Does Cloud Come With A Silver Lining For BPOs?

At the 2009 Oracle Open World, Larry Ellison, was asked to comment on cloud computing and if it really is the future of computing. He had a hilarious set of comments on people who hype cloud computing, and I would encourage you to view his comments on YouTube. The gist of Larry’s answer is that cloud computing is NOT the future of computing, but HAS been the past and IS the present of computing.

The IT industry has surely come a long way, from mainframes to client servers and Web-based applications. But the “CLOUD” has been a part of the IT landscape for quite a while now, and most organisations have already been experiencing its benefits. Think about it, didn’t Salesforce.com and Amazon exist a decade ago? Simply put, Wikipedia defines cloud computing as ‘Internet-based computing, whereby shared resources, software, and information are provided to computers and other devices on demand, like the electricity grid’. You use a bunch of computing resources as a service, instead of owning them yourself. Today a number of on-demand offerings are being re-labeled and being offered as cloud computing and these include:

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Software-as-a-Service (SaaS): For long, the software industry has been paranoid about increasing the use of ‘Software Components’. These components attempted to provide pre-created and tested application components that reduced the need for developing commonly used software functionality from scratch, and thus reduced the development and testing efforts and time. During the era of mainframes and client server computing, these were offered as libraries, CORBA and OLE Components, and they exposed their functionalities through Interfaces or Application Programming Interfaces (API). With the advent of network and Internet computing, these are being offered as Web Services that can be used from a remote infrastructure.

Infrastructure-as-a-Service (IaaS): Few years ago, when many of the large Internet-based businesses started building scale, like Google and Amazon, they had to build a very sizeable infrastructure to manage the volume and scale of users they were servicing. This led enterprises to re-think their business model, as Google and Amazon had succeeded in providing services to their end-customers through virtualised environments. The advent of virtualisation technology for servers, storage, desktops and networks, led to a new service offering – ‘Infrastructure as a Service’. IaaS allows customers to rent infrastructure on demand and shed their concerns about managing their computing hardware in their datacentres. IaaS has enabled customers to buy services on tap with limited CapEx and without worrying about datacentre maintenance, real estate and rentals.

Platform as a Service (PaaS): With software components and infrastructure being available on demand and as a service, the next logical step was the provision of application systems as a service. Remember ASPs – Application Service Providers? PaaS allows applications to be rented on variable pricing models with very limited upfront CapEx. The platform service provider manages the complexity of installing the necessary computing infrastructure, operating system, databases and provides you a customised instance of your application in a virtual environment.

All the three services mentioned above are being offered as stand-alone or a bundle today, and the new name for these is cloud computing.

That brings me to the next set of services that are now being offered in the market by major Business Process Outsourcing providers (BPO), and I would like to term them as Business Process-as-a-Service (BPaaS). Here are some benefits that BPaaS can deliver:

• Acquisition Time: The timing and duration of an on-site implementation can directly impact the technology decision. Typically, the standard implementation process can be quite lengthy, depending on the complexity of the system, staffing, training and connectivity requirements. Clients may not have the luxury of waiting for months before they begin to use the system and capitalise on the resulting benefits. In addition, for each day without the solution, the existing problem generates increased costs, lost productivity or lowered revenue. It takes a relatively short amount of time to make a BPaaS solution ‘customer ready’. With application access provided much sooner than with a local installation, clients can quickly start using these applications and minimise the financial impact of the existing problem.

• Capital Investment: Due to the current macro-economic challenges the industry is facing, the available upfront capital to purchase a new IT system is limited. The cost of a traditional on-site system implementation, which may include a software license fee, an implementation fee, an optional support fee, and hardware and network costs — represents a significant capital outlay. The economic model of BPaaS dramatically reduces upfront exposure and lets the clients pay a predictable, simplified monthly fee or ‘pay-per-use’ fee.

• Resources: By accessing applications running in the BPaaS environment, clients are no longer responsible for ensuring that the appropriate staff is available and possesses the required skill set (IT and business) to support the solution. Because the applications are hosted by the service provider in a secure data center, the client does not need to hire and train the engineers who install the necessary hardware; ensure connectivity and software for each solution; hire the application experts who operate the systems, or the engineers who maintain them.

• BPO Services: BPaaS services providers not only provide IT Platforms and solutions to meet the client’s system needs, but they also provide complete back-office operations support, to help the client manage their entire back-office operations. Platform solutions bundled with BPO offerings can further reduce the time to ‘go-live’ as the clients get ready access to trained manpower to perform the necessary operations.

• Innovative Engagement Model: Since the entire complexity of funding and implementing the necessary hardware, system software, application software, training people, future updates and upgrades is managed by the BPaaS service provider, these solutions tend to be priced either on transaction pricing or on outcomes. The client thereby has the flexibility of either engaging on a variable pricing model that provides it the much-needed mechanism to manage variability in its businesses or on an a pure outcome-based pricing model that enables it to pay for a well-defined business outcome

BPaaS is not a new offering, but is a new term for what was earlier called Platform-based BPO. BPaaS focuses on taking the ASP model (PaaS) to the next level and also provides trained and experienced staff to manage the underlying process, often in a virtual, global and distributed operating model.