The Opportunities and Challenges of BPaaS

BrandPost By IDG Contributing Editor
Dec 20, 2016
CIOIDG EventsIT Leadership

KPMG defines business processes as-a-service (BPaaS) as the combination of technology, people and process requirements of a business function into a fully-managed service, provided in a leveraged environment and measured on the basis of an accepted business outcome. rn

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Forward-thinking organizations are on the hunt: They’re searching for cost savings, strategic capabilities and scale while minimizing capital investment, time to market and risk. Cloud computing, in the form of SaaS, IaaS and PaaS, has been a big part of making that happen.

KPMG defines business processes as-a-service (BPaaS) as the combination of technology, people and process requirements of a business function into a fully-managed service, provided in a leveraged environment and measured on the basis of an accepted business outcome.

And now, it’s become a tremendous opportunity. The sweet spots include business units with unique repetitive transaction bases, such as human resources, finance and accounting (think payroll and accounts payable). Spending on BPaaS, in fact, is expected to reach $13.7 billion in 2016, up from $12.95 billion in 2015 (Gartner, Forecast Analysis: Public Cloud Services, Worldwide, 1Q16 Update, May 2016).

There are plenty of benefits to explain the growing popularity of BPaaS, including reducing costs and improving speed to market.  According to KPMG Managing Director Randall Wiele, there are several other key benefits to focus on, such as capital avoidance — not just for underlying capabilities, but also the ability to have a constant refresh of the services. 

“With traditional outsourced services, we found there was often a stale period where service wasn’t improved all that dramatically,” he says. “By sharing scale with other clients and by being responsible for the process and the technology, the service provider can constantly refresh the solution and achieve best practices.”

In addition, with BPaaS the business no longer needs to be the expert on all regulatory changes, he adds. Generally, the business can also take advantage of more secure usage that is also elastic, and pricing, which is resource-based and pay-as-you-use.

BPaaS Challenges Bring Lessons

The clear benefits and opportunities of BPaaS don’t mean there are not challenges and lessons organizations have learned as they move through the journey of implementing these cloud options. Wiele offers three important tips for organizations to make the move towards implementing BPaaS as smooth as possible: 

1. Don’t rush the setup. 

More work on the front end can solve a lot of problems that could occur down the road, says Wiele. Deals that are rushed into just to save costs, for instance, don’t last very long and are seldom satisfactory. “It’s important to take the time to define the solution and understand the existing environment, but also to prepare for the new environment with a transition and transformation program to achieve a positive result,” he explains.

2. Let the provider be the expert.

If you simply want a new service that does the processes and activities in the same way they are currently performed, you won’t achieve the maximum value from BPaaS, warns Wiele. “There is a reason the provider created the offering and has brought it to a best practice standpoint,” he says. “It’s important to allow the provider to move you through the redesign you need and make the necessary changes to achieve the benefits and the value.”  

3. Live within the new structure, not the old ways.

There are many people involved in various business processes, so typically a lot of change is required when moving to BPaaS, says Wiele: “You need to live within the new structure that’s established, not try to make it what it was before.” In-house resources will no longer be managing the process, but will be managing relationships with the service provider, which is a very different skillset. “If the parties aren’t working well together and don’t understand their new roles, we find there can be a lot of conflict, which diminishes value from the overall solution,” he explains.

CIOs Need to Lean In for BPaaS Success 

Opportunities to implement BPaaS may come from within the IT organization through the CIO, or through the business. Either way, it’s important to support the initiative — Wiele emphasizes that CIOs need to lean in and respond to the business: 

“A joint approach is very important, because it generally takes equal amounts of effort from IT and the business to come together to make BPaaS work effectively,” he says. 

The CIO also needs to take time to integrate BPaaS within what is most likely a large and growing suite of products and services in the IT portfolio — IT needs to provide the integration and orchestration required to make it work. Finally, the IT organization itself will change as key elements are outsourced, with the CIO overseeing organizational redesign and change management. 

“BPaaS affects IT as with any kind of outsourcing,” he explains. “It never eliminates overall responsibilities, and IT will continue to provide the integrated environment and controls, and the organization needs to be prepared for the changes.” 

Growing Intersection Between BPaaS and Robotics

The growing demand for BPaaS is aligned with the growth in the global market for RPA (robotics process automation), which is expected to reach $8.75 billion by 2024, according to a new report by Grand View Research. As with other digital disruptors, RPA — including advanced software automation and digital labor — is driving a new generation of BPaaS offerings that provide a virtual workforce, says Wiele. 

“Robotics and digital labor are already a key component of next generation BPaaS engagements that employ various cognitive tools, and RPA is rapidly changing and enhancing BPaaS capabilities,” he says. Wiele points out that RPA-enabled BPaaS moves business services from a shared scale and large-scale labor reduction to labor elimination with accompanying significant reductions in cost.

“It’s really a game-changer,” he says, cautioning that contracts need to reflect this new reality: “From a contracting perspective, certainly in any current or next-generation BPaaS engagement, we need to make sure that the savings achieved through the addition of RPA to the BPaaS shows up in the contracting and is shared among all the users,” he says.

To learn more, visit the KPMG Shared Services and Outsourcing Institute for further insights and thought leadership.