companies are adapting to the new pace of change by becoming more agile in order to be able to react to change rapidly and stay relevant to their clients. This need for agility is cascading on to the BPO providers. Are BPOs embracing the change? Apparently not. BPOs are still working with old rigid frameworks in their operations and financial engineering. However, with need for greater agility resonated by all clients, BPO is getting ready for its new avatar!
Becoming more agile by design
Larger shared services centres, better equipped recruitment teams, technology enabled training and development teams are all playing their role in making BPO more agile. And this has enabled BPOs to operate optimally over a wide range of demand and respond to client needs at much shorter timelines. However there is scope of improvement:
- The traditional governance models that are driven by monthly, quarterly, annual meetings are not agile. There is an immediate need to design a more flexible governance model that fosters greater agility.
- There is a need for better relationship management. Today's typical hour glass like intersection between client and BPO impedes smooth and quick flow of information. Need of the hour is to allow various stakeholders at both clients and BPO partners connect at different levels.
- Clients need to integrate the BPO support groups with company's own support group to ensure more integration, which allows for greater agility.
- Clients need to demand advisory service along with BPO services (transactional) in order to ensure vision and execution are matched at regular intervals.
The new Avatar
Operational agility has limitations. To provide next level of service BPOs need to look at alternate ways of addressing clients' needs and challenges. One way to achieve this is by financial engineering where operations demand volatility risks are amortized over all clients. This will be like companies trying to take insurance against market volatility and insurance premium is the transaction mark-up. However, like insurance differs depending on demography, transaction premium too needs to be spread fairly. For this, BPOs need to gauge industry and risk of market volatility in different industries/geographies to appropriately premium for transaction for different companies.
Traditionally BPOs have shared a 'customer-vendor' relationship where they asked for all information from the client and merely played a role of executioner. But as a risk mitigator, this role is not appropriate. BPOs will need to undergo paradigm shift from an executioner to a consultative role.
My wild imagination hints the next level of financial engineering, where companies will commit a fixed percentage of their revenue for operations and BPOs could handle the whole operations on their own. For instance a company may call BPOs for a bid process where companies will need to quote a percentage of company's revenue for managing the operations. One could imagine bidder A bidding 2.22% of revenue while bidder B bids for 2.84% of revenue.