The Business Process Outsourcing Industry

1.
Sri Rao, President of Market Development and Strategy of Quatrro Business Support Services
(Quatrro) (Kim and Mauborgne, 2015), a Business Process Outsourcing (BPO) firm, weaved
through the bustling streets of Gurgaon, India to get to work early on a blistering summer
day. It was March 2017, just before the beginning of a new fiscal year (most Indian
companies follow an April-March fiscal year).
There was a sense of anticipation and uncertainty in the office. Quatrro offered outsourced finance,
accounting, and payroll solutions to small and medium-sized enterprises (SME’s) across the world,
but mainly the United States
the ups and the downs, and the strategy for moving forward. Growth had been moderate with small
deals, despite a disruptive business model. Local and regional Certified Public Accountant (CPA) firms
continued to provide stiff competition, and the cost of acquiring new clients was high. Clients
continued to handle accounting work internally. There was a need to rethink Quatrro target markets
and business development strategy
Quatrro’s annual board meeting was coming up in three weeks, and Rao wanted to present a
credible plan to accelerate Quatrro’s growth. He was worried that if the board did not accept the
plan, any further investments in the business would be challenging. It could even lead to the board
directing Quatrro to divest. He believed they had run out of patience with a business that had much
potential but was not growing. He had one last opportunity to get Quatrro’s strategy right before his
planned departure from the company in just a year. Rao waited for his team to discuss their
recommendations based on a presentation he had made to them two days ago.
The business process outsourcing industry
BPO was the contracting of business activities and functions to third-party providers to enhance
process effectiveness and efficiency while reducing costs. BPO helped in improving the speed,
accuracy, and consistency of the client’s operations through process optimization, standardization,
and automation. included outsourcing of services such as payroll, accounting, and customer service.
Suppliers for such processes were Certified Public Accounting firms, payroll firms, and customer care
companies. Historically, some of the larger third-party suppliers included firms such as Accenture,
Convergys, and Sitel as well as specialists such as ADP and Netchex (for payroll) and Deloitte and
PwC (for accounting).
In all phases, the main drivers for outsourcing to these countries included:
availability of a highly skilled and educated workforce for both technology and business processing;
lower costs of services in comparison to North America (40-60 per cent savings);
focus on standardized and top-notch quality including the institutionalization of Six Sigma and
Kaizen based programs; and
accessibility and ability to process transactions 24 7, all year round. By 2016, the global BPO
industry was valued at about $140bn, of which about $30bn was in India and $25bn in the
Philippines[1].
Quatrro: Strategy, growth and growing pains
Between 2008 and 2017, Quatrro focused on serving the needs of its target clients through its
revenue-enhancing services. Rao, along with several Board members, recognized the immediate
challenges:
to create a service offering that was superior to what was currently available for CPA firms and at
an equivalent or lower cost;
to build a business model that would be innovative, lower costs and at the same time be profitable;
build credibility for the new brand – “Quatrro Business Support Services.” How do we build trust in
the brand among SMEs?; and
alleviate clients’ discomfort with a purely offshore model since the clients are based in the USA;
SMEs were not ecstatic about offshoring; they often wanted face to face or direct communication
with service providers.
Technology
The target market needed investment in a sophisticated yet simple to use Financial and Accounting
technology platform. Additionally, since these enterprises could not afford, nor had the resources to
implement and manage a dedicated Premise-Based technology, Quatrro implemented a shared
platform using cloud-based technology
Shared resources
Resources were shared across clients, eliminating the need to deploy dedicated clientspecific teams.
This would significantly reduce costs as each client was too small to justify a dedicated team for its
accounting operations and also allowed for fractional and shared resources. The work was allocated
by skill sets (functions) and not by customer, resulting in greater inefficiency
Client relationship managers
US-based Client Relationship Managers (CRMs), who were experienced in handling accounting and
understood the local nuances, were added on to the Quatrro model. This move not only improved
efficiency and quality but also helped alleviate any sensitivities to offshoring and mitigate the liability
of foreignness.
Pricing mode
l Two pricing models were introduced. The first was a Subscription-based model where clients paid
for only services they used, while the other was a “fixed cost per month model” based on
anticipated volume. The first option was based on “per report generated”, “per taxes filed”, “per
employee salary processed”, or “per store per month” while the latter was an all-inclusive package.
The total cost of providing accounting services to a single store restaurant would be less than $5000
a year as opposed hiring a part-time accountant that would cost at the minimum $20,000 per year.
The new pricing model was a significant departure from existing pricing models that were based on
“per accountant per year” with a minimum committed number of accountants. The traditional
model was rigid and did not vary based on the workload or volume of transactions. In addition, the
model did not allow for fractional use of an accountant’s time
Developing a client base
While Monica was building the technology and improving delivery capability, Rao focused on
expanding Quatrro’s client base. Rao deployed a well-equipped and trained sales team that included
Business Development (BD) Representatives who could engage in nonscripted sales discussions with
C-suite level executives. However, Quatrro soon realized that deploying a sales team to sell directly
to end customers was not viable for the following reasons:
On average, an end customer presented a revenue potential of less than US$10,000 per store per
year. The average cost of a Business Development representative was around $80,000 annually. The
return on investment per sales dollar was not feasible; and
There were numerous SMEs all over the USA, and reaching out to them directly meant deploying a
large geographically dispersed sales force and incurring huge travel expenditures

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The business process outsourcing industry

Client relationship managers

Developing a client base

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