New Buyer Demands and SMAC Are Changing Both Providers and BPO

SMAC, social, mobile, analytics and cloudBPO, the outsourcing constant, is continually changing. Here’s the constant: Service providers in 2014 “have to live up to evolved client demands, increased competition and a rapidly changing regulatory environment,” notes Sanjay Jain, chief strategy officer, WNS Global Services. What’s changing is how they are meeting their evergreen challenges…and some new ones, too.

Here’s how.

The shift to an outcomes-based model

This is a seismic shift in outsourcing. It is affecting everything from BPO pricing to technology choices.

From process to business outcomes. Suhrid Brahma, vice president, Wipro BPO, says the new model is changing buyer expectations. “Today they want business outcomes,” he says. In the past, “service level agreements were linked to process outcomes. Today they are linked to business outcomes. It’s not about how many collections calls we make per day but about how a service provider reduces days sales outstanding or improves working capital.”

Technology as the new enabler. How can service providers do that? “Technology is the new enabler,” says Suhrid. “New technologies make way for new delivery models where we are in better control to drive outcomes for the customer.” Options include platform BPO and business process as a service (BPaaS). He adds providers are integrating their tech platforms in the form of core-tech engines with the customer’s applications.

End-to-end solutions. Another way to work to outcomes is to provide end-to-end solutions, notes Jain of WNS. “Providers will have to take the onus of driving outcomes,” he says.

For example, the Wipro executive says in the old model for collections, Wipro “ran only a part of the process and had nothing to do with collection patterns and reasons for delinquency.” That’s now not good enough. Fortunately, today’s technology allows service providers to integrate their platforms with a customer’s SAP and upstream credit check platforms. This allows the service provider to run analytics on customer profiles and perform credit checks. The goal: to notice trends in collection patterns so the customer can avoid delinquencies.

New pricing models. Suhrid says another consequence of this shift is pricing models are changing. “Pricing models traditionally have been FTE-based. Now newer models like transaction-based pricing, outcome-based pricing and fixed-fee-plus-variable pricing are coming up,” he says. In addition, he reports both new deals and renewals are moving to the newer pricing models.

New buyer demands

There will be a new bottom line in 2014: “Clients expect their service providers to solve multiple business challenges and add real, sustainable value to their businesses,” says Jain of WNS.

It’s no longer about cost. That means BPO is no longer just about cost optimization. “Clients are no longer satisfied with incremental changes that quality initiatives like Six Sigma and Lean achieve. Buyers today expect us to bring in step changes in productivity and efficiency. The question buyers ask today is, ‘If you did this process with 100 people in the past, can you do it with 70 people today?'” Jain explains.

Suhrid of Wipro agrees, noting today’s outsourcing buyers, many of whom are on their third generation outsourcing, “want higher value per dollar spent and do more with less.” He says this includes:

  • Enjoying gains beyond meeting the SLAs
  • Looking at gain share
  • Receiving extended hours of support
  • Receiving support in multiple languages

Demand for integration. Michael Alfonsi, managing director, Financial Transactions Portfolio, Americas for BancTec, says buyers want an integrated solution. “Look at your smart phone. You may have a hundred applications, but few if any combine to get you the multi-threaded answers you need,” he explains. “It’s the same at companies. They have multiple internal applications, legacy systems and outsourcers. Services providers will be keenly aware of integrated services output that provides a more seamless experience or specialized analysis. They can achieve this because of the level playing field of portal development and the data stores behind it.”

Transparency. Andy Arends, managing principal, Health Plan Innovation & Consulting of Dell Services, says buyers are increasing their demands for transparency. “Health plans have to expose more of their internal workings to consumers,” he says. For example, today’s consumers are used to tracking a FedEx package by GPS or using tools like Kayak to understand airline pricing. Now, he says, “they are demanding the ability to understand claim and payment processing progress and real-time adjudication.”

He adds buyers need better process management tools and analytic suites to support this transparency. Healthcare service providers will be “implementing business process management suites and portals to expose more information to health plans and consumers,” Arends continues. These tools enable consumers to engage in more self-service as well as better evaluate care options, leading to increased consumer stickiness and loyalty, while reducing member turnover and administrative costs. “Through Dell’s social media and mobility business, we have found it to be incredibly valuable to fully integrate the view of customer interactions, aggregate that data and drive to actionable insights,” Arends explains.

The solutioning team. The days of one sales or relationship management professional doing it all is over, according to BancTec’s Alfonsi. “Today clients want service providers to be ready to deploy a solutioning team when shaping a deal.” The team typically is composed of experts from IT, process re-engineering, finance and legal, and that’s just the start. “Clients see not bringing a seasoned, solution-oriented deal team as the inability to provide anything of value to them,” he says.

Solving the business variability challenge. Jain says an important new buyer demand is the “business variability challenge.” He explains that “every business is faced with fluctuations in the current business environment.” For example, forecasting sales volumes has become more complicated given the current proliferation of choices coupled with the age-old fickleness of customer loyalties. “Clients are expecting their BPO partner to provide mechanisms, tools and methodologies to ensure sustainable and predictable outcomes,” the WNS executive continues.

More data sharing. Arends of Dell notes enterprises want “greater sharing of data in an almost or even true real-time capability.”

More geographies. In addition, today’s customers want more geographies covered with multiple languages support, according to the Wipro executive. Adds Dell’s Arends, “Buyers want increased levels of ‘right shoring’ for many services, including front, middle and back office activities.”

Control and compliance. There is also a heightened importance on a traditional area: control and compliance, Jain observes. This includes legal, operations, financial and IT. “Clients are beginning to depend on their providers for improvement. We have a better view of best practices across multiple clients and industries. That’s what gives us an added advantage to guide clients in their control and compliance pursuits,” he says.

Contract renewal. Finally, Wipro’s Suhrid observes buyers now have “higher expectations at contract renewal. Renewals are more demanding today and that has a direct impact on growth for BPO service providers,” he says.

SMAC is changing everything!

Social, mobile, analytics and cloud (SMAC) have become a game changer. “A new frontier,” says Alfonsi. He says “the day has indeed arrived where the entity that can action the data it has on hand has the advantage.”

For example, service providers have always provided some form of analytics. But next year analytics “will evolve further. It is no longer about data mining. Service providers will use holistic, advanced analytical frameworks that will drive concept to execution for business,” says Jain of WNS.

He believes the convergence of SMAC and Big Data “pave the way for providers to become innovative, offering new ways to offer value to clients.”

Predictive analysis. Jain says providers “will re-orient their solution architectures to help clients predict important events and business outcomes as well as gauge market potential.”

Customer analytics. The role of analytics and Big Data gives the service provider a new role: “to give our clients a single view of a customer,” explains Suhrid. He says Wipro can do this because “we touch a lot of customer data.” Arends of Dell says “a service provider can present a single view of the customer when it integrates its enhanced social media tools with its other systems. The buyer’s BPO partner will have to be able to support and manage this function with solutions that are available anywhere, anytime via the cloud.”

Suhrid of Wipro says “we couple Big Data with market and competitor information to help customers improve process, acquire and retain customers and grow their businesses. Big Data involves working on these areas together and suggesting next steps.”

He points out this kind of work “goes beyond the regular BPO SLAs.”

For example, the WNS executive suggests “insurers should not spend unlimited amounts of money to retain all of their customers. Instead, they should look at existing customer data to identify profitable customers and not just retain them but extend the company’s relationship with them by cross-selling other products.” Arends of Dell adds that social media tools “allow us to not only better understand consumer actions, but to tailor additional offerings to their needs that drive customer profitability and predict their behavior.”

Big Data apps. So how do you do this? With applications, naturally. Arends of Dell says “outsourcing buyers want more applications that can leverage both the structured and unstructured data in electronic medical records and other patient information to create a more complete picture of the member.” The buyer then can use the information for administrative purposes, cost reduction and the creation of new revenue streams.

Customer service. SMAC “are changing the world of customer service,” observes Suhrid of Wipro. SMAC:

  • Lowers the dependency on voice
  • Increases the options for self-help
  • Increases vulnerability
  • Creates multi-channel options for customer service

He says “these are new areas and customers are looking to us to optimize these channels for them.”

Arends of Dell agrees mobility “will ultimately reduce the number of voice interactions through self-service portals.” He adds mobility and other consumer-facing applications “are increasing the need to work in real time and be transparent, such as providing access to more facility and provider information. This will raise the expectation of what a customer service representative can do, given the knowledge they have. Mobility and social media are expanding the ways BPO providers will need to be able to support customers.”

A Big Data caveat. Alfonsi says analysis is “no longer about exhaustive analysis but the selection of the right data, and then action. Any outsourcer worth its salt is not just paying attention but has already used this emerging, important perspective to sharpen its skills and redefine client offerings.”

Service providers are ramping up their skills

Suhrid of Wipro says next year buyers will define service provider success “by their ability to do higher value-added services.” He says now they “will have to do more knowledge intensive work to continue to impress.” One way to do this: add consulting to BPO “to heighten process maturity to industry benchmarks.”

Technology investments. Another way to do provide higher value-added services is to pump up their technology investments. Suhrid of Wipro says BPO providers next year will have to do this so they can:

  • Equip customers with an end-to-end view of their processes
  • Provide analytics for problem identification and assessment and predictive analytics for next best action
  • Build partnerships with leading product players and cloud providers
  • Employ SaaS models

Jain of WNS believes in 2014 “providers will need to keep pace and align their solutions with the evolving high-end technology.”

Customized solutions. In addition, service providers “have to create customized solutions for client challenges,” Jain continues. Suhrid of Wipro reports this trend is forcing service providers to invest in specialization. For example, they are creating vertical solutions for insurance claims processing using fraud analytics and providing forensic loans in the mortgage world. In 2013 “claims processing was table stakes. Now financial and insurance companies are basing their expectations on business outcomes from using fraud analytics,” says Suhrid.

BPO Insourcing

Alfonsi of BancTec predicts 2014 will see a trend of companies accelerating repatriating certain processes or sub-processes “where they feel they have competitive advantage.” This will happen in the next two years because “companies will deploy more capital as capital markets loosen even further and rates rise. Companies with cash or access to it will consider spending money on infrastructure projects or capacity expansion.”

The importance of transformation

Suhrid says Wipro’s clients “want a lot more transformation in their processes so they can be best-in-class. Until a few years ago clients were happy with incremental improvements but now want to benchmark their processes with industry best practices.” In addition, he has noticed Wipro’s clients “want to be guided through the transformation journey. Analytics has a big role by measuring process performance, identifying gaps and suggesting corrective actions.”

Arends of Dell adds next year service providers “will increase bundling of value-added services around innovation with the goal of sustainable transformation.” SMAC is one example.

Buyers Beware

Alfonsi of BancTec warns outsourcing buyers to be careful when choosing a new service provider. He notes that the economy over the last five years winnowed out the poor-performing providers. He predicts new entrants will appear in our recovering economy. He fears “in their quest for market share the new entrants will forget the key principle that it is all about the client’s success. There will be a split between companies running around shouting about their services and the seasoned companies co-crafting solutions that exactly meet the client’s needs.”

Amid all these changes, buyers beware!

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