Outsourcing is out, OaaS is in

Traditional Business Process Outsourcing (BPO) has come a long way since it began in the 90s. However, Australia’s economic uncertainty, driven by falling growth in China and cheaper commodities, is leading businesses to focus intensely on costs, agility and innovation. Meanwhile, international competition is rapidly increasing and is forecast to become more powerful as digital technologies accelerate globalisation in many industries.

Given the economic and competitive forces at play, organisations should be looking past a traditional outsourcing model towards something more innovative.More recently, sourcing has blended with various forms of ‘as-a-service’ via integrated, cloud-based applications.

Advancements in data processing and computing intelligence have also become essential – allowing for a new class of data-driven business insights. This overall combination of proven business process management disciplines and intelligent, cloud-driven technologies is now known as Operations-as-a-Service (OaaS). OaaS should become a strategic imperative, since it offers not only the chance to drive down costs, but it also increases agility and adds new competitive advantages.

Fully-fledged OaaS is relatively new. However, early adopters have been laying the foundations for the past three years. In Australia and Asia–Pacific, just 8% of organisations have implemented a core enterprise function under the OaaS model, but 62% see it as critical or absolutely critical for their organisation, and 46% plan to implement by mid-2017, according to Accenture research.

Rio Tinto, a global mining company, has taken steps along the path to as-a-service. The company is moving to a new information systems and technology delivery model that will migrate core enterprise information systems and technology to a cloud-based, as-a-service solution. The model also incorporates pay-for-use pricing so that costs are fully flexible and services are scalable based on business demand.

The program will include the modernisation of the company’s existing enterprise resource planning and information management platforms, consolidating and hosting these applications in the cloud. Rio Tinto expects to realise significant cost savings through increased business agility and cost flexibility inherent in cloud services. Unlike early generations of BPO, this model is based on output, rather than input, and is aligned to a key business outcome.

These four key changes will answer on how Australian organisations can move faster, and with more confidence, towards full-scale OaaS:

1. Get design thinking

   Businesses need to recast their operating model, integrating greater automation and analytics, and adapting the business to the speed, agility, responsiveness and available insights this provides. Design thinking, which prioritises prototyping and iterative development cycles, is increasingly seen as a prerequisite in this process, and for OaaS success in general.

2. Exit the cocoon

   Intelligent automation allows for greater personalisation and responsiveness, while analytics insights can drive customer-centric innovation. At the same time, OaaS requires a partner organisation that provides data insights, advice, new ideas and knowledge. Integration with the organisation’s existing systems is managed by the partner, not the organisation, reducing internal stress.

3. Get skills on both sides of the fence

   Businesses must ensure they have the right available skills inside the organisation, and crucially, from providers. Operations-as-a-Service requires a blend of specialist management and technology talent. The right providers have an abundance of expertise across the board – helping supplement and develop internal skills and capabilities. However, a unified team needs to gel. Without a cultural fit and shared values, the partnership is unlikely to succeed. And unlike previous BPO models, the provider will not just be a vendor. It will be a partner.

4. Rewrite the rules

   Existing outsource contracts should not get in the way of OaaS. To make OaaS possible, agreements need to be dynamic, flexible and supportive of innovation. Traditional rigid, fixed-scope contracts with slow change requests should be retired – not evolved – in favour of a fresh construct designed to enable a fluid partnership.

Australia’s business environment is increasingly challenging to compete in. To remain a top competitor, it’s crucial for your organisation to look past traditional BPO towards OaaS. At first it may be difficult to make the transition, but the potential for new efficiencies and cost benefits is too great to ignore.