Download - The Future of Business Process Outsourcing
- 1. The Future of Business Process Outsourcing
2. The BPO Hype Cycle Source: Gartner Group, The Hype Cycle for IT Services, June 6, 2003.
- Rising investments
- Explosion in # of new entrants
- Market confusion
- Valuation spikes
- Market CAGR estimates range from 50% - 80% for the next five years
3. Long-Term Business Pressures Drive More Outsourcing 4. Moving Up the Value Chain Source: Edelweiss Capital, Business Process Outsourcing: Coming of Age?, May 2003 Future Simple Processes Complex Processes Business Functions 5. The Evolution of BPO Models TransformationalOnshore BPO Example: Sabre (Travel Services) Onshore Offshore Commodity BPO Transformational BPO CommodityOnshore BPO Example: CSC, EDS(IT Services) CommodityOffshore BPO Example: GE Capital (Payroll Services) TransformationalOffshore BPO 6. Approaches to BPO Simple bulk transactions processing Broad shared services High-volume vertical processes Niche vertical apps Bottom-Up Approach Top-Down Approach Source: Cognizant Analysis of Forrester Research Report: BPOs Fragmented Future, August, 2003.
- Leverage:
- Economies of scale
- Labor arbitrage opportunities
- Industry best practices
- To Create:
- Best-of-breed commodity services
- Immediate cost savings
- Flawless process execution
- Growth Opportunity:
- Identify complex processes that require industry / domain expertise
- Build differentiated competencies that boost market position
- Leverage:
- Deep process expertise in vertical industries
- Trusted partner relationships and reputations
- To Create:
- Highly customized, industry-specific services
- Long-term differentiation / competitive advantage
- Growth Opportunity:
- Leverage outsourcing competency to reduce costs and boost performance throughout value chain
- Consider retailing services to competitors
7. Emerging Offshore BPO Opportunities
- Transaction processing
- Credit Card / Check processing
- Loan processing
- Mortgage processing
- Collections
- Insurance application processing
- Claims processing & adjudication
- Member management services
- Medical billing
- Claims processing & adjudication
- Member management services
- Medical transcription
Banking / Financial Services Insurance Healthcare
- R&D
- Equity Research
- Clinical Trials
- Revenue Accounting (Airlines)
- Engineering Design
- Architecture
Other Verticals Sales and Marketing Contact centers, telesales/telemarketing, customer care, web sales and marketing, market analysis Human ResourcesPayroll processing, benefits administration, HR administration Finance and AccountingAccounts receivables / payables / general accounting, financial reporting, shareholder services 8. Possible BPO StructuresService Arrangement Joint Venture Outsourced Service Build Operate Transfer Service Management People & Investment Pros Cons
- Can get going quickly
- Lower client management overhead
- Higher ongoing P&L cost vs. alternatives
- Limited value creation potential for client
- Less control
- Eases entry into offshore operation with experienced partner
- Lower long-term cost
- Complete control
- Limited value creation (captive)
- No ownership Day 1
- Retention
- Only 2nd tier partners
- Leverage partners offshore infrastructure and experience
- Ownership Day 1
- Lower costs (initial and long-term)
- Limited value creation (captive)
- Leverage partners offshore infrastructure and experience
- Value creation opportunity (if non-captive)
- Exit issues
9. Offshoring and Reengineering Can Lead to Dramatic Performance Improvements 10.
- LOB
- Bank card processing/ receivables
- Telemarketing services
- Mutual fund services
Opportunity for Value Creation - FDC (FORMERLY AMEX INFORMATION SERVICES)
- Highlights
-
- Provides bank card processing, payment products for Mastercard, Visa, American Express, and numerous private-label cards
-
- Recent expansion in receivables management (American Creditors Bureau, Ingram)
-
- Provides inbound and outbound telemarketing services and, through joint venture with AT&T, interactive services for 800/900 telephone industry
-
- Manages the processing for 20 million mutual fund shareholder accounts
- Results
-
- 2002 Revenues: $7.636 billion 2002 Earnings: $1.238 billion
-
- AMEX sold 40 million shares (40% ownership) in early 1992 for $22/share; recently traded at $160/share (split-adjusted)
-
- AMEX further reduced stake to 22% through second offering worth approximately $1 billion in 1993
-
- Acquired FFMC (August 1995) for expanded operation and greater economies of scale
-
- Finalizing acquisition of Concord EFS
Source: FDC annual reports; industry articles; Datamation 11. Cognizants Initial Approach
- Deep Process Experience
- Deep Industry Expertise
- Industry Value Chain
- Industry Competitive Forces
- Company Core Competencies
- Business Strategy
- Company Outsourcing Readiness
- Excellence in Offshore Recruiting/People, Processes/Infrastructure
- Excellence in Delivering High-quality Services Remotely
- Established Market Leader in the India Space
Clients Cognizant Joint Analysis Transformational Outsourcing
- Strategic Outsourcing Decisions
- Highly Customized Service Offerings
- Long-term Competitive Advantage
12. Strategy To Drive BPO DecisionsScope Discovery Analysis Feasibility Assessment
- Inventory key business processes and current SLA parameters
- Catalog support technology platform requirements and skill sets of support staff
- Identify root drivers of process costs and inefficiencies
- Gather transaction volume data and model across processes
- Map underlying support systems
- Determine BPO structure model
- Identify pilot
- Determine resource requirements
- Identify changes to support process in onshore/offshore model
- Determine cost savings per business process based on task migration and improvement
- Identify costs of process migrations
- Identify any key sequencing needs
Undertake a BPO strategy assessment to determine which processes to outsource, financial impact and implementation plan 13. Cognizant Service Offering
- Cognizants Business Technology Consulting Group in concert with its vertical practices, works with clients in BPO strategy engagements
- These engagements last from 8-12 weeks, depending upon scope typically deliver:
-
- An assessmentof suitability of select business process outsourcing based on economics, integration with other processes, systems and skill requirements
-
- A step-by-step plan for creating a BPO operation that mitigates risk and provides senior management focused measures and controls for BPO management
- For for information, contact:
- Kaushik Bhaumik
- VP, Business Technology Consulting
- (925) 790-2012
- [email_address]