Different Deal Structures in BPO

BPO or Business Processes Outsourcing has taken the world by storm. A lot of organizations would like to take their share from the BPO pie. However, being an industry on its own right, BPOs have their typical ways of going about the business. Deal structures are probably the most important part of any business, because without a proper deal structure in place, one cannot even think about successfully conducting a business. In fact, the parties involved in an outsourcing deal should pay a great deal of attention to the development of the deal structure, because that would ensure that justice is done to all involved parties and the business works out well.

The different types of deal structures followed in the BPO industry include

· Classic Deal Structure

This is also known as the “fee for services” arrangement. In this model, an amount is decided upon during the negotiations, which is paid after the services have been rendered satisfactorily.

· Joint Ventures

This is a collaborative deal structure, wherein two or more parties share control and ownership over various property rights and operations, each agreeing to share the profit or loss generated.

· Strategic Alliances

This is collaborative agreement between two parties with a common aim of achieving some strategic goal; it includes management contractsand international licensing agreements.

· Joint Marketing Operations

This is a partnership of two or more parties at marketinglevel, with an objective to tap the full market potential by bundling certain resources/ competences.

· Shared Services

Shared Services refers to a service sharing arrangement between different parties; for example, two companies might decide to collaborate by merging their Accounts or IT functions.

· Asset Sales

Under this structure, the selling party agrees to sell some or all assets and liabilities of a company to the purchasing party; there is no transfer of the corporate entity involved.

· Co-Branding

Co-Branding is a type of collaboration between two or more brands, wherein a synergy can create enhanced value for both parties, greater than the value they could generate separately.


Before deciding on a suitable deal structures the involved parties should ensure the following:

* Clearly specify the objectives of the business. The objectives in a BPO deal may include cost reduction, relieving management resources to focus on the core competencies and improvement of service levels among others. Clarifying objectives would help the BPO service provider and the service taker to nail a deal structure which is beneficial to both.

* BPO service providers should be clear about the service expected from them and fashion the solution accordingly, this would also help them set the right price for the deal.

* BPO deals should be structured in such a way that they allow for flexibility. This means, that though the organization that requires the services should clearly specify its requirements, it should refrain from influencing the delivery mechanism to the minutest details. Decisions regarding the details of the delivery mechanism should be left upon the BPO service provider.

* While structuring deals, a company should take into account organizational changes, by making allowances for rapid ramp up and ramp down of the volumes of business processes.

* The success of a BPO deal depends upon the maintenance of service levels. Therefore organizations should examine their present performance capacity and establish expected qualitative, as well as quantitative standards of performance. They can use this knowledge as a base to identify fair service level requirements from the business services provider.