First There Was BPO, Then KPO, Now Comes PPO
posted in Outsourcing News and Top Outsourcing deals |Everyone has heard of BPO (Business Process Outsourcing) and KPO (Knowledge Process Outsourcing), however, it is time now to add PPO or Person-to-Person Outsourcing to your vocabulary.
A new word coined by US-based Alok Aggarwal, Chairman of Evalueserve Inc. and co-founder of the global research and analytics services firm, he is of the opinion that off-shoring has begun to go mainstream, touching both upper and working class alike.
“This is very reminiscent of 1991-92 when manufacturing in China and other low-wage countries began to impact the lives of the rich and the not-so-rich in developed countries,” he says, going on to explain, how small offices, home businesses and even individuals utilise PPO services everyday, through online tutoring and home & landscape design services, and other various such means. So much so, even invitation cards for weddings, parties etc., personal assistant secretarial services like scheduling appointments and maintaining calendars are being person-to-person outsourced, these days.
All that is required is a broadband connection and professionals can work from the cosy comfort of their homes. Given the low overheads, it mean vendors and free lancers are positioned well to charge cost-effective rates.
That is the reason, a few companies, such as, Future Net (a subsidiary of the Alaphuza, India-based Future Groups) are experimenting with providing ancillary and concierge services from low-wage countries.
Going online in their model, the end-client registers on their website and comes to an agreement as to the charges. After which, Future Net provides property deals for customers or for their family members and friends. Other services include making payments to utility service agencies, educational or other institutions; purchasing simple items, such as, movie tickets, personal computers, and electronic equipment.
Then there is over the web, online tutoring, one-on-one ‘live’ homework assistance, essay-writing guidance, help with educational content by companies, such as, Transtutors, Career Launcher, Educomp Datamatics, and Tutor Vista. With most Indian tutors charging anywhere from $8 to $40 an hour, tuition costs are a pittance by US standards.
One may harbour the misconception that the PPO market is rather small and, therefore, insignificant. However, Aggarwal says, while individual contracts may often be of low value i.e. between $100 and $5,000, what counts is that the number of end consumers and small businesses is enormous, which means the total addressable market in the US alone, easily exceeds $20-billion.
Research and analysis carried out by Evalueserve confirms, between April 2006 and March 2007, revenue from PPO was more than $250-million, and likely to grow to over $2-billion by 2015, a cumulative annual growth rate of 26%. But, Aggarwal says, the growth rate is likely to be much more in the future, since many of the PPO off-shoring trends are at the infancy stage.
Evalueserve says PPO services follow two business models:
1. Direct interaction model, wherein an individual client signs a contract directly with a vendor in a low-wage country, whose employees (tutors, administrative staff etc.) work on a full-time or a part-time basis, or as sub-contractors.
The fact that these are low cost contracts, means the client is exposed to a certain amount of risk, as an individual client is unlikely to travel to an off-shore location or perform a costly due-diligence process.
Though payments can be made through cheques or wire transfers, the fairly low cost of these individual projects, usually means vendors are paid through credit cards, thereby off-setting some of the risk.
2. The other online marketplace model is about vendors providing PPO services by enrolling in an online marketplace after paying a monthly subscription fee, plus a fixed percentage of the revenue if they win the project through this marketplace. So, when an individual client posts requirements for a new project to be conducted on the online marketplace, the marketplace communicates these opportunities to the selected vendors and freelancers and requests proposals to be delivered to the client.
The client then awards the work to an appropriately cost-effective vendor (the price may be on a per hour or a fixed cost basis), delivery time and a quality score provided by other clients, served by this vendor.
In this model, the online marketplace typically earns between 5% and 15% of the contract price in return for an assurance of a minimum service level from the vendor, thereby, reducing client risk.
Evalueserve’s research estimates, currently, there are more than 90-online marketplaces on the World Wide Web, with projects involving over 500,000-vendors and freelance professionals providing these services from low-wage countries.
Some prominent online marketplaces are:
• www.Guru.com (the largest marketplace with more than 625,000-registered vendors and freelance professionals),
• California-based www.elance.com,
• Florida-based www.RentACoder.com, and
• www.GetAFreeelancer.com, which is owned by Sweden-based Innovateit.
Anyone wishing to tap in to the PPO trend, simply goes online, registers and then sits back for something suitable to come their way. For the right people, there is always right job that pays the right costs! Broadband has changed much of the way business is done, shrinking the world, so much so, one could be sitting at home in USA, while one’s lawyer or tutor is online from India, or elsewhere! Person-to-Person Outsourcing (PPO) is another off-shoring / outsourcing trend that is making fortunes for those tuned into it! And, India’s Person-to-Persons are cashing in on this new trend as the country has in other fields.
The sub-continent has always made education top priority, as can be seen from its dedicated worship of Saraswati, the Goddess of Learning, which has ensured vast numbers of graduates pass out of colleges and universities, across the country each year. This whole-hearted devotion to education is paying off in a big way, as even with only a school degree under one’s belt, any one who is fluent in English, can land himself a BPO job, which often pays much, much more in terms of a starting salary, than those of his father’s generation could dream of even, after many years of service.
And, so India and Indians taking advantage of a national homage to learning and education, have found monetary benefits in ways unimagined before. Now the conundrum: What came first BPO or PPO? A Catch-22 question, whichever way one looks at it!
