SaaS, Shared Services, BPO - Will they converge?

Now that’s an interesting question. Combination of SaaS - Software as a Service offered along with the process service either in the form of Shared Service or BPO seems very very feasible and attractive proposition.

However, I think that SaaS, on its own, is yet to prove itself as a credible alternative to packaged / custom-built software applications. SaaS is in a very primitive form to convince IT as well as business organizations to opt for itself for mission critical applications such as Core Insurance system or ERP. There are a number of parameters that need to be given consideration before a decision in favour of SaaS can be taken. Few days back I had written a blog entry "Software as a Service - A reality check!" detailing parameters that can govern decision of organizations against or in favour of SaaS.

Are shared service and BPO two sides of the same coin?

In shared servies, you seek to pool resources offering similar services to various departments / divisions / SBUs within the organization. The objective is to achieve economies of scale, and maintaining optimum level of resources so as to reduce costs as well as offer SLA based services to consumer departments / divsions / SBUs. Examples of shared services are call centers, payroll, analytics, leagal and complicance services.

Is BPO greatly different from Shared Services? The only difference is that BPOs typically tend to be independent organizations which offer the same services as that of Shared Service organization but primarily to "external" customers. Sandy Kemsley argues that an enterprise is usually captive to its shared services, whereas they have a choice with an external SaaS (BPOs). Well that may not be completely true. I know many instances where there have been captive BPOs set-up by MNC organizations at on-shore as well as off-shore locations. Also, many a time organizations are forced to opt for BPO companies within the same corporate group when there are credible and better options available outside of the group.

I feel that shared services and BPOs are two sides of the same coin. They bring about the similar benefits to the organizations. There are merits and demerits in either models. BPOs especially if they are external organization, may offer superior services considering the customer - service provider relationship especially if the exit barriers are very low. On the other hand, Shared Services, being internal to the organizations can draw comfort from the fact that the sensitivity of data or records are still managed within the four walls of the organization.

I expect SaaS to mature over a period of time and then convergence of SaaS and BPOs is simply inevitable. Already organizations such as IBM, and Infosys have both package applications as well as process outsourcing services to offer to the market. What would really stop Infosys to offer loan processing service deployed on their core banking solution - Finalce as SaaS. In India I know at least one bank, which have outsourced their complete IT set-up to Wipro. What would stop this bank from using software applications developed on Wipro's Flow-brix as SaaS in combination with credit card payment collection services from Wipro's outsourcing unit. Just think about it.