Business process as a service (BPaaS) is a noteworthy shift in the evolution of software’s role from merely supporting business processes to ensuring business outcomes. Software providers, services, and their customers alike all must clearly identify and jointly pursue these opportunities in order to increase efficiency and foster innovation.
Contemporary businesses often grapple with the dual challenge of managing cost pressures while simultaneously driving innovation to maintain competitiveness. On one hand, business models must be further optimized to unlock efficiencies and margin potential through standardization and automation. On the other hand, the exploration of novel business models is critical, despite associated uncertainties and the potential need for extensive transformation efforts.
To manage and further optimize ongoing business operations, outsourcing entire business processes to external service providers rather than operating them in-house can prove beneficial. Similar to the software as a service (SaaS) business, there is an emerging market of service providers that use cloud-based technologies to assume responsibility for the execution of business processes.
BPaaS in Practice
BPaaS means entrusting the service provider to manage and maintain the defined business process. In contrast to business process outsourcing, BPaaS is an evolution in which the provider has automated the delivery of business process outcomes to a high degree using modern technologies such as machine learning and robotic process automation (RPA). Obvious areas of application include business processes with a high number of transactions that are highly repetitive and homogeneous, which includes invoice verification in procurement, receivables management in sales, and auditing of travel expense claims.
For instance, SAP offers Intelligent Audit as part of the SAP Concur portfolio. Intelligent Audit is a customized service for travel expense claim auditing, enabling customers to ensure compliance with their company travel policy. This helps ensure that the amounts entered match the receipt data, that the correct tax rates are applied, and that the costs being charged are within company-specific limits. Moreover, employees are given direct and specific instructions about what to do to correct any incomplete or incorrect claims for travel expenses.
SAP already provides this service to more than 4,000 customers and has continuously increased process automation over more than 10 years. At the same time, SAP cooperates with experienced third-party service providers that perform some of the audits that still need to be carried out manually. Last but not least, it is necessary to fulfill country-specific tax laws as well as other compliance requirements.
Advantages for Customers
The BPaaS model improves customers’ ability to accurately predict costs because the services are usually billed based on usage. In the example of travel expense auditing, a fixed amount is paid for each audited claim for travel expenses, regardless of how complex each individual audit actually is. Additionally, performance-based remuneration can be agreed upon with the respective provider. One study commissioned by SAP revealed that 94% of all executives already believe that modern technologies can improve the quality of audits.
BPaaS generally results in the advantages for customers that include:
- Focusing on core competencies
- Outsourcing of repetitive operational activities
- Achieving process results that are only possible through cross-company best practices
- Predictable usage-based costs
Advantages for Providers
Providers use modern technologies to significantly reduce the volume of manual activities and, in turn, aim for a higher level of automation. Due to the increasing number of customers, the sheer amount of business process data being accumulated is giving rise to another growing asset: the ability to dynamically determine best practices and thus continuously improve and optimize the service. This increases the value of the service for each individual customer.
The emergence of federated learning has become its own field of research within machine learning because it enables providers to address the requirements relating to data security and data protection more effectively. In addition, the higher level of automation results in greater profitability for the provider.
BPaaS thus generally results in the following benefits for providers:
- A significant reduction of manual activities through modern technology utilization
- Dynamic determination and continuous further development of best practices based on business process data from a wide customer base
- Improved profitability – and competitiveness – due to the increasing level of process automation
Innovation at All Levels
Service level within the cloud
Role of the service provider
Example of SAP
|Business process as a service
||Business process services for specific processes or process segments on the basis of underlying SaaS applications||Intelligent Audit: Auditing of claims for travel expenses|
|Software as a service
||Process automation as an integral component of SaaS applications||ExpenseIt: Digital capturing of receipts for travel expenses using optical character recognition|
|Platform as a service
||Tools that enable customers and partners to implement specific requirements for process automation themselves||SAP Build: RPA, workflow management, functions for artificial intelligence, etc.|
Table 1: Process automation in cloud computing
The obvious areas of application for BPaaS include business processes with a high number of transactions and highly repetitive and homogeneous work steps that do not have many industry-specific or regional differences.
BPaaS can be viewed as the logical progression of the cloud service model because many BPaaS services will be implemented on the basis of familiar SaaS solutions. At the same time, today’s SaaS solutions can already facilitate integrated automation of certain process steps.
Finally, customer-specific requirements and enhancements can be implemented using tools for process automation from known platform-as-a-service (PaaS) environments. This means that the provider can also implement the necessary “last mile” of process responsibility.
SAP itself will only offer a few selected business processes as BPaaS. In keeping with our corporate strategy as a global provider of cloud services, such an offering is only pursued if there is significant market demand and a high degree of automation can be achieved. Therefore, the large majority of BPaaS solutions are and will be offered via our partner ecosystem. In particular, our advisory partners have the in-depth expertise and extensive capacities required to offer BPaaS across larger business domains.
It is crucial for companies to remain in contact with their service providers to pursue the right strategy for their business regarding where they retain business process responsibility and where they hand over responsibility to service providers. When opting to use BPaaS, companies can redirect the saved time from operational process optimization toward innovation, ultimately achieving the entrepreneurial ambidexterity described above.
Claus von Riegen is head of Innovation Strategy and Services at SAP.