Predictions 2014: Business Process Services

The pace of change impacting the business process services (BPS) market is set to accelerate even faster in 2014. Platform-led BP services are becoming widely adopted across many sectors, and cloud-sourced Business Process as-a-Service (BPaas) is maturing. And new technologies and services that target both consumer demands and business process requirements are coming on stream. Suppliers need to adapt, but challenges abound, such as how to develop outcome-based pricing models that really work, and how to manage new flexible on-demand BPS models so that suppliers can actually make money from them.

Nowhere is this 'race for change' more frenetic than around social, mobile, analytics and cloud (SMAC). Some BPS suppliers are already actively investing, but we expect this to accelerate. New technology and software divisions are being established to drive investments in process platforms and partnerships in consumer mobile apps. The key here to this is gathering intelligence around business processes and behaviours to drive process efficiencies and better customer service outcomes.

But investment on the one hand has to be balanced by the usual demands for cost reduction on the other. In the public sector supplier transparency and accountability are now taking centre stage. This will make margin growth a real challenge in 2014. Efficiency innovations will be critical to keep moving in the right direction. So we expect to see more standardisation around business process platforms and shared services, as well as investments in new process automation technologies across the board.

Despite the challenges, we remain very optimistic about the prospects for the UK BPS market in 2014 (see UK BPS Market Size and Forecasts, 2013):

Business process automation (BPA) adoption will increase

We expect BPS providers to accelerate partnering and M&A with business process automation (BPA) enablers - typically SaaS providers that automate a discrete sub-process activity, as diverse as processing correct delivery order information, or unstructured documents like complaints, or even on-boarding customers to a new contract. Automating these activities takes human involvement out, and aims to reduce both error rates and cost. Some big BPS names are already engaging BPA providers on exclusive new deals. This could leave suppliers less prepared to engage becoming increasingly uncompetitive and unable to respond to demands for continual cost/service improvement.

Tough year for Government BPS suppliers

2014 is going to be a tough year for the big Government BPS players, as they respond to the demand for greater openness and transparency with UK Government. The four biggest central government players, Capita, Serco, Atos and G4S, have all agreed to greater oversight of their accounting practices, following recent scandals recent scandals involving Serco and G4S. But this will require more investment by suppliers in contract governance, audits and ethics and code of conduct assessments. It will also mean reviewing existing deals and being prepared to take further haircuts if costs are deemed too high. The ones that embrace transparency could however stand to benefit greatly as a new era of Government partners emerge.

Refocus on ‘enabling’ business outcomes 

Outcome-based BPS has so far proved difficult to get right (see Outcome-based BPS – what’s it all about?). In 2014, we expect suppliers to take a step back and refocus on what it really means for the end customer, and how it can be more pragmatically embedded within the contract to ensure everyone is pleased with the outcome. We think the goalposts have been set too high, particularly in ‘payment by results’ deals in the public sector where suppliers only get paid if they meet defined outcomes. Providers need to consider focusing on definable metrics that can be measured by both sides – such as volumes of work done to a set level of quality, or number of transactions successfully completed. These can enable a business outcome, which is surely what suppliers are actually trying to achieve.

BPaaS morphing to subscription model

Business Process as-a-Service (BPaaS) as a model for cloud-based process provisioning, is maturing as a concept and technology. However just like the SaaS space, suppliers are struggling to make it financially viable as an on-demand service. We think 2014 will see a push back by suppliers on some of this on-demand approach, and seek a return to subscription pricing  that includes access to the cloud-based process platform and third party processing for a minimum term subscription. It will be up to the supplier how they price this packaged offering. But the model begins to shift towards something more like a cloud-sourced managed business process service, than a pay-per-use utility. This will have implications for true on-demand providers, who may need to adapt to survive.

‘Apps’ and BPS converge

We expect 2014 to be the year that some of these early SMAC investments in the BPS market start to gain wider adoption. In particular we see mobile ‘apps’ that target processing opportunities in general insurance, banking and retail being a hot area since these tend to engage directly with the consumer. Organisations need help in driving business through these new channels, and BPS providers will be in a strong position, offering back and front office services to manage these volumes. But it is early days, and so these new apps need to be enterprise grade quality, capable of managing significant volumes of processing to make the investment of time and effort worthwhile on both sides. Keeping ahead of the game will be the next challenge as new requirements and opportunities flood in.

Subscribers to our BusinessProcessViews research stream will be able to read the full analysis of our Predictions in the New Year.

Posted by John O'Brien at '08:32' - Tagged: bpo   bps