When you’re selling to friends & family, making money on a small scale makes business seem easy, but when you scale-up, you find business is anything but. You face not one, but two Sisyphean battles; constant upward pressure to make increased profits, but constant downward pressure on margins. Your profit comes from lowering your costs or by selling more.

Let’s take each in turn. Whether you are a manufacturer, distributor or service provider your cost-base is to all intents and purposes fixed. A bread manufacturing plant can take flour, yeast and water and produce a maximum of 1 million loaves a day at X pence each, at best. If something goes wrong the production cost of X goes up. Distribution businesses can carry only so many parcels in their vehicle fleet. Each parcel costs X to deliver. 

Service businesses can process only so many applications or enquiries per day. Of course, these businesses can source cheaper flour, deliver to less far-flung locations or outsource processes to foreign call centers, but these incremental improvements only go so far. That’s why companies focus not on lowering costs but increasing sales, despite a firm with a 4% profit margin needing to do an extra $25 in sales for every $1 they could have saved in cost instead.

Throughout Covid, I have noticed that aside from a small wobble with toilet rolls and dried yeast, manufacturing firms have done a remarkable job in dealing with spikes in demand despite the obvious pressure of staff shortages. Equally impressive is how, with our Amazon Prime membership, another SMS or ring on the bell announces another eagerly awaited parcel on the hour, every hour. This is in stark contrast to the abysmal experiences I am having with every services firm I have had the misfortune of interacting with over the last 6 months. 

From estate agents to law firms to insurance companies and banks, delays are everywhere. Nothing happens, week after week, despite claims that staff are successfully working from home. And it’s the lives of ordinary, powerless individuals like you and me whose lives are kept on-hold. Forget this government’s bungling inability to implement track and trace — the bungling in our services sector is every bit as tragic on mental health.

Even the most advanced service providers such as banks, where customers can self-serve money transfers in seconds using self-serve, fail miserably when it comes to other service processes such as mortgage applications.

The difference lies with automation. Manufacturers and distributors are designed to scale without people. Services firms are designed for people without scale.

This is why I’ve been so excited about the potential for Business Process as-a-Service (BPaaS) in making services firms as advanced, if not more so, than manufacturers or distributors.

Most services companies should be familiar with what a Business Process is but for those that are unsure, here’s a helpful and cogent definition from Hammer & Champy;

“a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”

Most people should also be familiar with what as-a-Service means;

a service designed and managed in the cloud and accessible to an end-user, typically via a web browser.

Taken together, BPaaS is the ability to automatically scale-up highly automated, resilient, fault tolerant business processes in the cloud, without needing to worry about physical office space or employee intervention.

Let’s take the example of a routine insurance claim where further evidence is required after a customer conversation.

1. The agent sends an SMS to the customer
2. The customer clicks on a link and is guided on how to take high quality photos of their vehicle damage.
3. The photos are analysed in real-time by an AI service to detect and classify damage.
4. Due to an uncertain AI result, the customer is advised that the photos will require manual review by an engineer.
5. A motor engineer supplier is instructed, who reviews the evidence and returns a report within 60 minutes.
6. The report is imported into the insurer’s systems and an SMS notification is sent to the customer.

In the past an insurer would need to;

1. Find and maintain an SMS gateway integration to send text messages
2. Write some code to generate a secure URL and build a web or mobile application to guide the customer on the required information
3. Build and maintain an integration with a software provider that provided an AI damage detection service
4. Build and maintain an integration with a motor engineer partner
5. Find a way to orchestrate all of the above events and keep the customer updated on progress.

It isn’t at all surprising that insurance companies globally spend $5bn a year on insurance software to try and automate processes like this, and a further $128bn on employee costs where their home-grown systems and processes have failed to do so.

And here’s where BPaaS is so exciting. Imagine if this sequence of 6 activities was available ‘as-a-Service’ in the cloud. A single API call is all that would be needed from the insurer’s system to start, run and end the process in the cloud. Sudden surge events, such as catastrophic weather conditions no longer stop the company providing routine services to customers, because BPaaS is designed to scale without people.

Moreover, the customer experience is far improved too, as the BPaaS platform provides a single interface for customers to interact with as opposed to the multitude of apps I am asked to download by my insurer for different products they offer or because they are using different fulfilment partners, each with their own apps.

To sum, this particular insurance company’s interest (as should yours) should only be about ‘ends’, i.e the claims outcome — paying 100% of valid claims in seconds at the lowest possible cost, and not in the ‘means’, i.e how that claim is processed.

BPaaS shifts the focus from companies needing to build, host and maintain capabilities in-house (which amazingly for decades has still failed to raise overall employee productivity) and instead look to the cloud to search, test and securely deploy complex enterprise-grade process solutions in real-time, with a simple API hand-off to systems of records.

Not only would this approach enable services companies to offer the automated equivalent of a manufacturing plant or AWS distribution center, but it enables services firms to surpass them altogether. How so? By moving their product (i.e their services’s business processes) to a BPaaS model, a services firm in effect swaps physical assets and fixed costs such as offices and people (costs it can’t control so easily) to a virtual, variable cost model (which it can control). And it gets even better; as BPaaS becomes ever more sophisticated and integrated with further services the variable cost naturally reduces over time too.

Source: Michael Lewis, Claim Technology