Business Process as a Service (BPaaS): Definition & Principles

Instructor: Marco Comuzzi
Business Process as a service (BPaaS) combines business process outsourcing with cloud computing technology to provide a flexible way to implement IT-intensive business processes. After having defined BPaaS and discussed examples, you will learn in which situations BPaaS is beneficial for a company and in which situations it should be avoided.

What is BPaaS?

In order to concentrate on their core business, companies often outsource non-core activities, such as payroll or IT incident management, to a service provider. This practice is usually referred to as Business Process Outsourcing (BPO).

Traditional BPO becomes Business Process as a Service (BPaaS) when the outsourced business processes are delivered by service providers using the cloud computing paradigm. Companies access their outsourced processes using standard Internet technologies, such as web browsers and mobile apps.

Service providers implement BPaaS on top of a traditional cloud computing stack, which involves the infrastructure, platform, and software as a service layers. Figure 1 shows an example example of the BPaaS blueprint at IBM. This structure enables them to exploit typical cloud computing capabilities in order to optimize the provisioning of higher level business process solutions. For instance, BPaaS can be implemented using a multi-tenancy paradigm, in which the processes of multiple client companies use the same cloud resources. Cloud computing also allows for high elasticity. Hardware and software resources can be dynamically allocated and unallocated according to individual client needs. This allows them to handle their peak loads and avoid resource waste.

Figure 1: BPaaS stack implementation example at IBM.
BPaaS stack at IBM

Top providers of BPaaS solutions include major technology players such as IBM (US), Accenture (US) and Wipro (India). These companies provide solutions across a large range of business process types. Other providers, such as, leverage their expertise to focus on specific business processes, such as customer relationship management (CRM).

BPaaS is a way for a company to get access to industry best practices for non-value-add processes and to use standard internet applications and protocols, all while maintaining focus on their core value-adding business activities. From a strategic point of view, BPaaS is also a way for organizations to move from capital to operational expenditures. Implementing a business process in-house requires a large amount of capital (e.g. hardware, software, human, and other physical resources). With BPaaS these costs are substituted by more flexible operational expenses (e.g. a fixed monthly fee per number of users). This change is aligned with recent trends in IT services, fueled by the wide availability of cloud computing resources. IT services and resources are increasingly seen as a commodity, and are accessed by companies on an as needed basis. To some extent, BPaaS brings the notion of commoditization to business processes as well.

Processes that can be outsourced using BPaaS are normally IT-intensive and can be either horizontal or vertical. We will discuss each of these below.

Horizontal Processes

Horizontal processes involve interaction with other business partners. For instance, a company may outsource their order-to-cash business process (guarantees that client orders are eventually paid). In this case, once an order is placed by a client, the BPaaS solution is in charge of activities such as issuing an invoice, sending payment reminders and collecting the payment from banks. By outsourcing order-to-cash, a company can concentrate on its core business activities and just watch cash flow.

Vertical Processes

Vertical processes are those residing within the boundaries of a company. For instance, a company may decide to outsource payroll management to a BPaaS service provider. In this case, the BPaaS provider will handle all the activities related to calculating and paying monthly or weekly salaries and bonuses to employees. By outsourcing payroll management, a company could reduce the size of its Human Resources department.

BPaaS Benefits

The choice to use a BPaaS solution is driven by several potential benefits that can be achieved:

Scalability. The input volume of the business process can easily scale up and down, since the service provider can dynamically adjust the resources allocated to each process in its cloud computing platform. For instance, a sharp increase in the number of orders to process in an order-to-cash process will not be a problem for a company, since the service provider will simply allocate more cloud resources to handle a higher number of orders.

Financial flexibility. Being based on cloud computing technologies, BPaaS allows for flexible payment schemes, such as pay-per-use or pay-per-unit. The outsourcing company does not have to incur the huge capital expenditures that may be required to implement a similar solution internally.

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