Customer Experience (CX) and Business Process Outsourcing (BPO) has to change. Everyone knows it. Typically business processes like customer service have always been charged based on how many people are working in a contact centre – Full-Time Equivalent (FTE) pricing.
Industry analysts and advisers have been talking about outcome based pricing and gainsharing for years. Here is a report from EY in 2024 saying that we should be looking to create win-win partnerships. The thing is, this British Computer Society book from almost 20 years ago said the same thing.
It’s true that people and businesses don’t like change, but it is becoming impossible to ignore. The quality of service delivered by a BPO company isn’t reliant on how many people are working on the contract. Generative AI, Agentic AI, and other automation tools are all increasing productivity and creating new opportunities to improve the service delivered to a client.
This change is taking place across many different professional B2B industries. There is a decoupling of the direct labour cost, or time spent working, from revenue. Businesses are focusing on charging for value created or business outcomes – not hours.
Look at the accounting industry. Long known for their 6-minute segments of time-billing, but now finding it hard to justify billing by time because compliance work and other types of accounting are being automated. Service bundles and tiered plans are becoming more common ways to charge.
Law firms have the same problem. Customers hate paying for wasted time and inefficiency so it is now common for these companies to charge for successful case outcomes, to work on a retainer basis, to share the risk of litigation, and even to offer fixed fees for some projects – such as contract law.
Management consulting and business advisory work is another good example. Consultants have always been paid by the day (or hour) for their advice on resolving a business problem or advising a company on growth and strategy plans. Traditionally, they would explore the problem faced by a client, hand over an advisory report, and then move on to the next project.
But this has changed. The Harvard Business Review podcast recently featured Bob Sternfels, Global Managing Partner at McKinsey. He describes how McKinsey now partners with clients to advise on change and then they work to help deliver the change. They go on a journey with the client and benefit from the upside.
All these industries are moving to charge by value created, rather than headcount or hours. Why is it still so common to talk about FTEs in BPO?
BPO needs to be following these examples from the law, accounting, and consulting. Charging for successful business outcomes, not for the headcount in an office.
It is possible. I have talked to many different clients about partnership and shared rewards rather than just supplying a business service. The model does already exist for BPO.
And the danger for BPO companies is real. Especially those with big, long-term contracts they rely on to pay the bills. These big contracts can’t be taken for granted.
Imagine if a rival talked to one of your clients paying your BPO $10m a year for their customer service processes. The rival offers to deliver the same service for $5m a year – so their basic costs are mostly covered – but then if certain business targets are achieved they will earn extra.
Which client would refuse an offer like this? If it doesn’t work well then at least the cost to provide customer service has halved. If it does work out then the supplier earns a bonus, but it will also mean that the client is also doing much better too.
This is the value-focused model in BPO. Don’t just deliver a business process for a set price. Deliver a partnership and vision for how the business can be improved. Work together to constantly find improvement. Share targets and aim for them together.
I truly believe that outcome-based pricing is now becoming essential in BPO. We are no longer selling the call volume that is possible with 100 FTEs. We are selling a solution that will involve a blend of people and AI.
It’s also pointless to talk about platforms and AI replacing people. This is not a binary choice. The real skill is orchestrating which processes can be automated and which will require greater human empathy or an emotional response. Interaction with customers needs a blend of both.
A conversation with a knowledgable person can convince a customer to buy an upgrade. A pop-up box saying ‘do you want an upgrade?’ doesn’t have the same emotional connection.
AI is reinventing BPO. The smartest BPOs are now weaving AI into all their services and unlocking value for clients throughout the supply chain. But this fundamentally changes how services need to be priced and I believe partnership is that way forward.
It’s working for other professional service companies in industries with very traditional charging models. There is no reason why BPO cannot evolve so we share the risk – and the upside – with our clients.
CC Photo by Jakub Zerdzicki