Gartner defines BPaaS (Business Process as a Service) as delivering business tasks performance service based on cloud technologies. BPaaS model is the best solution for a company that needs to automate recurrent key jobs in the absence of specialized employees. Several BPaaS provider customers may use the same service. Payment for such outsourcing is made at a fixed price for a period or upon completion of services.
BPaaS Principal Diagram
Customers cooperate directly with BPaaS providers, who may choose between the two options:
- ordering cloud software, built by a SaaS vendor on the platform and infrastructure that can be either purchased or in-house developed,
- developing their own cloud software based on third-party PaaS or even IaaS solutions.
Providers’ roles may be combined in the model, but it does not concern a BPaaS solution consumer. It’s crucial for customers to know who provides software, platform and infrastructure for their business tasks performance only if they plan to stop using the BPaaS model in future and start using a SaaS solution independently or even take some more steps down in the diagram.
Technologies here rank next to business task performance. Generally, customers leave all concerns for BPaaS and other providers having paid for additional cost. Theoretically, a customer receives service quality, which is financially guaranteed, while the responsibility for the quality lies fully with the BPaaS provider.
Clouds Plus Division of Labor
The logic for the model emergence is obvious.
The model is based on cloud technologies, whose development relies on the increasing demand for software products including business efficiency-oriented solutions. Switching to software, platforms and infrastructure, provided as a service, arises from the economic viability. Cloud solution benefits include fast deployment, relatively low cost, as well as maintenance internal costs reduction.
Besides, the principles of the division of labor are also used here. Why purchase software that needs to be administered by a full-time employee, whom the company has to train, retrain, retain and so on and so forth? One may purchase software as a service that will ensure a guaranteed quality administration. Moreover, in case of a SaaS provider offering system maintenance service to hundreds of customers, their administrators are supposed to be highly qualified.
BPaaS is a logical step forward, as the model solves not only IT problems, but also those of professional spheres. Why hire an HR manager, even working in a cloud HRM system? One may use a BPaaS vendor’s service, which includes solving HR issues as well as providing a cloud system access. Such combination of services may be necessary when an executive needs to consider some job applicant’s CV for a middle manager’s position and higher. The customer determines and may alter, if necessary, the amount of competences transferred to a BPaaS provider.
As a result, employees work in their domains without dispersing attention to adjacent spheres, while administrators maintain the system’s efficiency, HR workers deal with personnel recruitment, and BPaaS customer’s employees are involved in their company’s main activity.
BPaaS Economic Aspect
BPaaS vendors emerge due to the demand, and the demand, in its turn, arises from the new model benefits. Various participants, from a SaaS-vendor and a BPaaS-provider to end-customers, get their benefits.
Customer’s Return on Investment
The invoice approval process handling takes from one to three employees. An AP specialist’s average annual salary in the US is $38,220, which means that the business task performance costs the company $38,200–$114,660 per month. Therefore, if your BPaaS solution costs less than $75,000 per year, you benefit from AP specialists’ payroll costs reduction. Besides, the BPaaS option offers corporate system administration cost savings, considering that IT specialist’s average annual salary in the US is $77,330.
No need to purchase or develop a corporate system in the cloud or at the company facilities can result in additional “secondary” savings. These savings might be quite sound, providing for the fact, that data center creation costs hundreds of thousands dollars.
BPaaS Provider’s Profit
BPaaS providers determine extra cost, which obviously includes net income. They save a lot, as they buy not an on-premise solution, but a SaaS one, and, as a rule, do not have to think of renting a cloud platform as well as of deploying and customizing the system.
The provider’s business profitability depends on the cloud system cost on the one hand, and on the price agreed by the end-customer on the other hand. Plus, both restrictions are external, and the provider cannot influence them.
As a result, the provider accepts some profitability of their business and can earn on volumes, purchasing more and more facilities to be able to handle more customers’ requests. The critical points for a BPaaS provider are software purchase licensing model as well as SaaS solution scalability and architecture that allows using one database for supporting a variety of customers. Under these conditions one can increase profit margin by gaining volumes.
SaaS Vendor’s Savings Possibilities
One would think, cloud system vendors can independently find end-customers, and BPaaS providers would even cause additional competition here. However, in practice, cooperation with big customers, purchasing licenses and facilities in bulk, make a profit for SaaS vendors too.
Cooperation with big companies allows SaaS vendors to focus on product development, leaving aside marketing, sales and other customer search related issues. BPaaS providers offer SaaS vendors stability, transparent relationship and easier system administration process.
There are also savings in payroll for employees involved in the company’s main activity, which is developing and providing software as a service. The principle of division of labor, mentioned above, works here as well.
BPaaS in Nearest Future
Forbes in its article “Gartner Predicts Infrastructure Services Will Accelerate Cloud Computing Growth”, dated February 19, 2013, shared Gartner analysts’ forecasts concerning cloud technologies’ and specifically the future of BPaaS.
According to the forecast, the BPaaS market’s annual average growth by 2016 is projected to be 10,7%. The market aggregate volume will reach 47,9 billion USD. This is $15 billion or 46% more, than the SaaS market volume is expected to be by 2016. The BPaaS model will be in greater demand in such domains as finance and outsourcing, customer relationship management, e-commerce support, and some others. Slower BPaaS market growth will be in HR management and supply management spheres.
Nevertheless, the BPaaS market growth rates do not seem rapid against the general background of cloud technologies. One might assume, this is determined by the fact that the model participants need to put great organizational efforts, change accustomed operational principles to arrange the whole working process. Besides, each participant must move towards one another and expand cooperation, which takes a lot of time. That is why the position of SaaS vendors, working directly with customers, looks more promising so far.