The worldwide economy shows sluggish growth numbers. Global corporations are posting modest earnings growth. What does this really mean to Business Process Outsourcing (BPO)?
Think of these guiding principles in the acrostic ACE… Applicability, Calculability, Enforceability.
Applicability - How strongly interrelated is the outcome to the scope of services being performed? Will the outcome be materially impacted by the proficiency of service delivery? This is the most difficult assessment to make, specifically related to BPO. To date, the evolution of outcome based pricing hasn't been commonly demonstrated in many BPO towers (HR, Legal, F&A); however momentum is building for outcome based pricing with respect to Strategic Sourcing (managed services) and Call Center solutions.
Calculability – Is the outcome of services being delivered definitively identifiable and quantifiable? Whether the outcome is savings or other business metrics, there should be clear definition with respect to the calculation. For example, as related to strategic sourcing managed services----what exactly is “realized savings”? What are the measurement periods?
Enforceability – What contractual conditions are being leveraged to enhance the likelihood of the desired outcome? An important caution here is that this driver is not the “run of the mill” service levels agreement (SLA). The main idea is to not only impact price, but to also influence the viability of the contract life, through “push and pull” terms for both parties.
As the market continues to mature, anticipate more and more BPO deals to incorporate some element of outcome based pricing. To take full advantage of the benefits of BPO, business leaders must stay on top of evolving advancements in pricing and service delivery in order to take full advantage of the benefits BPO can bring to their business.
To learn more about WGroup's Demand Management services, visit http://thinkwgroup.com/services/demand-management.