When a new baby arrives in the world, almost everything about its physical appearance changes as it grows. Hair color, eye color and facial features become set as the child reaches adulthood.
So it was with the new babies in the outsourcing world, the ASPs. Their features remain fluid as their business model continues to evolve.
Now the stork has brought another outsourcing baby, the Business Services Provider (BSP). This newborn has yet to develop its striking characteristics. But I predict a few features that will probably appear.
What is a BSP? I’ll start by telling you what its not. Recently I spoke to the CEO of a prominent ASP. He told me he was in the process of becoming a BSP because he was adding another application to his original offering. Having more than one application in your quiver does not make you a BSP. That’s just becoming a very market-savvy ASP.
ASPs have proven their merit in today’s Internet world by providing applications over the Web. For many companies, the ASP solution is the only way they can enjoy the benefits of many world-class applications. And that is all they need.
But other companies, feeling the dual pressures of global competition and low unemployment, don’t have the time, money or energy to keep these non-core processes in-house. They want a total solution so they can concentrate their scarce resources on the core competencies that pay the rent and insure their survival in this changing business world. Up until now, an ASP was incapable of assuming the ownership of a process.
Definition of a BSP
The marketplace gave birth to the BSP, a vendor that provides an Internet enabled standard business process. A BSP takes on the full responsibility for the entire business process, providing more than just the technological solution.
Portera is an example of a classic BSP. The Campbell, California company created a business services application for the service industry (law firms, architecture firms, public relation firms, advertising agencies, etc.) that it hosts in its own data center. However, if these firms want Portera to handle their time keeping, billing and accounting, they can hand over the process to the firm, too. The BSP has the capability to send out invoices and manage the accounts receivable, retaining ownership of the process.
To date, only a few other ASPs have made the transition to a pure BSP. ASPs base their success on their technological savvy. They know how to update applications, provide help desk support, create interfaces, run data centers and insure access. This is a different skill set than assuming responsibility for a process.
That is the challenge for the ASPs who want to become BSPs. They must acquire the process expertise to assume responsibility for the process.
The ASPs have to look over their shoulders at their Business Process Outsourcing (BPO) cousins who are also pondering how they can transform themselves into BSPs and tap into this powerful new market. They, after all, know how to own a process.
To date, the ASPs and the BPOs are chasing the same market from two different angles. Both have standard offerings that are not open to any significant change or customization. Each outsourcing provider is currently aiming its offerings at small and middle capitalization companies, start-ups and departments of very large corporations.
Scalability: The ASP Advantage
Scalability is the ASPs’ big business advantage over the BPOs. They have no staffing issues, so they can scale more easily than a BPO, who has to have the people to own the process. ASPs are automated and have more implicit leverage.
Although my crystal ball is cloudy, there are some things I can see. I believe all three outsourcing business models have viable value propositions. ASPs, BPOs and BSPs can co-exist and compete successfully.
I believe ASPs will flourish. Their strength lies in hosting applications like Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), billing and email.
The large BPO providers will thrive because they are the only ones who can handle the processes of large corporations. They perform these profitably in shared services centers.
The BSPs will blossom where the business process needs more hands-on attention. Even though a business process is difficult to scale, they will able to scale more than the traditional BPO through the use of technology.
I believe the BSP will create a new market segment. BSPs, since they are fleet of foot, can service smaller transactions that the large, traditional BPO providers have been unsuccessful at completing profitably. I also see them poised to grow into larger and larger transactions. As they solidify their place in the outsourcing constellation, I predict they will give today’s large BPO vendors some formidable competition.
One answer for these large BPOs is to create a joint venture. The large BPO links with application companies to offer BSP services to its clients. This is the path Cap Gemini Ernst & Young has taken, as we have described in this issue.
The Outsourcing Exchange
Since knowledge is power, I recommend companies interested in the arrival of the BSP also read our sister publication, the BPO Outsourcing Journal. This month we discussed the evolution of BSPs from each perspective. It never hurts to learn how the other side thinks.
Finally, companies interested in outsourcing to a BSP face the challenge of being pioneers since the BSP model is so new. The Outsourcing-Center has created the Outsourcing Exchange as a cost effective way for buyers to complete their outsourcing contracts. The B2B exchange provides sample contracts, detailed process descriptions, inclusive metrics and customization options for all outsourcing options, including BSPs.
The Outsourcing Exchange allows buyers to subject their BSP outsourcing contracts to the same rigors as any other outsourcing legal agreement. BSP agreements must be fair contracts to their buyers. They must incorporate rigorous service level agreements (SLA). And they must be legally appropriate. The Outsourcing Exchange allows buyers to walk through the contract process on-line in a timely and cost effective way.
Lessons from the Outsourcing Primer:
- ASPs must acquire business process expertise to become BPOs.
- Scalability is an advantage ASPs have over BPOs when becoming a BSP.
- The Outsourcing Exchange helps buyers with BSP contracts in a B2B exchange. The Exchange allows buyers to subject their on-line contracts to the same rigors they would use if they hired a consultant.