Quo vadis, BPM?

Over the past decade, India has established leadership position in the global BPM outsourcing space through a combination of low cost, access to talent pool, mature industry landscape with over 500 service providers, global footprint with presence in over 78 countries and multi-lingual skills. The Indian BPM ecosystem is unmatched in the world, and despite pressure from other emerging locations, this unique value proposition has enabled India to maintain its leadership position in the global BPM outsourcing landscape with a share of 38 per cent in 2013.

However, the past couple of years have seen a different kind of reality for BPM players globally, with moderation in growth rates hand in one hand, and a sea change in the very nature of work on the other hand. Political, social, macroeconomic, demographic and technological trends are altering the demand and operating environment for BPM service providers. Shifting centers of economic growth (from North America and Europe to Asia-Pacific, Africa) implies a parallel shift in demand for BPM. Changing demographic patterns, which includes increasing aging of the populace in the West will increase dependency on manpower from younger nations.

At the same time, technology continues to play a defining role, eradicating existing markets, while creating new ones. The nexus of forces- predictive analytics, cloud, social media, enterprise mobility, and internet of things offer great potential for creating customized solutions and business services on demand. Simultaneously, advances in robotics, machine learning, natural voice recognition technologies will ensure that today’s generic BPM processes will get automated.

Regulations, sector dynamics and buying behaviour of end-consumers are redefining customer expectations across sectors. This will lead to new expectations from redefined customers. Customer expectations will vary from – one with ‘unmet’ needs (newer smaller clients – ‘Forgotten 5000’) to the other with ‘unknown’ needs (mature companies e.g. Fortune 500, etc.). The ability to cater to each of these and the type of service offerings / delivery that will be provided will be very different.

In order to retain leadership in market, as well as grow/sustain in future, clients are changing the way they are looking at their business models and this is having a significant impact on their relationships and expectations from BPM firms, who are now being looked at as innovation partners, rather than execution partners. In the next 5-7 years, BPM players will need to move from ‘Horizontal’ to ‘Verticalisation’ to ‘Specialisation’ to cater to different set of customers. This will result in rethinking and remodelling of the existing service delivery system, and as recent history has shown, not all firms will be successful in this transition.

Best processes and technologies are likely to virtualise work and make it location-agnostic, whereas business outcomes are likely to be ‘in-focus’. Significant IT-BPM interplay is likely to be the key driver of business process delivery engine. There is continuous change in definition of ‘Core’/‘Non-Core’ processes with clients becoming more comfortable outsourcing end to end processes other than peripheral, disparate ones. Which in turn will lead to transformational outsourcing- where client benefits will involve a combination of value, technology, innovation and cost, and there will be germination of new service offerings in addition to existing opportunities.

Transformational outsourcing also implies a lot of flexibility in solutioning, and the establishment of consultative and collaborative capabilities in BPM providers to support clients on a growth path. The focus will shift from services to IP centred, platform based solutions. While platform based delivery will become the norm, it will require significant investment to buy or build the platform capabilities and hence may not be possible for significant number of BPM firms to do so. ‘Rent based’ usage model and/or alliances/partnerships will help BPM firms leverage platform capabilities to deliver value to their clients.

The motto for the industry will have to be “local partners with global presence”- client specific global delivery models that involve a mix of near-shore, offshore, and onshore locations which will enable delivery of end to end services because of access to talent, culture, language and domain. To accommodate the need for specialisation, service delivery will require a combination of centres of excellence (COEs) and ‘Glocal’ centres. The BPM providers need to adopt a hybrid organisation structure with semi-decentralised governance model – The global/ glocal centres of excellence will manage day to day governance on its own, while the overall governance is expected to be managed at headquarter location.

A concurrent shift to a differentiated pricing regime that includes FTE based, as well as transaction and outcome based is inevitable. Industry shift towards specialization will in turn create demand for highly qualified talent – ‘Process Scientists’ – who can design end-to-end transformational processes and have required leadership skills. The emerging focus areas for BPM firms in regards to talent will be to integrate the ‘global diverse workforce’ into a localised environment, build specialisation and create specific location/geography driven long-term career paths to retain talent.

Over the next 5-7 years, global BPM spend is expected to grow between 6-7 per cent per year and reach USD 233 billion by 2020. Offshore BPM market is expected to rapidly increase its share in the global BPM spend pie as the offshore BPM services are expected to grow at a fast rate (9-10 per cent) than global BPM spend. If Indian BPM providers continue with their current business models, then the industry can touch USD 42 Billion by 2020. However, in an accelerated growth scenario, the industry has potential to grow to be a USD 50 billion industry by 2020, if the BPM providers invest significantly in Tools, Technology and Talent (3Ts), build appropriate solutions and effectively communicate the value proposition.

Proactively managing the changing dimensions in the outsourcing Industry will be imperative for key BPM stakeholders. Focus will have to be on three ‘I’s – Infrastructure, Innovation and Investment in right capabilities. India is a better destination today than it was 10 years ago compared to other emerging destinations. However, the India-focused story needs to move towards India-led growth story through optimal global-local delivery mix, inclusive value proposition to all size buyers, diversified service offerings with substantial depth and breadth, technology infused and enablement and with significant IP focus.

We own this industry, and it is we who will decide the finish line.

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