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Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
Improved Business Performance: Exploring an Evolved FAO Strategy
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Improved Business Performance: Exploring an Evolved FAO Strategy

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Industry experts from Price Waterhouse Coopers, Tata Consultancy Services and Everest Group will discuss practices best for evolved FAO outcomes, how metrics can improve performance as well as …

Industry experts from Price Waterhouse Coopers, Tata Consultancy Services and Everest Group will discuss practices best for evolved FAO outcomes, how metrics can improve performance as well as examples of engagements that have taken on an evolved FAO strategy.

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  • 1. Today’s webinar is brought to you byOutsourcing CenterToday’s webinarImproved Business Performance: Exploring an Evolved FAO StrategySynopsis:Industry experts from Price Waterhouse Coopers, Tata Consultancy Services and Everest Group will discussbest practices for evolved FAO outcomes, how metrics can improve performance as well as examples ofengagements that have taken on an evolved FAO strategy.About Outsourcing CenterOutsourcing Center is the world’s most prominent internet portal for authoritative information on outsourcing.The Center’s mission is to build the industry by helping people understand how to create value throughoutsourcing.outsourcing We serve the outsourcing community through: Trusted and objective third-party perspective Database of over 81,000 opt-in subscribers Relevant media including editorials, research, whitepapers, and the annual Outsourcing Excellence AwardsFor more information, contact Peter Bowes at pbowes@everestgrp.com 1 Proprietary & Confidential. © 2010 Outsourcing Center
  • 2. Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 2 Proprietary & Confidential. © 2010 Outsourcing Center
  • 3. IntroductionKatrina Menzigian Vijay Damle Shelly NicholsVice President – Research Head – Horizontals BPO Director – FinanceEverest Group Tata Consultancy Services Price Waterhouse Cooperskmenzigian@everestgrp.com Vijay.damle@tcs.com Shelly.nichols@us.pwc.com 3
  • 4. Improved Business Performance:Exploring an Evolved FAO StrategyJune 8, 2010
  • 5. Agenda Evolution of FAO TCS : A PACT t t k your P to take Processes t th FORE to the ectiveness The PWC ExperienceEffe Efficiency 5 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 6. The FAO market has shown a consistent appeal toCFOs through various economic scenarios and isexpected to grow 20%+ annually in 2010 EstimateSnapshot of FAO contracts over time CAGR over the period 2004-2009Number of new contracts Pioneer phase Rapid growth phase 81 83 82 65 58 9 9 33 26 20 10 9 56 3 2 6 5 1991- 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E1 1996Snapshot of Active Annual Contract Value (ACV) over timeACV1 in US$ billion 2.8 3.1 0.4 2.3 1.9 1.5 15 0.8 1.0 0.3 0.5 0.1 0.2 0.2 0.3 0.3 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E1 1 Factual data available till November 2009 and figures for December 2009 are based on Everest Research Institute’s estimates Institute sSample size: 476 contracts signed as of November 2009 Note: Refer to the FAO annual report 2008 (ERI-2008-1-R-0245) for further details Source: Everest Research Institute (2010) 6 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 7. Market maturity is leading to increased focus onbroader value creation opportunities from FAOBuyer in early 2000s Key objectives Capture labor arbitrage Ensure price predictability Protect IP Workaround information gaps (e.g. volumetrics, service l ( l ti i levels) l ) Outsourcing approach Limited involvement of end business users Micro-management of suppliers Predominantly lift-and-shift and buyer-driven transformation Use contract to minimize perceived risks 7 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 8. Market maturity is leading to increased focus onbroader value creation opportunities from FAOBuyer in early 2000s Buyer in 2009/10 Key objectives Key objectives Reduce Total Cost of Ownership Capture labor arbitrage Create pricing flexibility and variability Ensure price predictability Leverage supplier and industry best- practices Protect IP Create stronger linkage between service levels Workaround information gaps and pricing (e.g. volumetrics, service l ( l ti i levels) l ) Manage complexity of global delivery model Outsourcing approach Outsourcing approach Limited involvement of end Multi-tiered governance structure with greater business users supplier accountability li t bilit Micro-management of suppliers Push towards supplier-led investments for Predominantly lift-and-shift and transformation and continuous improvement buyer-driven transformation Drive leverage through contract Ts and Cs Use contract to minimize Empower business users through g p g greater perceived risks transparency Multiple levers are being applied to drive value, including New operating / delivery models Value beyond arbitrage New pricing models 8 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 9. Value created by FAO can be evaluated at multiplelevelsDimensions ofEverest’s Total ValueEquation (TVE)StrategicimpactProcess/businessimpactDirect-costimpactSource: Everest Research Institute (2010) 9 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 10. Dimensions of Everest’s Total Value Equation (TVE) forFAO: Direct-cost savingsDimensions ofEverest’s Total ValueEquation (TVE) Illustrative savings profile of a typical Key components of FAO contract1 direct-cost direct cost impact Baseline from FAOStrategic 100impact Labor arbitrage Ongoing Labor arbitrage 80 improvement One time improvement One-time 60 improvements 40Process/ Ongoing productivitybusinessimpact 20 improvements 0 Year 1 Year 2 Year 3 Year 4 Year 5Direct-cost FAO typically generates 30-40% net impact onimpact operational costs (including transition and governance costs) 1 Illustrative case example for savings in a steady-state offshore operation without considering inflation; it does not include transition and buyer governance costsSource: Everest Research Institute (2010) 10 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 11. Dimensions of Everest’s Total Value Equation (TVE) forFAO: Process / business impactDimensions ofEverest’s Total ValueEquation (TVE)Strategic Value derived by aligning process capabilities more closelyimpact with business needs Measurable business benefits (e.g., DSO1 reduction, faster resolution)Process/business Improved service l I d i levels limpact Support of variations in demand Achieve b t i class standards and process h A hi best-in l t d d d harmonization i tiDirect-costimpact 1 Defined in AppendixSource: Everest Research Institute (2010) 11 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 12. Dimensions of Everest’s Total Value Equation (TVE) forFAO: Strategic impactDimensions ofEverest’s Total ValueEquation (TVE) Value created by impacting business drivers or making long-term investments for competitive advantageStrategicimpact Supporting M&A Creating new capability (e.g., analytics)Process/ Customer satisfactionbusinessimpact Innovation in business model Creating competitive advantageDirect-cost Access to new pools of talent/skillsimpactSource: Everest Research Institute (2010) 12 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 13. An advanced FAO value proposition is attracting newbuyer segments and is driving new offerings 1 Investments in intellectual propertyEmerging areas of 2 Differentiatedenhanced FAO offerings ff ivalue proposition 3 New buyer segments 13 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 14. An advanced FAO value proposition is attracting newbuyer segments and is driving new offerings 1a Technology-led FAO 1 solutions Investments in intellectual property 1b People and process led FAO solutionsEmerging areas of 2 Differentiatedenhanced FAO offerings ff ivalue proposition 3 New buyer segments 14 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 15. An advanced FAO value proposition is attracting newbuyer segments and is driving new offerings 1a Technology-led FAO 1 solutions Investments in intellectual property 1b People and process led FAO solutions 2a Industry-specific FAO I d t ifiEmerging areas of 2 2b Differentiated Specialized processenhanced FAO offerings ff i offerings ff ivalue proposition 2c End-to-end offerings 3 New buyer segments 15 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 16. An advanced FAO value proposition is attracting newbuyer segments and is driving new offerings 1a Technology-led FAO 1 solutions Investments in intellectual property 1b People and process led FAO solutions 2a Industry-specific FAO I d t ifiEmerging areas of 2 2b Differentiated Specialized processenhanced FAO offerings ff i offerings ff ivalue proposition 2c End-to-end offerings 3a Mid-market 3 New buyer segments 3b Emerging buyer E i b geographies 16 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 17. As the FAO value proposition expands, several solutionelements are also changingSolution element Prevalent model Emerging model Access to similar Access to scarce + better skills at 1 Skill sets skills at lower costs lower costs 2 Delivery mode Offshoring Global sourcing 3 Technology role “Tie-and-run1” “Tie-and-run1” + augmentation 4 Pricing structure FTE-based fees FTE/Volume based fees + incentive Service levels 5 Diagnostic Diagnostic + business oriented and KPI focus 1 “Tie-and-run” refers to the technology approach wherein the FAO supplier leverages buyer’s existing technology infrastructure and applications to deliver FAO servicesSource: Everest Research Institute (2008) 17 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 18. Key takeaways FAO solutions may start out focused on achieving short-term gains, but increasingly involve a broad view towards a larger value proposition for the longer-term The movement towards the positioning of the finance organization as a strategic corporate business enabler is taking shape Buyer organizations are adopting FAO as a long-term management model and are making the necessary internal investments to optimize that strategy In order to achieve the full potential of an enhanced FAO value proposition, buyers will need to take a partnership approach that supports success The suppliers of FAO services continue to invest in and evolve their offerings in order to meet the evolving needs of current clients and to compete effectively for new engagements Buyers will need ongoing awareness of the FAO supplier landscape and the differentiated positioning and offerings available 18 Proprietary & Confidential. © 2010, Everest Global, Inc.
  • 19. With You Today… 6.3 USD 6 3 B in IT & ITES Revenues 12% from Business Process Servicing 15% Business Processes delivered in Process as a S i M d l P Service Model. • Vijay Damle manages service delivery for F&A, Procurement, SCM and HRO processes in TCS BPO Procurement BPO. • He is responsible for delivering the Certainty Experience to customers globally. • Vijay has held diverse roles over his career – starting as a Finance analyst, and over time has managed Finance, Production Planning, Transitions and Sales / Relationship Management • Email: vijay.damle@tcs.com 19 Experience certainty
  • 20. forE : Process Maturity Model – Delivery Characteristics 1 2 3 4 F Fragmentedd Fragmented d O i Organize O Organize R ii li Rationalize Rationalize E l Excel Excel • Legacy and disparate  • Decentralized modules  • ERP enabled customer  • Centralized ERP based  systems and varying  and localized system  master maintenance with  Customer master Customer  p g processes of Customer  checks leading to  y p system enabled checks at  maintenance process.Maintenance i Master maintenance  possibilities of  unit and regional levels inconsistencies • Periodic audits on Customer  Master  • Disparate systems for  • Order management and  • Integrated system from  • Integrated billing  order management  order management customer billing modules  Order management till customer billing modules Order management till  functionality from Order to  functionality from Order to and customer billing  interfacing and interacting  customer billing and  invoice generation at  across organization  with ERP collections process scheduled intervalsCustomer Billing • Regional variances in  • Regional applications with  • Common set of  • Enabled month close and  processing orders processing orders limited level of integration applications serving  limited level of integration applications serving accruals on revenue and  accruals on revenue and global locations with  supports business decisions  minimum regional level  in sales and Finance. exceptions • Manual Cash  • Scanned electronic  • Work flow enabled and  • ERP embedded application  application using  l documents for Manual  d f l integrated with ERP and  d h d bl d l df enable direct upload from  different screens and  Cash Application enable online cash  bank remittance fileCash  Physical Documents  application to invoices Application and outstanding items. • Multiple modes of  remittances leading to  ILLUSTRATIVE : AR additional work load 20 Experience certainty
  • 21. forE : Measuring Delivery Certainty ILLUSTRATIVE : AR 1 2 3 4Sub Process Measures ‐ SLAs, KPIs Fragmented Fragmented Organize Organize Rationalize Rationalize Excel ExcelCustomer  Cycle time for Customer  >3 days 2-3 days 23 1-2 days 12 <1 dayMaintenance Maintenance % of invoices distributed  < 50% 50-70% 71%-90% >90% electronicallyCustomer Billing % of Credit notes raised to  >10% 5% - 10% 2% - 5% <2% total invoices % of auto application < 70% 70% - 80% 81% - 90% >90%Cash Application % of unapplied payment to  >10% 5% - 10% 2% - 5% <2% total payment total payment % of invoices coming under  >30% 21% - 30% 5% - 20% <5% queryCustomer Service % of queries closed within  < 80% 80% - 90% 91% - 99% >99% agreed standard 21 Experience certainty
  • 22. With You Today…. • More than 163,000 people in 151 countries help our  clients succeed.  • Our industry‐focused services in the fields of  assurance, tax, human resources, transactions,  performance improvement and crisis management  have helped address client and stakeholder issues • Shelly Nichols is Director with PwC and has been p g responsible for leading the Finance Business Services organization • Prior to her role in Finance, Shelly spent several y years in PwCs Information Technology organization gy g • She joined PwC after having spent 16 years with MassMutual Life Insurance Company in a variety of business and technology leadership roles. gy p 22 Experience certainty
  • 23. PwC & TCS – FAO Engagement Overview Phase 1 : Lift &  Phase 2 : Improve  Phase 3 : Optimal  Shift Performance Services Transaction‐based (T&E; AP; AR, Payroll) Reporting and Allied Processes p g (GL, Procurement, Reporting) Business Finance (Engagement Accounting) ( ) 23 Experience certainty
  • 24. Finance & Accounting Journey at PwCF t dFragmented O i Organize R ti li Rationalize E l ExcelDecentralized Internal SSC  Outsourced Partnership Information &  Insights  Exploit  p Technology Optimize  Processes • Engagement related  Optimize  Finance Structure &  S & • Cost allocation  Operations  • Standardize Processes, Eliminate  • Financial Reporting, Variations  • Contract Lifecyle • Consolidate AP, AR, T&E • Leverage Talent Pool / Near  management,  • Move to Low Cost Location Move to Low Cost Location shore services • Expand Technology Deployment 2006 2009 2010 24 Experience certainty
  • 25. PwC– Finance & Accounting Transition Schedule• Transition Cookbook • NA T&E Go Live Stabilize & • Due Diligence Kick‐Off Improve• Infrastructure Build Steady  • Pilots for Other Geo. State • Automation & Technology  Leverage Pilot Pilot • AP, AR & Payroll: Aug 09 Transition • Firmwide Finance, Accounting,  Procurement, BAAR: Dec. 09 • Process Measurement Kickoff • Multi Track Transition  • CAA Assessment  Building  Blocks Dec 2008 Dec 2009  25 Experience certainty
  • 26. Driving Excellence : FAO Beyond Arbitrage Unapplied Cash reduced by 60% Engagement Finance on Handhelds ess ctivene 40% improvement in Invoice TAT 40% improvement in Invoice TAT 100 % Roll out of e‐Imaging in LockboxEffec Cross Functional Understanding of Interconnects Manage Volume Spikes and Dips within same FTE Manage Volume Spikes and Dips within same FTE Process Centric Financial Services Organization  Efficiency 26 Experience certainty
  • 27. Q&A Attendees will receive an email with a link to download today’s webinar presentation. To access a recorded audio version of this webinar, please contact Mark Williamson, mark.williamson@everestgrp.com For background information on Everest, please visit: www.everestgrp.com www.everestresearchinstitute.com Thank you for attending todayTo ask a question during the Q&A session Click th Cli k the question mark (Q&A) button located on the floating tool bar in the bottom right of your ti k b tt l t d th fl ti t l b i th b tt i ht f screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 27 Proprietary & Confidential. © 2010 Outsourcing Center

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