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BPM companies increasingly moving towards outcome-based deals

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Business process management (BPM) firms say they are increasingly moving towards outcome-based deals, or tying sourcing strategy to business results, in keeping with clients’ requirements and changing efficiencies brought on by automation and adoption of digital.


As more and more businesses move towards digital technology-enabled solutions such as chatbots to increase interaction with their own customers, BPM companies have seen a significant chunk of their revenue proceeds shifting towards business outcomes.



In a 2015 whitepaper, research firm ISG defined outcome-based pricing as one that ties service provider fees to a metric directly relevant to the business for clients. For example, it could be linking of fees to factors such as customer churn rate reduction, customer satisfaction, incremental revenues earned and cost savings.


Typically, the outcome-based “at-risk” component of the pricing represents no more than 10-20 per cent of the total fees, it said.


“Many of our clients are consumer-facing brands and leaders in their respective markets. Our clients have a heightened focus on the customer experience and are making strategic investments in omni-channel engagement, digitisation and the customer journey. Outcome-based partnerships are far more customer-centric than contracts based on operational KPIs and help us and our clients better manage complexity and business outcomes,” said Lance Rosenzweig, Global CEO of BPM firm Startek & Aegis, which was earlier owned by Essar.


The promise of outcome-based pricing is also more for BPM players as it promises a longer term relationship with their clients.


Mumbai-based WNS said 36 per cent of its revenue comes from non-fixed price-based models. “WNS…has been…offering innovative revenue models and the company has a flexible approach to suit the diverse needs of clients. As a result, we may cannibalise our short-term revenues, it gives a much bigger bank for a buck to the client. It allows us to ask for a wing to wing process. For us, it means that customers and we are engaging on a strategic level,” said Keshav Murugesh, Group CEO of WNS.


Bengaluru-based Hinduja Global Solutions said customers have now realised the data they have from clients can be analysed better to provide greater efficiency. BPM providers embracing analytics have helped in this area.


“Earlier, customers traditionally used to look at 5-10 per cent year-on-year benefit. So, if they sign a contract and say I do it at a certain cost this year, they will be able to do the task 10 per cent cheaper next year. Whereas the numbers are 30-40 per cent more efficient now with outcome-based pricing,” said Ram Mohan Natarajan, senior vice-president (business transformation and innovation), HGS.


Industry experts, however, are skeptical about the success of outcome-based pricing models.


Peter Bendor-Samuel, CEO of research firm Everest Group, said the progress claims made in outcome-based pricing by BPM firms are often exaggerated, as the contracts are difficult to negotiate and often leave one of the parties feeling like they have been taken advantage of.


“Having said that, pricing has evolved with most clients preferring to move to some form of usage or “as a service” model, where the client pays a fee on the usage it makes of the service. This can take the form of number of seats, or number of transactions or some other usage measure. Clearly the old FTE model is giving way to this more “as a service construct with clients eager to drive adoption,” he added.



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Final approvals for Adani coal mine to be decided within 3 weeks: Australia

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The process to obtain final approvals for Indian energy gaint Adani’s Carmichael coal mine in Australia will be settled within three weeks, the leader of the country’s Queensland state said on Friday as she sought to expedite the controversy-hit project.


If given the green light, Adani could begin breaking ground at its Carmichael mine site within weeks, after more than eight years of planning.



Adani group entered Australia in 2010 with the purchase of the greenfield Carmichael coal mine in the Galilee Basin in central Queensland, and the Abbot Point port near Bowen in the north. The massive coal mine in Queensland state has been a controversial topic, with the project expected to produce 2.3 billion tonnes of low-quality coal.


In addition to its impact on climate change, environmentalists have argued the mine could do serious damage to Great Barrier Reef World Heritage Area. Another major concern about the environmental impacts of the proposed mine has been that it would wipe out the most important habitat of the threatened black-throated finch.


Queensland’s Premier Annastacia Palaszczuk announced that the two last final approvals involving groundwater and endangered black-throat finch will be settled within the next three weeks.



According to media reports, Palaszczuk said the black-throated finch plan decision is due by the May 31, the groundwater management plan decision is due by the June 13th this year.


“I know initially people thought this was months, and what I’m announcing today is it’s in a matter of weeks,” she said in Cairns.


“Everybody needs to have these issues resolved. That’s the timeframe the Coordinator General has set,” she added.


Earlier this week, Palascczuk ordered the state’s Coordinator-General to bring Adani and the state environmental authority together for discussions stating that she was ‘fed up’ with the ongoing delays.


While the post the final approval, the mining giant could start the work on the mine within weeks the coal exports could take up to two years.


“Now it’s really a case for the independent regulator to work through their internal processes and then they can make a determination and then we will be in a position to then start construction,” ABC news quoted Chief Executive of Adani Australia Lucas Dow as saying.



“We’re not expecting any significant surprises. Our construction activity will start as almost immediately as we’ve got these approvals,” he said.


Dow said over the past 18 months the company had so far produced 11 versions of its groundwater plan and seven for the black-throated finch.


The groundwater management plan has failed to meet key environmental requirements, including identifying the source of protected desert springs.


Last month, the Federal Government granted its final environmental approvals for the project days before the election was called.


While construction at the mine could begin with approvals, Adani’s proposed railway line plan is yet to be finalised.


Dow said the state’s Coordinator-General would also be publishing dates for other key activities, including the deadline of completion for the rail line’s deed of access and required sublease.


“That will also give us certainty and will also give the folks of central Queensland certainty of our project being able to proceed and deliver those jobs,” he said.



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EY working on govt’s Air India disinvestment, to issue EoI soon

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The government has put top consultancy firm EY to work for divesting its stake in flag carrier Air India and “quickly” issue expression of interest (EoI).


“EY continues to be the transaction advisor for the sale of Air India. We have been directed to close the accounts for FY19 and provide updated data for EoI to take the disinvestment process forward,” said a senior Air India official.



“Until the transaction gets completed EY is our advisor. They will be paid their fees after disinvestment process is complete. The instruction now is immediately start the process for EoI. Of course, approval of the Union Cabinet will be required for it,” he added.


The development comes close on the heels of Prime Minister’s Office (PMO) directing the Aviation Ministry to speed up the process of strategic disinvestment of Air India and three of its subsidiaries.


In a letter to Air India Chairman Ashwani Lohani, Civil Aviation Secretary Pradeep Singh Kharola had advised to finalise the financials of Air India and its subsidiaries by end of June, 2019.


“Also, the accounts for FY19 would form the basis of bidding. Therefore, it is necessary that they are prepared with utmost caution so as to reflect the correct financial status,” Kharola had written in the letter which has been reviewed by IANS.


The Aviation Secretary directed the airline to get contingent liabilities and account receivables verified thoroughly besides a physical verification of the inventories. A list of pending litigations is also required to be drawn up.


The government had last year initiated the process to sell majority 74 per cent stake in the national carrier but the plan proved a damp squib with no private investor turning up for the offer.


In view of rising fuel price and weak investment environment, the government had put the process on hold maintaining that it would be taken up after Lok Sabha elections 2019.



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Grasim Industries plans to invest additional Rs 6,400 crore to add capacity

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Aditya Birla Group’s Grasim Industries plans to invest an additional Rs 6,400 crore in expanding its capacity as its existing plants are unable to meet growing demand from the local customers.


Dilip Gaur, managing director of Grasim, said the investment would be made in the speciality fiber business, which would increase its capacity by about 40 per cent in the next two years as the company.



“We have invested Rs 7,000 crore in the last 10 years and will invest a similar amount in the next two years as demand is fast picking up. We have to divert our exports consignments to the domestic market to cater to the demand,” he said.


The additional capacity will be commissioned at Vilayat plant in Gujarat in two years. Grasim also holds stakes in Ultratech and Aditya Birla Financial Services.


ALSO READ: I-T dept slaps Rs 5,872-crore tax demand notice on Grasim Industries



Sushil Agarwal, Grasim’s outgoing chief financial officer, said as Grasim mirrors the trend in the economy, they are expecting the government’s thrust on the infrastructure sector will help it to boost demand for cement and financial services business in the coming quarters.


“With the government planning to invest heavily in building infrastructure, it would boost all our business.”


“The government’s thrust on infrastructure development like construction of cement concrete roads, metro rail networks, airports, irrigation projects and increase in the pace of execution under the low cost housing program supported strong volume off-take of cement,” the company said in a statement. “All of these are expected to result in sustained demand growth for cement going forward. This augurs well for the industry,” it said.



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