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   BPO: Driving Major Shift in Business Module
The challenge is to first observe and diagnose the latent socio-cultural perspective of society, and see how the target customer fits in there

4. Infrastructure
State of the art BPO Center

• High-end database servers and workstations
• High speed Internet connections
• Encryption software and firewall
• Microsoft SQL Server / Oracle Data Warehouse software
• Dedicated 24x7x365 Help Desk service

5. Business Models of BPO
There are three business models of BPO viz. Transactional, niche and comprehensive. The characteristics of these models are given as per the following:

BPO Business ModelCharacteristic Transactional Niche Comprehensive
Supplier community examples Payroll, Credit card processing and Customer billing Workforce management, Order to cash and accounts payable HR, Finance and accounting Number of processes Transactions only, typically for one process 2-4 processes 10+ processes in a function; sometimes more than one function Invest in client assets? No, migrate everything to their system Yes-but modest amount and personnel take-on Yes-significant and employee take-on
Location Work is performed at the provider’s location; very low headcount at the client site – who are typically account managers and sales people Mixed, people at both client and provider locations Mixed, people at both client and provider locations Geographic spread Multi-country Domestic Global Business model Offload transactions from client, use provider’s software Make processes more efficient-reduce costs, raise service levels Make functions more effective, introduce best practices Accountability For the transaction processing For process outcomes For cost savings for the entire function plus business outcomes Risk-holder 90% of the risk is still on the client, 10% provider 50% client and 50% provider 30% client and 70% provider Metrics Per transaction Based on outcome Based on outcome

Transaction providers handle the transactions for only one process. In payroll, for instance, they do not take over entire payroll department; they only cut the checks. These providers will not buy the existing software to liberate the vendor’s capital; and they use their software at their location. They do not take on vendor’s people, their contracts are short (1-2 years), and the contract values are not large ($1-5 million a year). Using transaction providers, has many benefits, but the more processes are outsourced, the more fragmented the client’s processes become. In essence, the clients still have an in-house department to manage.

In transaction outsourcing, most of the operational risk (approximately 90 percent) stays with the client. There might be penalties for non-performance, but these are minor because the client still retains most of the function in-house.
Niche providers focus on two to four processes. For instance, it focuses on employment and workforce management. Niche providers will hire the client’s resources, but only up to 50 or so.
They will invest modest amounts of capital to release some of the client’s asset value. For instance, they will invest money migrating assets to their system or they will buy your assets in their specialist process area. Niche providers are generally domestic, and their deals range from three to five years in length, with a yearly contract value of $5-10 million. Niche providers aim to make selected processes more efficient, by lowering costs and raising service levels. They are paid based on outcomes, such as lowering turnover or reducing hiring time from 120 days to 90 days.
In niche outsourcing, risk is typically shared evenly between client and provider. Although the providers will hire the client’s resources and be responsible for outcomes, they only make limited investments in capital and only impact a few processes. Thus, clients continue to shoulder the other processes in a function. So the other internal processes of client and provider are interdependent
Comprehensive providers handle almost all the transactional and administrative processes in a function, or even several functions, such as HR and financial accounting. For instance, there are 22 processes in HR and 33 processes in finance and accounting. Comprehensive BPO prefers global deals, which are typically 7-10 years in length, and are generally over $100 million a year. These providers will buy client assets and will take on hundreds and sometimes thousands of client staff. Comprehensive providers strive to make interrelated processes more effective, so they aim to reduce the total cost of a function by introducing best practices – such as requiring direct deposit of payroll or increasing the HR-to-employee ratio from 1:50 to 1:300. They are accountable for cost savings as well as outcomes for an entire function, so clients pay for outcomes, not inputs (as they have traditionally in outsourcing). Comprehensive providers shoulder 70 percent of the operational risk of the in-scope processes because they are responsible for the information.

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