Whenever a new business mutation appears in today’s survival of the fittest Web world, knowing what to call it is can be a conundrum. It’s a time of change in the outsourcing world as the Business Service Provider (BSP) evolves. What exactly is a BSP?
The term was coined by a group of companies who built their applications to run on the Net from the ground up. The applications themselves are designed to simplify the process for the buyer. They are so automated most buyers can cheerfully run their businesses straight from the Web without outside support.
These companies had their programmers write the code so its buyers could run the software as a service, not as a traditional application. These companies never intended to become a Business Process Outsourcing (BPO) provider according to the accepted definition. “They have no intention of taking over any of the buyer’s processes or do transactions for clients. These companies act more like a hub than a traditional outsourcing engagement,” says Rebecca Scholl, BPO analyst for Dataquest, a Gartner Group Company.
Samples of companies in this group include:
- works.com, an online business purchasing company.
- NetLedger.com, which specializes in back office and financial services for small businesses.
- eAlity, an expert in integrated administration, human resources and procurement for small and medium sized businesses.
- Agillion, known for its customer relationship management software to create customer loyalty for small businesses.
- Employease.com, a human resources (HR) provider.
Back To The Future
Scholl predicts this trend will continue, especially among Application Service Providers (ASP) who can readily adopt this business model. It’s the Internet version of the service bureau outsourcing popular during the 1970s. Companies today can access their human relations or finance software as a service instead of dealing with applications and providers in the updated Web version. “This is the revolutionary way these processes are going,” observes Scholl.
These responsive and scrappy companies have directed their efforts at the small to medium sized companies. This market heretofore has not had the financial resources for traditional BPO outsourcing. Now they can purchase best practices applications at prices they can afford since they are renting, not buying.
The next layer of BSPs are ASP companies that offer traditional BPO services. Unlike the first group, they willingly accept the ownership and the liability for the business processes they assume. They also are targeting the small to medium sized company.
In the HR, employee benefits and payroll area, two such BSP companies are EmployeeServices.com and Simpata. In the finance and accounting arena, virtualgrowth and resourcePhoenix are the pioneers.
The third permutation is the large, traditional BPO providers. As pure play BPO suppliers, these companies have expertise in transforming a business.† These companies sign pretty significant engagements, says Scholl. One example is Exult.
Traditional BPOs Partner With ASPs
These BPO providers also use the Internet as their delivery mode. They can either develop the software themselves or† partner with leading ASPs – “not just anybody,” according to Scholl. They know their partner’s applications well and typically assume full responsibility for the buyer’s use of the ASP’s software.
Most of the companies in this category specialize in a specific area, becoming the best in that space. An example includes LeapSource, which specializes in the financial and HR areas.
Finally, there are the big accounting firms that do BSP in many areas. These giants specialize in multi-process outsourcing and have well developed consulting practices. “They are able to sell a deal that encompasses lots of different processes,” reports the analyst. She mentions PricewaterhouseCoopers'(PWC) $625 million contract with Nortel. Like the other BSPs, the accounting firms are using the Net as their delivery mode.
These firms are targeting the large corporations like Nortel. Already known as BPO process experts, Scholl predicts they will take on even more strategic processes at these behemoths so they can link the processes together to create a more efficient whole.
At the other end of the feeding chain, the Big Five have also targeted the dot.com start-ups. Arthur Anderson, for example, has become the back office for these new companies, providing strategic finance and accounting. “They want to be the virtual chief financial officer (CFO)”, says Scholl.
Helping The Dot.coms Grow
The goal here is to help these companies grow, hoping the seedlings eventually evolve into strong trees bearing fruit. “Dot.coms don’t need 10 year outsourcing agreements,” she says. Instead, they need one point of purchase, contracting with a BPO provider who can outsource several processes.
Scholl says at this stage of the evolutionary process most companies are betting their survival on finding a niche and growing there. But defining a BSP is still difficult. “Everything’s still in flux,” Scholl says.
Lessons from the Outsourcing Primer:
There are currently four categories of BSP providers, a new form of outsourcing. They include:
- ASPs whose applications are so automated they act as BPO providers without taking on any processes.
- ASPs who become BPO providers by accept the responsibility for the process.
- Traditional, pure play BPO providers who write applications for the Internet delivery themselves or partner with ASPs for their applications.
- The Big Five accounting firms who take over more than one process for a client.