[IMGCAP(1)]Everything would seem to be “as-a-service” these days: infrastructure, platform, software, government, healthcare, storage and more. There is now even the term “anything as a service” or XaaS, which encompasses this entire movement. So, I apologize in advance to adding to the jargon with this discussion of business process as a service, or BPaaS. To explain what I mean by BPaaS, I should give a little background.
As an auditor for PwC, I saw firsthand how large enterprises used outsourcing for some of their back office processes. In the early days of outsourcing services abroad—or offshoring—companies were really just looking to lower their labor costs by moving pieces of their non-core or contextual processes to cheaper labor markets. This is where outsourcing (often used as a synonym for offshoring, though outsourcing can still be domestic) started to get a bad reputation. We can all think of customer service experiences where language, culture or geography has made explaining a complex issue difficult and kept a problem from being resolved. In addition to concerns about level of service and quality, there are also ethical and political concerns about lost jobs and wage erosion in the originating country, as well as working conditions in the destination country. I will stay well clear of these topics.
We’ve seen a trend to increase the value and level of service of outsourcing by moving processes back to the originating country, a trend sometimes called nearshoring or re-shoring. The larger providers of business process outsourcing (BPO) would normally dedicate a group of workers to one particular customer, so if a large enterprise wanted to take advantage of finance and accounting outsourcing (FAO), we’d see a portion of the outsourcing provider’s offices dedicated to that customer. A handful of clerks might handle the accounts payable, accounts receivable and general ledger activities for that particular customer.
The advent of cloud-based and SaaS technologies has changed the game, providing sophisticated tools to companies of all sizes. SaaS allows for economies of scale and efficiencies for both the software provider and the customer. Multi-tenancy, resource pooling, and elasticity allow providers to manage one code base and make the most efficient use of computing power. The same attributes allow customers to offload server maintenance and IT resources to the provider, and they allow a customer’s business to scale without needing to worry about how the software will handle that growth.
A parallel to the move from on-premises legacy software (customer-managed) to SaaS (vendor-managed) can be seen in the move from in-house business processes to BPaaS. When you turn on your computer and log into your SaaS accounting, CRM, or HR software, you expect it just to work. You don’t worry about how it’s managed, where the servers are, what the disaster recovery plan is. The vendor handles that. With BPaaS, the same is true: Vendors are paid. Customers are billed. Cash transactions are reconciled. Employee expenses are captured and reimbursed. Accounts are analyzed. Reports are delivered.
With SaaS, the CFO no longer has to expend time and effort dealing with software installs, servers and performance. With BPaaS, the CFO no longer has to worry about managing the transactions…or even the people that manage the transactions.
In addition, BPaaS goes beyond the older BPO/FAO model in one key way: specialization. Instead of just taking the back office of one company and moving it into the purview of an outsourcing provider, a BPaaS provider has specialized and dedicated resources for each functional area (AR, AP, GL, cash management, etc.) across all customers. Similarly to how SaaS providers can lower their costs and build efficiencies and economies of scale by sharing code and server resources across all customers, BPaaS provides “economies of skill” by shifting resources elastically across the provider’s whole customer base. As with SaaS, this provides cost savings for the provider that can then be handed down to the customer, allowing small to midsize companies to take advantage of technology and services not available ten or even five years ago.
CFOs should be strategic advisors to their companies. They should be analyzing data, helping make key business decisions and securing the capital necessary to grow the business. They shouldn’t be managing software, servers, clerks or transactions. They should be subscribing to software and outcomes—predictably priced and predictably delivered outcomes.
Marcus Wagner is founder and CEO of AcctTwo, a consulting firm and provider of cloud-based financial management solutions. AcctTwo specifically addresses the challenges unique to software companies, not-for-profit organizations, oilfield services and midstream oil and gas companies. You can connect with Marcus at www.AcctTwo.com.
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