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Executive Summary

What is MindPrice App?

MindPrice as name suggests is pricing of human mind irrespective of its geographical location. Price and cost of operations of processes will now be determined by Meaningful Human Interactions (MHI) i.e. Man and Machine arbitrage.

MindPrice guides on determination of MHI.

MindPrice App can be divided into 2 parts:

  1. Labour Arbitrage: Real time Pricing of human bodies charged by various types/tiers of service providers at various geographical locations for different skillsets for various processes with different experience levels.
  2. Man Machine Arbitrage: Automation maturity of these processes and access to 400+ RPA Use Cases. We are aggregating these RPA Use cases from our client engagements for RPA and data collated from various data sources such as RPA tool providers
Origin of MindPrice App? Why MindPrice?

Most client engagements have started with comparing outsourcing and automation as alternatives for rationalising cost of operations. We have now automated our consulting services and offering it free to our clients.

It will address and provide assistance in following areas:

  1. Real-time BPO rates - the purpose of this app is to provide an in-depth analysis of the base/standard rates charged for business process outsourcing (BPO) resources sourced from low cost countries. BPO resource pricing for 4 different types of vendors are categorised, taking different skill sets and experience levels into account. These rates are then further analysed to give a picture of pricing when sourced from Tier1, Tier 2 and Tier 3 cities. 
  2. Maturity and potential of automation of the process along with access to 400+ RPA use cases
What are the drivers of the MindPrice App?
  1. Commoditisation of resources in the BPO industry. This industry has now been in existence for the last 15 years, and the ecosystem has become mature. Staffing resources can be conveniently accessed and selected based on the scale required for roles and processes which require individual judgement or are purely repetitious.
  2. Contract duration for BPO is becoming shorter than was previously the convention. This requires a more frequent fine-tuning of the contractual terms and reassessment of the pricing. Our research trend shows that the percentage of long term deals (5+ years) have reduced to 34% in 2015 from 74% in 2008. (Source: Mindfields)
  3. Since the 2008 Global financial Crisis, macro and micro parameters of global economies have become more volatile. This is impacting the cost structures and business models of both the client organisations and service providers.
  4. Due to technology advancement and anthropological development of low cost geographical destinations, more options have become available for offshoring. Both client organisations and service providers are constantly exploring new geographical location for offshoring with different cost structures.
  5. Mobility of resources has become more easier and more economically feasible in the last 8 years. Since 2006, there has been an increase of 45% of work force from tier 2 and tier 3 cities working in the BPO industry in Tier1 cities in India. (Source: Mindfields)
  6. Low cost geographical locations are experiencing high inflationary pressure on the cost structure and business model.
  7. Client organisations are no longer emotionally attached to their vendors, and may choose to switch to another vendor if the pricing is more attractive and relative quality is maintained. Since 2008, there has been an increase in instances where client organisations have switch partially or fully to other vendors.
  8. To model innovative pricing structures based on transactional/utility basis, both client organisation and vendors need to understand resource pricing to make it viable and sustainable.
  9. Emergence of mature Automation and RPA tools which are now beyond screen scrapers and macros over last 2 years
  10. Ease of implementing and executing RPA tools
What is the use of the MindPrice App?

This app can be useful in the following purposes:

  1. RFP price benchmarking
  2. Contract negotiations at the time of BPO contract renewal.
  3. Determination of Meaningful Human Interactions (MHI)
  4. Estimation of Labour arbitrage
  5. Potential and maturity of the process for RPA
  6. Business case for comparison between Outsourcing and RPA
  7. Access to library of 400+ RPA Use Cases
What is the target audience of the MindPrice App?

This app is targeted at the following audience:

  1. Procurement Executives
  2. Heads of Strategy
  3. Heads of Operations
  4. Chief Financial Officers
  5. Business/Strategic Partnering Group.
  6. Head of Innovation
  7. Head of Automation
What methodology has been adopted for the MindPrice App?

We have constructed a machine learning based real-time pricing model based on our analysis of the cost structures and business models of various types of vendors. The following factors and cost components of each type of vendors have been built into the model:

  1. Salary
  2. Training
  3. Real estate
  4. Other overheads
  5. Sales and marketing
  6. Brand equity
  7. Gross margin
  8. Productivity
  9. Quality of resources
  10. Experience level of resources.
What are the sources of information used?
  1. Real time salary data from various HR companies
  2. Real time salary data from various HR websites
  3. Annual financial reports
  4. Quarterly accounts
  5. Press releases
  6. Experience level of resources
  7. Interviews with senior executives from client organisations.
  8. Interviews with senior executives from vendor organisations.
  9. RPA engagements executed and implemented by Mindfields
  10. Websites of various RPA tool providers

DEFINITIONS AND TERMINOLOGY

Type of service providers
Type A – BPO service providers are majority owned by Non-Indian stakeholders / shareholders
  • Generally listed on the US or other non-Indian stock exchanges.
  • They offer services in both IT process and business process outsourcing, with an average revenue mix of 85% and 15% respectively.
  • Historically, they had no centres in low-cost destinations, but have added them in the last 12 years, either through acquisitions or organic growth.
  • Now they generally have centres in low-cost destination such as India and the Philippines, which are used to perform the work required in a BPO contract/engagement.
  • Most have an onshore presence in Australia, and provide consulting as separate line of service.
  • They offer management consultancy and other advisory services (apart from Six Sigma).
Type B – BPO service providers are those which offer only BPO services. They have pure BPO offerings.
  • They can be majority owned by either by Indian or Non-Indian shareholders/stakeholders.
  • Generally listed on the NASDAQ or other non-Indian stock exchanges.
  • They generally have delivery centres in low cost destinations such as India and the Philippines. They have also open centres in Eastern Europe, South America in last 5 years.
  • The majority do not have a fully functioning onshore Australian presence, except for a marketing office comprising not more than Sales and Client Account Executives.
  • They also offer advisory services in business process improvement, such as Six Sigma based consulting services.
 Type C – BPO service providers, which are in majority owned by Indian stakeholder / shareholders
  • They offer services in both IT process and business process outsourcing, with an average revenue mix of 90% and 10% respectively.
  • They will generally be listed on the NYSE, NASDAQ or Indian stock exchanges.
  • They generally have centres in India, which are used to perform the work required in a BPO contract/engagement. 
  • While historically they only had centres located in major Indian cities, they have increased the number of BPO centres they own in other low-cost destinations during the last 5 years. This has involved acquisitions and organic growth in place like the Philippines, Eastern Europe (e.g. Poland) and in tier 2 and 3 Indian cities.
  • The majority have an onshore presence in Australia in IT outsourcing, but do not offer business consulting as a separate line of service (excluding Six Sigma or process efficiency/improvement related consulting.)
  • These vendors have enhanced their portfolio of service offerings in recent times by adding skilled workers through acquisitions of other BPO companies or captive back offices centres.
Type D – Second tier BPO service providers which are majority owned by Indian stakeholder/ shareholders, but are privately owned and not listed
  • They generally have centres in India, which are used to perform the work required in a BPO contract engagement.
  • The majority have no onshore presence in Australia, except for a small office with 1-2 employees.
  • Historically, they only had centres in major Indian cities, with had no centres in low-cost destinations. However, they have added them in the last five years to perform work in destinations such as the Philippines, Eastern Europe (e.g. Poland and the Czech Republic,) and tier 2 and 3 Indian cities.
Type of processes
Basic processes (both voice and non-voice)
  • Highly routine processes
  • Commoditised processes
  • Highly defined process specifications
  • Professional judgement not required
  • Local knowledge of process is not necessary
  • Low impact of employee turnover
  • Training at client site or by client is not mandatory
  • Large-scale low margin proposition.
  • Examples of processes include data entry, pay slip generation (not preparation) and office support.
  • Skill sets required are for basic graduate, who are generally freshly graduated or one-year post-qualification.
Simple processes (also includes moderate voice processes)
  • Routine processes
  • Highly defined process specifications
  • Professional judgement not required
  • Local knowledge of process is not necessary
  • Low impact of employee turnover
  • Training at client site or by client is not mandatory
  • Large-scale low margin propositions.
  • Examples of processes include payroll data processing, accounts payable and low-end collections 
  • Skill sets required are for basic finance graduate, either straight from college or one year post-qualification.
Moderate processes (also includes complex voice processes)
  • Routine processes
  • Moderately defined process specification
  • Professional judgement required under highly controlled/supervised environment
  • Local knowledge of process is necessary
  • Training at client site or by client is mandatory
  • Medium-scale medium margin proposition
  • Examples of processes include mortgage processing, collections (first interaction), General ledger maintenance and low-end research
  • Skill sets required are for graduates with five to seven years of experience; Post graduates with up to two years; or those with fresh professional qualifications such as CA, MBA (less than 1 year of Post qualification experience)
Complex processes (non-voice)
  • Non-routine process
  • Process specifications are flexible, and generally output driven
  • Professional judgement required of workers
  • High governance and monitoring cost
  • Compliance with local regulatory requirements such as APRA (Australia), SEC (US), FSA (UK)
  • Local knowledge of process is required
  • Training at client site or by client is mandatory and complimentary
  • Low-scale high margin proposition (Less than 50 full time employees)
  • Examples of processes conducted include valuation, modelling, customer segmentation and low-end analytics
  • Skill sets required include experienced staff with professional qualifications such as CFA, CA, MBA or Actuaries
  • This category might also include processes that require sensitive interaction with customers, and which have a direct impact on revenue and brand equity. One such process would be claims processing.
Type of tiers
  • Tier 1 refers to cities such as Bangalore, Delhi, Gurgaon, Noida, Chennai, Mumbai or top-quality resources such as rank holder CAs or MBAs from prestigious institutes like Indian Institutes of Management or overseas (US, UK.)
  • Tier 2 refers to Tier 2 cities such as Calcutta, Chandigarh, Jaipur, Pune or Manila (Philippines), Medium-quality resources from regional state-owned institutes.
  • Tier 3 refers to Tier 3 cities such as Nasik, Rajkot, Madurai, Coimbatore or Cebu (Philippines), low-quality resources such as an MBA from private institutes.

OTHER FACTORS INFLUENCING BPO RATES

We have ascertained the standard vanilla rate card, while making the following considerations to create a model for BPO rates:

  • Assumption regarding working hours in a year (220 working days, 8 hrs per day) - Each Service provider has its own definition of working hours per annum to come up with its rate per hour. To work out a BPO rates model, this study has assumed 220 working days in a year, with each working day comprising 8 working hours. This can be loaded/discounted with adjustments specific to a client’s requirements.
  • Consulting charges (inbuilt or charged separately) - Consulting charges are sometimes factored into an annual rate, as a standard feature in a package. This will, of course depend on whether the process in consideration requires any consulting from the service provider. Client organisations often prefer prospective service providers to quote without consulting rates inbuilt, so they can distinguish between both the rates i.e. consulting rate and BPO rate, before engaging the service provider for a specific activity or process.
  • Efficiency gains being shared with a client - Efficiency gain sharing might be offered as an incentive and commitment to the client organisation to ensure business process improvement and efficiencies. Efficiency gain sharing can range from 15% to 90% depending on the probability and the perceived room for improvement in the process in question.
  • Location in Indian cities (Tier1, Tier2 and Tier3) - Due to increasing real estate prices in Tier 1 cities like Delhi, Mumbai, Chennai, and Bangalore, some service providers have also developed delivery centres in Tier 2 locations like Calcutta, Jaipur and Pune, and Tier 3 places like Nasik and Madurai. Federal and State Governments have offered service providers incentives to develop delivery centres in Tier 2 and Tier 3 cities to ease the burden on infrastructure in Tier1 cities and promote employment in Tier2 and Tier 3 cities. Some service providers have passed the cost savings made to the clients, but others have not. Some clients have begun insisting upon Tier 1 cities for delivery centres for a range of reasons, including the higher cost of governance, and a lack of quality resources in available in other cities.
  • International standard processes or customised offerings - Service provider might quote non-standard rate for a process which requires a specific skill set or local knowledge, for example Para-planning for Australian market. A service provider may not charge extra time, material and cost if there is an opportunity to further offer this skill set to other clients in the same industry.
  • Set up costs (mobilisation) - These charges relate to cost incurred by a supplier in mobilising resources to serve the client organisation. It might include travelling and boarding costs, human resources costs and training. These costs are inbuilt in the rates quoted unless specifically mentioned in requirements laid out in the tendering process. These charges typically reflect the costs of data transmission, and are quoted separately, depending on the amount of data traffic and the client’s security and privacy requirements.
  • Governance and compliance costs - Governance and compliance costs depend on how critical the process is to the client organisation. Generally, for critical services, the providers commit premium resources at their end to ensure quality of their delivery, with these resources quoted separately or charged as a percentage of overall contract price. There are specific requirements of FSA, SEC, ASIC and APRA (regulatory authorities) which need to be complied with both by the client organisation and its service providers. These authorities might conduct audits of service provider and client organisation processes to ensure internal controls are working.
  • Minimum number of FTEs/Scale - Most service providers define and benchmark opportunities based on the minimum number of FTEs that will be required for any engagement. Depending on the process, the minimum of FTEs required can range from 2 for complex processes like valuation and modelling, to 20 for simple process like Payroll.
  • Cross selling opportunities - Service provider might quote non-standard rates if they see the potential for cross selling of other processes or services. This loss leader strategy for the process in question is quite common when there is potential for winning further business processes in the next phase of an outsourcing initiative at the client organisation.
  • Packaging with IT platform (Output or per transaction rates) - Business Process Outsourcing (BPO) might graduate to a Business Process Utility (BPU) model depending on the complexity and maturity of the process. For example, low-end processes like Payroll are often offered as a package with IT payroll platforms. Some service providers have acquired or tied up with different IT platform providers, which can then be packaged with business processes, for example Infosys’s HR Platform.
  • Acquisition of skill sets - BPO service providers initially won clients by offering simple processes such as payroll and accounts payable in the initial phase. They are now looking to enhance their portfolio of service offerings by acquiring new skill sets. The BPO rates offered by service provider might be different to their standard rates depending on the potential of this new skill set in acquiring business from third parties.
  • Market entry strategy - Australia is still viewed as an untapped market for most of the service providers as US and Europe are preferred markets.
    They might offer non-standard rates to undercut competition to enter this vital market.
  • Foreign currency hedging - To hedge against the US dollar’s dominance in their revenues, service providers have used Australian dollar revenue. A service provider might offer non-standard rates for Australian dollar revenue for hedging, but due to foreign exchange fluctuations in last eight months the Australian dollar lost some of its charm as a safe heaven.
  • Premium for Exclusivity in the geography - Some client organisations are willing to pay a premium price over the benchmark BPO rates if the service provider agrees to serve them exclusively in the geography for the vertical. In these cases, it would undertake not to serve any direct competitor of the client in the specified geography, and to seek approval for any other sales pitches in the region.
  • Packaging of voice component (both inbound and outbound) - Mostly top tier service providers prefer not to bid for pure voice based process work unless they are packaged with a minimum 20% of non-voice based process. Recent trends show client organisations end up paying a minimal mark up on the voice cost component when it is packaged with non-voice processes. BPO players are facing tough competition from pure voice-based players like Teletech, Convergys and Australian players like Salmat and Stellar. Australian companies can be reluctant to send pure voice-based processes offshore to low-cost destinations like India due to negative customer feedback. Some value-added voice BPO work have rigid price structures.
  • De-skilling of processes - Complex processes which were once performed by expensive, experienced and professionally qualified workers have been broken into simple and granular processes. These simplified processes can now be performed by cheaper and less qualified staff. Vendors which have a mature and optimised methodology may now be able to quote non-standard rates for such complex processes.
  •  Time zone of operations- For example: During Australian business hours, most Indian delivery centres are not utilized as it falls in between when the US closes and Europe opens. Some vendors might not allocate the fixed costs pertaining to these delivery centres while quoting BPO rates for Australia.
  • Automation - We are not considering automation impact on the pricing in the MindPrice. Gain sharing and transaction/ outcome based pricing need to work on a case by case basis.

Automation Maturity

It is determined by our experience from implementing and executing various RPA engagements. It is also validated by our library of 400+ RPA Use cases. 

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