July 13, 2016
Great goldmines lie hidden in large BPO providers’ backyards. A few clever ones have just started digging up fortunes. Some are, quite unfortunately, dragging their feet or blaming their tools. Most others are sleeping on tons of buried treasure, possibly not even aware of the magnitude of loss due to inaction.
The gold is data. BPO providers have long had access to their clients’ actual data. However, like buried gold, the data’s potential has never been exploited enough. Most providers use basic reporting and simple descriptive analytics to provide visibility into the client’s internal operations. The more advanced ones have invested in predictive and prescriptive solutions. But, even these providers have only skimmed the surface of the real treasure. We are talking here of an aspect of analytics that has huge potential but has not received the attention it deserves from BPO providers – benchmarking.
Currently, the multi-billion dollar benchmarking industry is mostly based on data collected through surveys or other secondary media. Such media are inherently prone to errors of omission and commission on the part of the participants, which directly impacts the accuracy of data that goes into the benchmarking analysis. Moreover, the volume of data with at least the smaller players in this industry is, in many cases, not large enough to ensure statistical significance. Perhaps most importantly, benchmarking service providers struggle to obtain the right context of data, which makes apples-to-apples comparisons difficult. Any organization with data that trumps that of the benchmarking providers in terms of accuracy, volume, and context is well-poised to disrupt this large industry.
Now, here come the billion dollar questions. What if the BPO majors with large portfolios of sizable clients start thinking bigger? What if they realize that their data is more accurate (as it is their clients’ actual data,) more voluminous (as they have a continuous flow of data of hundreds of enterprises,) and more contextualized (as they have high visibility into the processes that generate the data) than that of the benchmarking industry? What if, after realizing the value of their goldmine, they use the data not just for internal analytics for a particular client, but also to provide benchmarking analytics by combining data from multiple clients? What if they go whole hog and start offering benchmarking services apart from their usual BPO services? And finally, what if they combine this data with big data to unlock the true potential of predictive and prescriptive analytics? The answers will determine whether the BPO majors are ready to let go of inertia and wake up to their true potential.
To be fair, a few providers have taken steps in the right direction. The first example that comes to mind is ADP’s analytics. Its technology is powered by actual payroll and HR data of many of its North American clients. Perhaps the most powerful feature of its tool is compensation benchmarking. Currently offered only to BPO clients, this feature uses data on actual salaries paid to employees by its thousands of customers to arrive at pay benchmarks. Used to its full potential, this offering can be the stuff of nightmares for the incumbents in the lucrative compensation benchmarking industry, such as Aon Hewitt and Mercer.
The common argument put forth by naysayers of BPO providers’ benchmarking potential is that such use of data would constitute violation of client confidentiality. The fact is that client confidentiality can be ensured almost exactly the way it is done currently in the benchmarking industry – by sanitizing data so that actual entities cannot be recognized. As long as legal frameworks allow repurposing of anonymized client data, this argument against benchmarking is surmountable. Of course, an effort to obtain the customer’s buy-in is imperative. This can be through inclusion of security and confidentiality standards in SLAs, and through proper incentives including offers of pro-bono benchmarking services. The other important imperative for providers is to ensure they make the right investments in talent, process, and tools with respect to benchmarking services. Indeed, providers looking to harness the full potential of these services by offering them stand-alone may want to consider creating an organization separate from their BPO services.
What providers averse to the idea of benchmarking fail to realize is the opportunity cost associated with not letting the world know the potential of the data they have. For example, how did WhatsApp, which generated US$ 10.2 million in revenue in 2013, get acquired for US$ 22 billion in 2014? Answer – the potential of data. How did LinkedIn, which made US$ 2.9 billion in 2015, get a valuation of US$ 26 billion? Answer – the potential of data.
BPO providers are letting themselves be grossly undervalued by not looking at benchmarking as a possibility. And we are talking here specifically of the scaled-up BPOs that have the threshold of data in one or more BPO segments required to deliver benchmarking services. It is high time that these providers realize they are sleeping on a goldmine and get moving on developing benchmarking offerings. Those that do stand to take their enterprise values to whole new levels.
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