In the previous article, we've discussed very typical cases of Business Process Outsourcing. You can check them here: BUSINESS PROCESS OUTSOURCING OF SOFTWARE DEVELOPMENT AND RELATED SERVICES - IS IT AN EXPENSE OR THERE IS A PROFIT?
We've already checked what are the benefits of Fixed Price, Cost Plus, Subscription, and Dedicated Team models. However, there are some more for the consideration: Hybrid Models.
- There can be a certain, notable discount
- A vendor's team is already motivated and aiming at a positive business impact
- There is no need to check the day-to-day performance of the team
- The business should negotiate a percentage of revenue or equities to be dedicated to the vendor
- Risks are mitigated to all parties
- Business Process Outsourcing can turn into a long-term profitable partnership
Outcome-Based Model
It can be a sort of a Fixed Price Model, however, normally, it is related to a Dedicated Team Model. In this case, the Business Process Outsourcer takes the whole process from the very top to the bottom. This makes things a little bit less transparent, but lets this team focuses on what's valuable, unleash their innovative potential and all above for a very good discount on their services in exchange of bonuses for a good job done by the team, basing on the real business value created. In some cases, like Digital Marketing, there is a set of standard ways to calculate an Outsourcer efficiency. For other cases, for instance, the product development, it's more complicated, despite a very clear number related to self-cost and profit margin. There is still a wide range of negotiation.
Concluding this
- There can be a certain, notable discount
- A vendor's team is already motivated to achieve a positive business impact
- There is no need to check the day-to-day performance of the team
- The business should negotiate a percentage of revenue to be dedicated to the BPO vendor in case of positive business impact
Shared Risk-n-Reward
This model is a sort of Outcome-Based Model, just it's normally more specific to startups. In exchange for a discount flat-rate the business for an agreed portion of equities. Indeed, in this case, Business Process Outsourcing turns to Partnership, however, that's a great definition, how Fixed Price risks can be mitigated to both sides with a win-win solution.
Well, benefits are generally the same as in case of an Outcome-Based Model. Besides this, a startup or business can get a considerably big advantage:
- The one single reliable technical or operational partner instead of a well-known endless story of many vendors one-after-another.
- Risks mitigated for both Business and Vendor
- A possibility to make a long-term partnership of Business-Operate-Transfer