Business process management services (BPMS) is changing -- and for the better. A convergence of company demands and new pricing models is driving innovation in the nature of BPMS and how it is delivered. In short, we are seeing a marked rise in popularity of cloud-based business process management or "Business Process as a Service" (BPaaS).
What is driving this increased interest in BPaaS? To start, companies are evolving their demand from transactional support to transformational support. So rather than looking for simple replication of existing processes at a lower cost, companies are asking providers for transformational support through standardized best-in-class processes.
Many companies are also looking for technological support in addition to services. Most process innovations require supporting technology solutions. For instance, within accounts receivable, automated collections routing and processing, along with an increased ability to accommodate new payment methods, are becoming commonplace. Companies using BPMS are increasingly asking providers for these solutions rather than making capital investments to build these capabilities themselves.
In addition, we have seen an emergence of innovative pricing models that makes BPMS attractive to companies of all sizes. In the past, high transition costs have made the use of external service providers prohibitive for everyone but the large enterprise. Transitions have become much shorter and more cost effective, while pay-as-you-go pricing models with zero or low upfront infrastructure costs are opening doors for small and large companies alike.
What is BPaaS?
The cloud offers three basic service delivery models: Infrastructure as a Service (IaaS); Platform as a Service (PaaS); and Software as a Service (SaaS). Each model builds incrementally on the previous one, much like a stack.
Business Process as a Service (BPaaS) is the next layer of abstraction after SaaS. It builds on the stack by providing process and people expertise that enables part or all of a business process and makes it available through a pay-per-use model.
The benefits of BPaaS extend across industries and into companies of all sizes, creating opportunities for growth and expansion at all levels. Because it does not require a heavy upfront investment in new infrastructure, BPaaS can enable fast entry into new markets and smooth setup of operations in new geographies (e.g., BRICs), or upgrading of operations and systems across old ones.
One durable medical equipment manufacturer, for example, enhanced its entire reimbursement operation using a BPaaS solution. The provider assumed responsibility for end-to-end reimbursement operations, including document management, eligibility verification, pre-authorization, order intake, billing and sales operations support, collections, denial management and cash application. A traditional BPMS implementation would have required the company to bear significant capital expenditure and spend years on system overhaul prior to handing over the processes to the BPMS provider. Instead, the company implemented a BPaaS solution and was up and running in a matter of months.
In another example, a large bank leveraged a provider-enabled solution for its mortgage originations. The solution provided end-to-end support for mortgage origination, enabling interaction between the many players and parties involved in the transaction. The solution is now being enhanced with a comprehensive document management workflow process to streamline communications and significantly enhance the value of the solution.
To realize benefits from BPaaS, companies do not have to implement or replace their ERP systems with end-to-end solutions from a service provider. Point BPaaS solutions that enhance part of the process value chain can minimize cost in terms of investment and disruption to the existing system landscape. BPaaS allows either retooling of end-to-end processes or selected modular upgrades that avoid significant change management or investment.
A large manufacturing company reduced spend by about 16 percent through its use of e-sourcing tools in their indirect sourcing process. The service provider built a solution using the IASTA technology platform and experienced resources. The company reduced sourcing and negotiation cycle times, enhanced the user experience, lowered administrative costs for running auctions, and improved transparency in the bidding process and tracking of savings.
BPaaS is also a real consideration for companies facing structural change such as acquisitions, divestitures and new market entry. IT departments are increasingly considering dual ERP architectures in their systems landscape. They are questioning if the smaller acquisitions need to be integrated onto the ERP system, or if they can be standardized on a single platform that can interact seamlessly but is separate from the main ERP system. New market entry can also be a considerable drain on a company’s resources while adopting a BPaaS solution might be a lower cost, lower risk option overall.
A leading durable goods manufacturer was able to integrate three emerging market acquisitions and go operational in less than six months by leveraging a hosted finance platform with local resources and expertise from the provider. The provider was able to help the company navigate the regulatory requirements, adopt required operational changes, and bring trained staff, leaving the company’s resources more time to focus on market development.
Next Steps to BPaaS
Companies interested in BPaaS solutions should evaluate providers against the following criteria:
- Does the provider have deep operations-level functional expertise in the space it is serving?
- Is the provider committed to refining and improving upon practices as they evolve?
- Is the solution stable and scalable?
Every day, companies are discovering new benefits and capabilities of a BPaaS solution with limited disruption to existing operations. BPaaS enables greater end-to-end flexibility and effectiveness in an organization, providing options for improving processes today rather than waiting for a capital intensive system redesign project down the line. And BPaaS does not need to be an end-to-end transformation. It can be a set of selective improvements that generates the greatest payoff, maximizing benefits for the costs of change -- both in dollars and disruption.
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