#Asia How global uncertainty drives business, commercial, and pricing models


Change is inevitable — rather than be afraid of it, use it to your advantage

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With rising global uncertainties that have emerged over time, fuelled by the recession of 2008, came new operating and business models including cloud computing. BPO came in much earlier than that, perhaps due to the previous recession and evolution of technology.

On-demand and as-a-service

The traditional model of customers having to bear huge upfront cost for implementing large scale transformation programs and subsequent operating costs over time became the not-so-preferred model. The need for elasticity and OPEX-oriented models gained further momentum.

Conversion of CAPEX based pricing into OPEX based — where upfront costs are recovered over time on a certain basis such as a per-VM or per-transaction with cost of capital built into — could be one theme for large service providers who have the financial ability to do this, withstand, successfully deliver, and reap the benefits of being a true transformation partner.

Taking this further, a catalog-based pricing with options to mix and match offerings is another within this. On top of this simulating across different volumes of transactions or other unit of measurement such as VM meant a nightmare for the pricing modellers, as well as procurement departments of the customers who need to look into the future and guesstimate the demand to support the service providers in building a model and quote. All this has given rise to something very interesting for the customer.

Equally on the other side, customers need to provide some ramp up assurances over time to the service providers with a tight governance model on both sides, in order for the service provider to be able to meet commercial goals while unleashing the transformation.

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Not all transformation programs run their full life and meet their stated objectives. Many fall by the wayside for so many different reasons that one could write a book. In such scenarios, the service provider should get compensated for upfront costs that remain non-recovered.

Decision-making and implementation have to be quick, while the plan is for the long term. It is somewhat like running a marathon, but at the speed of multiple sprints, so as not to lose focus on the long term goals, as well as celebrating tangible short term success along the way, thereby retaining continued sponsorship for the overall program.

Some room for growth in fintech

The other not-so-related thought that comes to mind is why the cloud not being spoken about extensively in the finance and accounting (F&A) BPO space. After all, the so called key F&A processes such as accounts payable (AP), accounts receivable (AR), general ledger (GL) and fixed assets (FA) are so non-core to the finance function in the first place, which is why they go the BPO way toward the goal of reducing the cost of running the finance function as a percentage of revenue.

These are clear candidates for being moved onto cloud based computing environments, typically a public cloud. Similarly processes around procurement and other horizontal offerings can certainly be looked at being moved the cloud way. Some extraordinary mix and match of technologies, tools and providers are available in the cloud space, which should be evaluated, selected and implemented along with the now over mature cost arbitrage based process and workflow automation tools, to get miles of first mover advantage for new customers or take existing customers to the next level of transformation.

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Data privacy and security are key concerns for cloud deployments no doubt, but there are global best practices and standards around this, which service providers are more than eager to implement.

Outcome-based pricing

Outcome-based pricing is another area which is dreaded by most except commodity services as in the infrastructure maintenance space or low end BPO space where outcomes can be defined with ease and measured without ambiguity. Taking a true partnership approach, all the pitfalls of outcome-based pricing need to be overcome, and progress needs to be made vigorously by service providers in this direction far beyond these two areas, with customers ready to share the benefits when outcomes are realised and the times are good without taking it away from the service provider.

Continuity of account management and governance on both sides over a long period of time will be key here.

Fear of failure must be overcome, in order to succeed. And innovation, with relentless pursuit to implement it and showcase commercial success is key.

Service-oriented approach

Another aspect that comes to mind is how to deal with service. Today everyone wants to sell something to you and run away. When it comes to service, it is either expensive in the form of AMC or spares, or the product goes obsolete requiring a mandatory replacement.

While in the IT world, this is natural, as technologies evolve. In the non IT space, however, it is important that products are made like the good old days wherein the product would do its stated purpose for many years or decades to come and there is reliable service around it. In general, today’s products are not built to last very long as they used to, decades ago. Most of the parts require replacement at certain prescribed intervals or risk the warranty lapsing.

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For example, the value of the product — such as a car — can keep going down very rapidly. While this means big business for the car manufacturers in the form of revenues of after-sales for spares, and for dealers on account of servicing and selling these spares, the end customer actually ends up buying a consumable in the form of a car, rather than an asset, as in the past.

Technology should change the world

Similarly in IT, there is a need to build robust technology that can keep up with time. IT when taken in its total cost of ownership, is actually very expensive and hence this theme holds lot of importance.

IT should be used to solve the world’s major problems such as food security, healthcare and natural disasters in a much more intensive way than it is being used today, and there should be lots of opportunities if this happens.

IT spend within emerging economies has to go up and yet be affordable in such highly price-sensitive markets and thereby enhance quality of living where most of the world’s population resides.

The last two themes will be relevant in reducing global economic uncertainty, which is what this post started off with.


The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, submit your post here.

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