BPO: 3 Rules To Live By
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BPO: 3 Rules To Live By

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In the aftermath of the recession, the BPO industry overall seemed lackluster and had very few pockets of growth. Things got better in 2010.

In the aftermath of the recession, the BPO industry overall seemed lackluster and had very few pockets of growth. Things got better in 2010.

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BPO: 3 Rules To Live By BPO: 3 Rules To Live By Document Transcript

  • Everest Report Forecasts 20% All Eyes Are on Latin New Face of The BPO Growth in FAO Pg 8 America Pg 20 Sector Pg 27www.globalservicesmedia.com April 2011 The gateway to the global sourcing of IT and BPO services bpo 3 Rules to Live by
  • Recognizing & ceLebRating SeRvice pRovideR exceLLence! releasing : June 2011 compendium coverage 2010 sponsors be there where it mattersFor more information write to niketac@cybermedia.co.in
  • Global ServiceS A CYBERMEDIA PuBlICAtIonAn integrated media platform which connects thevarious constituents of the global technology and Pradeep Gupta business processing services industry ecosystem. Chairman & Managing Director Cyber Media (India) Ltd.Directory of ServiceS E. Abraham MathewNewSletter PresidentA regular digest of key industry happenings. Ed nair EditorDiGital MaGaziNe ed@cybermedia.co.inThe fortnightly digital magazine features researchreports, articles and experts’ views. Available on Satish Guptawww.globalservicesmedia.com Associate Vice PresidentwebiNarS satishg@cybermedia.co.inGlobal Services’ web-based seminars aim to impart Smriti Sharmauseful information related to outsourcing indus- smritis@cybermedia.co.intry in the form of presentations and discussionsby industry specialists. niketa Chauhan niketac@cybermedia.co.inreSearchWe deliver indepth analysis and research reports Global Serviceson sourcing subjects. Cyber Media (India) Ltd. CyberHouse, B- 35, Sector 32MicroSiteS Gurgaon-122001, IndiaOnline resource center designed to provide Tel: +911 24 4822222focused content on special subjects to the out-sourcing community. Fax: +911 24 2380694 Contact:eveNtS globalservices@cybermedia.co.inFrom multi-day, high-level, resort conferences tointimate breakfast discussions we offer a number Disclaimerof opportunities that connects the outsourcingcommunity. All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher.cUStoM ProGraMCustomized services rendered through different letterS to the eDitormedia platforms. Send letters to ed@cybermedia.co.in, or to any of our writers. We reserve the right to editoSoUrce booK all letters. Postings submitted to our blogs andA directory of global outsourcing service providers. letters to the editor may be published in ourwww.osourcebook.com digital magazine or Website.
  • April 2011 features 10 BPO: 3 RuLES TO LIVE By 10 by Ed Nair Convergence, process performance, and analytics define the vector for the growth of BPO. ALL EyES ARE ON LATIN AMERICA 20 by Smriti Sharma Latin America has grown to be a region of great promise for the global services industry. A look at the characteristics of the region and recommendations for buyers and service providers.8 xpertsEVEREST REPORT FORECASTS 20% NEW FacE OF thE BPO SEctOr 27GROWTH IN FAO by kumar Parakala, kPMGby Smriti SharmaFAO market growth continues to see strong adoption acrossmost industries with manufacturing, financial services, retail, kEEPiNG PacE With EvOlviNGtravel and logistics, and energy and utilities accounting. tEchNOlOGy kEy FOr lPOS 31 by vineet ramachandran, analyst at valueNotes Sourcing15 PracticeWhat’S DriviNG thE FaO MarkEt? BPO: WhErE iS thE iNNOvatiON? 33by Smriti Sharma By Nigel hughes, Global Services Director, compassFAO demand will continue to come from late adopters; the Management consultingmid-market also has strong potential18DElivEriNG PrODuct Quality aS a MaNaGEDSErvicE iN OutcOME-BaSED MODElby Ed NairOutsourced product development is no longer about engineeringat lower cost. The process of product engineering is now morevalue-driven and quality focused. GLOBAL SERvIcES DIGITAL MAGAzINE Next Issue: The Promise of IaaS Learn about the promises of IaaS in the May special report.
  • COMING SOON
  • Editor’s NotE Rewriting the Rules t he recession in 2008 brought about many changes in the outsourc- ing industry. Borne out of the need to seek more bang for the buck, be it in ITO or BPO, these rules were then famously called ‘the new normal’. One aspect of this ‘new normal’ was the stress on outcome rather than effort. This led to the popularity of outcome-based pricing (at least in terms of discussions) over input-based pricing and output-based pricing. Opinions are divided on which industry weathered the recession better – ITO or BPO? ITO contracts recovered with more contract renew- als, marked by lower contract periods and lower contract values, with very weak new scope contracts. The BPO industry gave mixed signals. For one, large-scale BPO contracts were an exception, and then, many BPO projects that were signed were incremental in scope. The BPO industry Ed Nair overall seemed lackluster and had very few pockets of growth. Things got Editor better in 2010. ed@cybermedia.co.in The outlook for BPO in 2011 is very positive. The impact of the ‘new normal’ is more visible now (than it was in 2010) in the context of the BPO industry. Many of the rules of the industry have been rewritten. In the aftermath of This issue of the digital magazine covers quite a bit of ground in charac- the recession, the terizing the various trends and drivers of the industry in general, althoughBPO industry overall there are more specific references to the FAO segment. seemed lackluster The other key trend story covered in this issue is the unprecedented rise and had very few of Latin America as an outsourcing region in the last few years. Countries pockets of growth. like Chile, Colombia, Costa Rica, Brazil, Argentina to name a few haveThings got better in emerged as very attractive destinations. They are an interesting set of coun- 2010. tries, ambitious and aggressive, in the way they are going about attracting outsourcing traffic. The story gives a good snapshot of the countries in the region and gives recommendations to buyers & services providers about making forays into Latin America. GS
  • COUNTRY-IN-FOCUS Ensuring Global Visibility A special feature for countries to showcase their uniqueness There are numerous outsourcing destinations that exist as great alternatives to India and China. Inviting Countries to showcase capabilities that accentuate their uniqueness.Examples of Country-in-focus feature Egypt Philippines Jordan JORDAN For more information write to satishg@cybermedia.co.in
  • Finance and Accounting OutsourcingEverest report Forecasts20% Growth in FAoFAo market growth continues to see strong adoption across mostindustries with manufacturing, financial services, retail, travel andlogistics, and energy and utilities accounting for 70-75 percent oftotal FAo spending in 2010.by Smriti Sharmat he Finance and Accounting Outsourcing “Increasing competitive intensity among service providers Annual Report 2011, published by Everest is driving innovation. Beyond cost arbitrage, the FAO value Group states that Finance and Accounting proposition will expand this year to include best-in-class Outsourcing market is expected to grow 15-20 process optimization and, as contracts mature, we’ll see morepercent and top $4B in annual contract value in 2011. demand for business and strategic impact. This also will be Analyses of the report encapsulate multi-process FAO a testing year for platform and SaaS-based offerings,” addedcontracts with a minimum of two F&A contracts with a Gupta.minimum of two F&A processes, over $1M in annualized The report highlights that F&A sourcing represents acontract value (ACV), and a minimum contract term of three $150-200B opportunity split equally across third-party serv-years. As per the press release on the report from Everest, the ice providers and captives/shared services. Current penetra-FAO vendor landscape features Accenture, IBM, Genpact, tion of the third-party sourcing market represents only 5-10Capgemini, Infosys BPO and HP as leading service providers. percent of the overall potential, implying a significant valueOther service providers in the analysis include TCS, Wipro, creation opportunity.WNS, ACS-Xerox, Steria, Vengroff Williams& Associates (VWA), Outsource PartnersInternational, Cognizant, EXL Services andIntelenet. Also included in the report are emerg-ing providers: iGate-Patni, Minacs, HCL andKPIT Cummins Infosystems. According to the study, in 2010, ACV grewalmost 15 percent in comparison to about 10percent growth during 2009, and total contractvalues (TCV) of new engagements reached $5B. The FAO market reached $3.5 B in ACV in2010, representing about $28.5B in total FAOspending. “Last year saw a strong rebound in multi-process FAO adoption, which we expect tocontinue this year as buyers look to reduce costsand optimize processes. However, buyers remaincautious and adopt a more phased approachrather than going in for big-bang solutions,”articulated Gaurav Gupta, managing partner,Everest Group.8 Globalservices www.globalservicesmedia.com April 2011
  • Finance and Accounting Outsourcing strategy for addressing the market in 2011. He said, “2011 FAO Bytes plan is not different from a 2010 plan which is that we will 1. FAO market growth continues to see strong adoption across beat the market, we will be ahead of the market in terms of most industries with manufacturing, financial services, retail, growth, our penetrations in the market share will improve, travel and logistics, and energy and utilities accounting for and our client acquisitions will continue to be very aggressive 70-75 percent of total FAO spending in 2010. 2. The United States accounted for over half of total FAO in terms of both new logos as well as expanding our footprints spending in 2010 while Asia-Pacific witnessed the fastest with our existing logos. growth. Genpact’s strategy is strengthened by technology platforms 3. Large buyers accounted for 55 percent of contracts signed that enable processes in different functions and industries. in 2010. Mid-market companies, which have revenues of Said Ghosh, “New markets like India which has got lot of US$1-5 billion annually, revived adoption of FAO last year. 4. Outsourcing of accounts payable, accounts receivable and small and medium is seeing traction. We will start addressing general ledger continue to be the most outsourced processes the small and medium business segment market through a whereas outsourcing of financial planning and analysis is an combination of our traditional service model and our busi- emerging trend. ness process as a service.”. 5. An end-to-end process-driven approach to FAO is also Further, from a competency prospective, couple of areas emerging as opposed to a traditional functional and piece- meal approach. More than 50 percent of the new contracts in like statutory accounting for European landscape is very 2010 had end-to-end scope (Procure-to-Pay, Order-to-Cash, tough to do from one centralized location. Here Genpact has Record-to-Report). the strategy to do it through partners. 6. Nearly 95 percent of FAO contracts had an offshore com- ponent with maximum offshore growth occurring in Indian Second Vendor aggressively contesting to tier-2 locations, Central and South America as well as South- east Asia. Several new locations entered the FAO delivery gain market share location map including South Africa and Morocco. Second tier vendors are aggressively contesting to gain 7. In 2010, technology augmentation emerged as the new market share and are creating differentiated offerings to “normal” – nearly 50 percent of the new contracts included distinguish themselves in the crowded FAO market. Gupta add-on tools such as workflows, interfaces, document man- highlighted their areas of focus: agement, business process management, business intelligence and user portals/dashboards. a) Innovative value propositions – process maturity mod- els, industry-specific solutions, end-to-end processes solutions, In addition to an increase in new FAO contracts last year specialized process offerings, bundled FAO-PO offerings.over 2009, the market also reached an all-time high in con- b) Strategic alliances between pure-play FAO service pro-tract extensions that along with contract expansions, repre- viders and technology providers to offer platform/SaaS-basedsented nearly 55 percent of ACV growth in 2010. The study offerings.predicts organic growth to continue as contracts valued $6.2B c) Increasing presence and foray into emerging locationsor more are up for extension within the next three years. such as Africa, Latin America, and Tier-2/Tier-3 cities in Shantanu Ghosh, senior vice president and global head mature destinations such as India. Also, focusing on mid-of practices, solutions and transitions, Genpact shared his market and small-market buyer. GS9 Globalservices www.globalservicesmedia.com April 2011
  • 3Tools & Technologies bpo: Rules to Live by10 Globalservices www.globalservicesmedia.com February 2011
  • Tools & Technologies Rule 1: BPO and IT are not two separate worlds. There’s a lot to gain when these glaciers collide. Rule 2: Process improvement is reaching its limit. Tie in process to business outcomes and performance. Rule 3: Acquire business smarts through analytics. And be smart about acquiring analytics.11 Globalservices www.globalservicesmedia.com February 2011
  • Special ReportBPo: 3 rules to Live ByConvergence, process performance, and analytics define the vector forthe growth of BPo.by Ed Nairt IT services company call it as platform-based BPO, whereas he BPO industry is getting more interesting pure play BPO vendors are looking at acquiring technology than ever. In reality, it is a stodgy old indus- capabilities. These involve the client transitioning from its try. But the last decade has brought the BPO legacy software to adopt a standardized platform used by the industry into the limelight and it gets con- vendor. This could be enterprise resource planning (ERP) orstantly compared to its other famous cousin, the IT serv- financial management and accounting software, payments, orices industry. Once very dissimilar with each other, there a billing system, for example.is now more similarity than ever. Comprised of a motleyset of horizontal and vertical industry-specific processes Platform-based BPO usually involves the developmentor functions, the BPO industry is growing along all axis of IP in the form of a solution that delivers the process.(the segments). The vendor landscape is showing great This is then overlaid on an IT infrastructure and servicesdispersion and yet presents dense clusters of strengtOver- are delivered using a per transaction-based pricing modellaying all the varied dynamics of business and underlying (rather than per FTE-based). Consequently, platform BPOall the varied forces of economic change, there are three can be thought of having four stages: hosting (involvesrules regarding BPO and BPO service providers that hardware and infrastructure set-up, networking, disas-organizations should watch out for. ter recovery); implementation (covers system design to deployment); process management (process standardiza- Rule 1: BPO and IT are not two separate tion, best practices, analytics); and maintenance. worlds. There’s a lot to gain when these Some examples include TCS’ platform BPO for pro- glaciers collide. curement that handles the source-to-pay cycle; IBM’s Lender Business Process Services for mortgage processing;BPO is no longer about running sweatshops with people and Caliber Point’s (Hexaware) Republic which is a multi-toiling away at processing work mechanically. The devel- tenant HR services delivery solution.opment of specific technologies like docu-ment management, information retrievalsystems, and such had speeded up work inmany document-intensive processes. But theadvent of IT-based solutions that automatespecific parts of the process lent furtherimprovement in efficiency. For example,solutions dedicated to processing insuranceclaims or processing mortgage applications,automated the process to deliver better effi-ciency and required lesser resources. At onelevel, this could be called as the integrationof process with technology, but at anotherlevel, it could be called as the integration ofIT with operations. There is a shift in approach by BPO vendorsto having increased focus on technology devel-opment. BPO vendors with the parentage of an12 Globalservices www.globalservicesmedia.com April 2011
  • BPO: 3 Rules to Live By Rule 2: Process improvement is reaching They also seek a wide range of secondary benefits that its limit. Tie in process to business can improve both efficiency and effectiveness, including outcomes and performance. standardizing and simplifying processes throughout the enterprise and making better connections between differ-Gains through process improvement have been incremen- ent processes.tal and may have reached its Finance executives inlimit. It is now time to relook the survey place equalat the process from the point importance on improv-of view of business outcomes ing overall companyand tie it into delivering some performance and onof the performance goals. improving the efficiencyCheck whether your BPO of processes themselves.vendor is able to deliver on A majority of respond-this front. ents (58%) say that In a survey of 151 sen- efficiency gains in proc-ior finance executives, done esses (e.g., faster, lowerby CFO Research Services cost, less rework) are aand Genpact, the respond- high priority for theirents showed that they take improvement initia-a broad view of the benefits tives, but just as manyof process improvement (55%) place a high pri-throughout their organiza- ority on the ability of process improvements to improvetions. Many of them link process improvement to overall company performance overall.company performance—not just to process efficiency.Source: cFO Research Service Report 201013 Globalservices www.globalservicesmedia.com April 2011
  • Special Report Rule 3: Acquire business smarts through intelligence is thus derived from the process level. BPO analytics. And be smart about acquiring providers who are able to do this demonstrate higher analytics. level of leadership. However, analytics often does not come as part ofAnalytics is about tapping into the embedded intelligence the BPO deal unless business outcomes are specified asof a system. Analytics helps in identifying patterns in part of the deal deliverables. Abehavior and performance and recent report on analytics offshor-is both diagnostic and prescrip- ing by HfS Research, titled ‘Wheretive. The application of analytics Offshore Analytics is Heading inin other spheres like marketing 2011’, states:and engineering have yielded “Analytics straddles across dataresults that go beyond improv- management, MIS reporting, pre-ing efficiency to delivering dictive model development, andbetter outcomes and therefore business consulting. We exploredhigher performance. The same the trend of IT-BPO players push-is true of business processes and ing these analytics services bun-how they are handled. dled together with other ITO- Smart enterprises derive BPO offerings. We recommenddecision-making power and tjat the business need ultimatelyagility from analytics that run must determine the nature of bun-across various business func- dling for clients, along with thetions, but it is a very challeng- organization’s level of experienceing proposition to put into with analytics. When analytics ispractice. This is because process measurements are ori- proposed for process optimization, it makes business sense.ented towards efficiency and not effectiveness. Process However, when business decisions (such as defining mar-analytics have to be measured in terms of performance keting strategy for the next 5 years) are based on high-levelparameters and thereafter be made part of the manage- analytics, saving a few dollars by bundling in a few proc-rial decision-making framework. The organizational esses is not recommended.” GS14 Globalservices www.globalservicesmedia.com April 2011
  • Finance and Accounting OutsourcingWhat’s driving the FAo Market?FAo demand will continue to come from late adopters; the mid-mar-ket also has strong potentialby Smriti SharmaJ ust as the Philippines continues to be the hub of Top Trends to Watch Out For in FAO contact/ call center outsourcing, India has scaled • Demand in the emerging market- whether it is up remarkably in the FAO segment of BPO. India or Asia Pacific or Latin America- for FAO According to estimates from Everest Research, services will grow this year. Shantanu Ghosh, senior nearly more than 55 percent of FAO contracts vice president and global head of practices, solu-offshore F&A services to India. Of more than 20 lead- tions and transitions, Genpact said, “The reasoning FAO service providers tracked by Everest, 18 have being a lot of multinationals - which are uS anddelivery presence in India with close to 80 delivery continental Europe based- have done their firstcenters when taken together. Gaurav Gupta, managing wave of FAO, where they obviously focused on highpartner, Everest Group, said “India continues to be the impact geographies like uS or uK or continentallocation of choice for offshoring F&A services.In 2010, Europe are now focusing on their second or thirdthe maximum FTE growth took place in Indian tier-2 wave outsourcing through the new market. Theselocations, followed by South East Asia, and Central & economies are creating companies that are growingSouth America. India-heritage providers also continue from small to medium to big and they are expand-to register a strong presence on the FAO service pro- ing outside their home territories. They are alsovider landscape.” looking not only from the prospects of labor arbi- “Beyond its prominence as a delivery location, in recent trage but also from the prospect of creating growthyears India has also emerged as a buyer geography for FAO. platforms along with delivering process excellenceLast 2-3 years have witnessed a significant growth in terms of through use o process management expertise.”domestic FAO deals, with most leading FAO service provid- • FAO will continue to increase in the developed mar-ers considering this market segment as an important part of kets, which is the source destination for demand.their future growth strategy” added Gupta . Demand will continue to come from late adopters. Ghosh shared, “These are the people who have not jumped on the FAO bandwagon earlier, but now have seen the model get proven and have got enough confidence that this works and they are therefore now coming in the market. Many of them are large but that also includes the medium business segments that are now beginning to show interest in now getting into the FAO market.” • For people who have experienced their first wave of FAO, they can be clearly seen going up the value chain. Lot of the business with existing customers that was in the initial pieces of transactional and little beyond transactional like ledger FAO has now moved on to closing reporting, financial planning, tax support etc.FAO is on its second generation of what can be done. Gupta stated, “Financial Planning & Analysis (FP&A) represents an emerging area in15 Globalservices www.globalservicesmedia.com April 2011
  • Finance and Accounting Outsourcing FAO. FAO has moved beyond just Accounts Payable, Accounts Receivable and General Ledger. An end-to- IntERvIEw vIEwPoInt end process-driven approach to FAO is also emerging as opposed to a traditional functional and piecemeal approach.” “increased alliances between• The role of technology in FAO has evolved from the basic “tie-and-run” model to an “augmentation” pure play BPO providers & model. In 2010, technology augmentation emerged as the new “normal” – nearly 50 percent of the new contracts included add-on tools such as workflows, FaO technology providers” interfaces, document management, business process management, business intelligence and user portals/ dashboards.• The adoption of performance-based incentives and/or Milind Godbole, President of operations, Asia Pacific, gain-sharing has increased. As the FAO value proposition Aditya Birla Minacs offers his perspective on FAo expands, the interest in performance-based incentives and/or gain-sharing models has increased to incentivize GS: How do you compare FAo market performance in service provider to deliver beyond standard expectations. 2010 and what’s the outlook for 2011? Buyers are looking at value propositions beyond just labor MG: The FAO market has attained maturity with respect arbitrage. to the large North American buyers and most of the• There is an increasing trend of “verticalization” in growth for this segment in 2010 was related to contract FAO, moving away from the traditional assump- renewals. As per Aditya Birla Minacs market intelligence, tion that FAO is a horizontal function. Gupta only 30 new large deals were signed in 2010 which is shared, “Many service providers are coming up 15-16percent higher compared to 2009. with industry-specific FAO solutions (e.g., focused The EMEA saw 10-12 new large deals that was similar offering in travel, telecom, utility etc.). Service to NA, rest of the growth in this market was due to contract providers are also aligning their sales and delivery renewals and scope expansion. team along key verticals to make a targeted market Mid-market (both in NA and EMEA) witnessed unprec- approach.” edented growth in 2010 and this trend will continue to been seen until 2015. Based on our market survey, 2011 will be the FAO year for mid-market customers; this segment has started focusing on profitability and is looking at all possible avenues for cost reduction. FAO in APAC has continued to lag behind rest of the world. However, we believe that from 2011 onwards we expect the APAC FAO market to get onto a growth trajec- tory which will gain further momentum 2012 onwards. FAO in APAC will not mature until 2016. Client F&A operations in APAC con- tinue to be primitive in comparison to NA or EMEA. The processes are paper based, limited use of technology, decentralized and mostly non-standard. We have already started notic- ing an increased interest in setting up Shared Service Centers (SSCs) which will pave way for FAO. SMB is another market segment that has huge market potential, but given the nuances, it might take a significant time16 Globalservices www.globalservicesmedia.com April 2011
  • Finance and Accounting Outsourcing for large service providers to M&A activities in the specialized FAO service provider make a significant impact. space. Given our recent acquisi- Increased investment in building onshore capability by tion (Compass BPO) in the traditional offshore (India) origin service providers. Similarly FAO space we have made a increased traction in Tier 2/3 cities in the offshore market for silent entry into the SMB FAO delivery so as to nurture new talent and reduce costs. space and are well poised to ride the growth. GS: what is your strategy to push your services for 2011? We believe that with MG: Minacs has adopted a Blue Ocean* FAO strategy for respect to industry segment, developing the FAO market healthcare, insurance, retail, 1) Process & Domain Led - This allows us to offer energy & utilities will wit- niche solutions focused not only on outsourcing but more ness maximum growth in importantly address CFO pin points. milind godbole 2011. 2) Target Market Led - Minacs targets its solutions towards Mid-Market & SMB customers allowing us toGS: what are the top trends seen in FAo for this year? create sole source opportunities.MG: The market would witness increased alliances between 3) Technology Led - Minacs offers technology ledpure play BPO players and F&A technology providers. FAO solutions and end-to-end managed platform forThere are multiple drivers behind this strategy including Automating Legacy Processesthe need for non-linear growth, higher revenue productiv- * Blue Ocean Strategy is a business strategy book firstity & ability to provide value added services. This would published in 2005 and written by W. chan kim and renéealso result in additional platform based offerings, mostly Mauborgne. Blue oceans denote all the industries not intargeted towards mid-market customers. existence today—the unknown market space, untainted by Increased demand for analytics and other high-end F&A competition. in blue oceans, demand is created rather thanservices (e.g. FP&A type services).Service providers will have fought over. There is ample opportunity for growth that is bothto develop industry specific analytics capabilities in order to profitable and rapid. in blue oceans, competition is irrelevantshow differentiation in this market. because the rules of the game are waiting to be set. Blue ocean FAO market consolidation - Increase in acquisition of is an analogy to describe the wider, deeper potential of marketcaptive FAO SSCs by third party service providers and also space that is not yet explored. GS17 Globalservices www.globalservicesmedia.com April 2011
  • Product Developmentdelivering Product Qualityas a Managed service in anoutcome-Based Modeloutsourced product development is no longer about engineering atlower cost. the process of product engineering is now more value-driven and quality-focused.by Ed Nairo utsourced product development is no longer In today’s about engineering at lower cost. The process environment, of product engineering is now more value- independent driven and quality focused. Companies such software ven-as Symphony Services are leading the trend by offering dors encoun-product development as a managed service and delivering ter a freneticnew outcomes. In an interview with Global Services,Sunil pace to deliverGupta, Head of PQM, Symphony Services offers his per- innovative soft-spective on product quality management and how these ware releases tonew outcomes can be delivered. Excerpts: market, out- stripping tradi- GS: what are the differences tional product between process/service qual- quality man- ity management and product agement objec- quality management(in the tives, method- context of outsourced prod- ologies, and uct development, which in processes. To itself is a service)? keep pace, we are seeing more and more ISVs move to a SG: The differences between managed product quality solution. This has been shown process and service quality to improve customer satisfaction, increase release cadence, management and product qual- shorten test cycles, lower defect leakage and testing costs, ity management (PQM) are thus saving R&D budget that can be meaningfully repur- sunil gupta small. In fact, PQM is actu- posed to increase investments in new product innovationally a combination of process quality—measured through and development.process maturity compliance—and service quality—meas-ured through service level agreement. Because of this GS: what are the key drivers of product quality in out-combination, PQM is delivered as a managed service in an sourced R&D/product development?outcome-based model to achieve an agreed business result, SG: Symphony sees successful product developmentsincluding reduction of test cycles by 25-30%, reduction of resulting from staying true to a few suggested “guidelines.”escape defect in to QA and out of QA by 20%, or reduc- Product development managers execute against these spe-tion of Dev and Test Infrastructure cost by 25%. cific key drivers for product quality:18 Globalservices www.globalservicesmedia.com April 2011
  • Product Development a. Building and checking quality at each stage – for a. Early-stage build management and certification–build processes and practices in to each stage to be checked This helps to improve build success rates while reducingat each stage re-work resulting from problem identification early in the b. Checking early and often – as early as the build stage development cycle—thereby increasing the efficiency andand continue full automation testing for every build productivity of teams, including reducing initial defect c. Quality through process – repeatability and predict- escape rates to less than 20%. This is especially true forability is key companies with a multi-site build model. d. Managed process- to ensure continuous evolution b. Dynamic automation and regression testing–Fasterand improvement and frequent testing ensures that you meet commercial e. Managed service model -for sustained and continu- grade software requirements for performance, scale andous results availability consistently. This can increase a company’s test f. Outcome engagement model - for measuring and coverage, reduce resource constraints of manual testing,achieving results and give more flexibility to adapt to changing require- ments. This is achieved in every daily build in an 8-10GS: How are some of the mature ISvs handling PQM? hours cycle.SG: In handling PQM, most of the mature ISVs have c. Experience-based usability and performance testing–realized limited benefits due to marginal knowledge of We are able to improve usability and performance guaran-the previous drivers, and by starting their product qual- teeing high levels of customer satisfaction.ity initiative by setting up their own teams, invested in d. Cloud-based development and testing–Symphonytools and infrastructure. However, realizing the down works to enable optimum utilization of IT infrastructuresfall in this, ISVs have later moved to a managed service by moving to a cloud-based model for development andmodel to achieve the desired resulting and benefits, testing. This results in 1.) optimizing cost and 2.) movingwhere the focus is still on managing outgoing metrics from a CAPEX to OPEX model and from fixed, dedicatedof QA phase rather than managing quality at each environments to flexible and on-demand provisioning ofstage. environments. This allows users to manage peak infrastruc- ture requirements on the cloud.GS: what are the essential steps to manage and opti- e. Causal-oriented problem management–We conductmize PQM? fine-tuning of product quality by performing a causalSG: At Symphony Services, we deliver five steps to achieve analysis on the field defects and taking corrective and pre-effective product quality management as a service: ventive actions accordingly. GS19 Globalservices www.globalservicesmedia.com April 2011
  • Special ReportAll Eyes Are on Latin AmericaLatin America has grown to be a region of great promise for theglobal services industry. A look at the characteristics of the regionand recommendations for buyers and service providers on how tomake forays into this region.by Smriti SharmaR ecent times have witnessed this region Juan Diaz, consulting manager, Wipro Consulting draw ace players of the outsourcing world - Services, author of the recent report (by Wipro American Express, General Motors, Intel, Consulting Services) titled Latin America- A New Genpact, Sitel, Wipro, Citibank and more. World Option for Offshoring said, “When clientsBusiness process outsourcing (BPO), shared service look at Latin America they look for Spanish languagecenters (SSC), call centers, offshore delivery centers skills, geographical proximity, and also cost effective-have grown significantly in the region. For exam- ness. For example, if you look at India which is theple, Wipro currently delivers finance and accounting most developed sector in outsourcing or shared serv-services to the largest beverage company in Latin ices, there is a lot of wage inflation going on, andAmerica from a service center in Curitiba, Brazil. For inflation is on the rise every year. In that comparison,years, TCS had had significant presence in uruguay. Latin America is more stable. If you look at long termSimilarly, many of the global leaders have presence in in that case, it is going to be probably same cost forcountries like Chile and Colombia. some years and these are the kind of things companies Still, many potential areas beyond call centers and IT are looking at. So, probably if you have the same cost,have been untapped. Areas like HRO, FAO and procure- if you have the same talent and it takes you the samement outsourcing have still not started to make best use to go from Europe to India or from Europe to goof the available resources. to Latin America, then Latin America is also a good option.” Allure of Latin America H Karthik, vice president, Everest Group stated four driv- ers apart from the obvious: 1. language Skills: Especially, in terms of Spanish and Portuguese it becomes a potent force as you think about the Spanish population in the uS. There is prob- ably no other region in the world that offers the combina- tion of language skills at scale plus cost savings. 2. Domestic Regional opportunities: In addition, to Latin America being a region to serve the uS, it also offers a fairly significant domestic or regional opportu- nity especially in large countries like Brazil and Argentina where the domestic market is also fairly large. Ou esti- mate suggests that between 60-70 percent of the work in the region is focused on the region itself and 30-40 percent is focused on offshore, primarily the uS. So domestic market is a large opportunity.20 Globalservices www.globalservicesmedia.com April 2011
  • Special Report 3. Same time Zone: The same time zone with the uS • Diaz stated, “I would recommend a company that and Canada. is looking at setting up their operations is that they 4. Domestic Business opportunities: If you are to need to have local support. As they are the ones wholook at large global companies, they also see domestic are operating in this location, they are the ones whobusiness opportunities in Latin America. This is irrespec- know the region and they are the ones who knowtive of outsourcing. which are the countries that bring the best benefitSpeaking of how Genpact’s client feels about their depending on what you want to do.”chosen locations -Juarez, Mexico and Guatemala. MaryKorthuis, vice president and operations lead, Mexico Recommendations for buyersand Guatemala, Genpact said, “Drug cartel-related Location strategies must place a high priority in identify-violence and related media stories has caused concern ing market saturation as Latin America is not one location,with some customers and their own security organiza- but several unique countries.tions have limited/eliminated their travel to Juarez. Buyers need to keep in mind that there are significantOther customers are fine and continue to travel in and differences across the region in terms of cost and laborout with no concern. Besides the city issues, customers pool. For example, between Brazil and Argentina, Brazilare pleased with the near shore location; easy access for is almost 40 – 50 percent more expensive than Argentina.mail pick up/drop off; facility literally within a “stone’s There is cost dissimilarity across the region, this is some-throw” from the uS; easy hiring of English speaking thing companies need to keep in mind while zeroingresources who go back and forth across the border upon locations.themselves so they are integrated into uS culture. Also, there are significant variations in the scale ofTechnology is all in the uS, so for all intensive pur- talent pool in skills and language capabilities acrossposes – on-shore functionality at near-shore prices.” the region. For example, countries like Argentina and Brazil support large scale, but countries like Colombia,Strategy of companies that see Latin Costa Rica can only support small scale centers. Also,America as a destination of choice should in terms of scale there are contrasts, Brazil has fairlyreflect on the following elements: evolved in terms of IT skills such as SAP but countries • Rather than a company-by country approach, com- like Costa Rica is more favorable for contact center panies should adopt a regional, networked approach. work in Spanish and English. Differences in language They need to capture the right skill in the right skills - Brazil is more suited for Portugese work; cities. Argentina, Chile, Mexico are more on the Spanish • Differentiated advantages should encapsulate cultur- side. Broadly, all locations offer some advantages, al similarities and the physical proximity part. These there are differences across the region both across advantages should be promoted aggressively on how countries and cities in the countries, which companies they can translate into real business value. need to keep in knowledge. • Don Berryman, general manager of Americas at Sitel Karthik said, “Most countries in this region have said,“you must remember this is not a domestic uS issues of fluctuating currency. For example, in recent location. There are many cultural and sociological months, Brazilian and Chilean currency are becoming similarities but they still don’t have the infrastruc- less competitive, while Argentinian currency is becoming ture of the typical u.S. location. So customers will more competitive.” not have the same experience they would with a uS Diaz added, “Buyers need to have a clear overview of call center. Expectations have to be aligned to the where they want to get to and what each of those coun- uniqueness of the environment, similar to when we tries offers to them. It comes to what they want to do in developed our presence in the Philippines or India.” the country; if you want to do just plain call centers, then • Focus on the services that are best provided in this just go for a cheap location and if you want to go further region and also carve out new niches that may do and into operations across all the uS and other places well. and company processes like procurement, then you need • Compete vigorously in the local market and the to be very careful where you set up those operations. They global service delivery playing fields to mitigate risk need to talk to the local people. Companies are already and enhance economic benefit. operating here and they have done the homework.”21 Globalservices www.globalservicesmedia.com April 2011
  • All Eyes on Latin AmericaRecommendations for services providers • What kind of business am I planning to put in Latin Services providers should approach this as an integral America?component of their global strategy. In other words, think • What kind of agents am I looking for?about what complementary roles that Latin America or the • Is there support in terms of workers, education level, cities/countries in Latin America can play to their network service or sales experience and English speaking skills?of existing centers. For example: Are you thinking of Latin • How will this location benefit my overall global loca-America as a location to do very niche work focused on tion strategy?the uS market, or are you thinking about Latin America Failing to answer these questions is a common mistakeas a location to get certain skills? that outsourcing providers have made in new markets. Added Karthik stated, “Overall, the strategy on how Latin Don, “Also, there are countries in Central and South AmericaAmerica fits in the global play needs to be very clear and that might not make good call center locations because theythere are lots of differences across the cities and countries don’t have the workforce in place, so service providers needso people need to be very clear on how they need to to carefully assess what kind of business they want to put inuse Latin America. If you are thinking of it on both the there, what kind of work experience the local people have,grounds of domestic opportunity and offshore opportu- and can the business model sustain a long period of time tonity, then some of the larger countries are more favorable be a viable investment.”to locate in. Also, in terms of strategies, acquisition can Talking about the major challenges Genpact is facing,be a powerful mode of entry.” Korthuis shared, “The main challenge is the drug cartel- Don Berryman, general manager of Americas at Sitel related violence and the related media stories. That said,states questions service providers should be cautious and this violence has not disrupted our operations there at allask before approaching the Latin American market: and we ensure that our employees are safe at all times.”Tax incentives make deal comparisons difficult to do Country Incentives Argentina: Income tax exemption of 60%, employer’s social security contributions reduced by as much as 70%, no restrictions on foreign currency wire transfers for imports of goods and services and a range of benefits derived from the recognition of software as an industrial activity. Brazil: Reduction in social security contributions up to 50%, tax exemptions for imports associated with software development, tax exemption on goods purchased for export, plus local government incentives, particularly around Rio de Janeiro and São Paulo. Mexico: PROSOFT agency provides grants for IT companies setting up in Mexico. Additional incentives are available from local government these vary from region to region, but tax credits on R&D and other investments are typical. Rest of Latin Nicaragua offers a 15-year tax holiday. Panama, costa Rica and Uruguay have setup special tax America: free zones near major IT and business process outsourcing centres. colombia has the following incentives: Free Trade zones offering up to a 50% tax break on sales into the local market, 40% tax deduction on the cost of purchased machinery, Service exporting companies can import capital goods exempt from custom duties and vAT. chile has setup chilean Economic Development Agency (CORFO) which helps by co-funding projects. Chile also benefits from trade agreements with US, Australia, china and canada.Source: HFS Research, 201122 Globalservices www.globalservicesmedia.com April 2011
  • Special ReportCountry Scorecards of low cost, talent pool and government support,Diaz shared, “If we take an overall assessment where you Colombia is becoming among the best options in Latinjust mix what you have in terms of talent, what you have America, especially in Call Centers. The number of localin terms of cost, infrastructure, countries been stable.. if and foreign BPO suppliers operating in Colombia andyou take all that and mix it then I’ll say Colombia and the significant growth the sector has had in the last cou-Brazil are best option. Brazil is the best option because it ple of years, show the country is gaining the confidenceis where the biggest market is and most developed next of foreign companies.to Mexico in the region. And Colombia is the one as it is 2. Brazil: Ranking: 3.08the cheapest one and most business friendly and it is here • Largest call centers industry in the region. Very where all the big players are actually going because there is strong telecom network (150 million mobile phones inhuge potential there.” operation and 50% of households linked to broadband The report, a New World Option for Offshoring, states by the end of 2011Wipro has developed a ranking methodology to help 3. Chile: Ranking 2.98organizations decide which of these countries would offer Chile is ranked as one of the best Spanish-speakingthe greatest benefits based on their needs and priorities. delivery locations. It’s pushing to grow in the sector byThe ranking method is based on three primary business covering operations as an offshoring location for compa-criteria, each composed of a group of key factors namely nies in Spain.cost effectiveness, talent and resource availability and 4. Argentina: Ranking: 2.91business catalyst. Inflation in 2009 was 13% and it is predicted that Here is the combined score (5= Best Ranking) Argentina will suffer higher inflation increases in 2010, 1. Colombia: Ranking: 3.34 which adds an additional risk when offshoring to this Negative publicity about guerrilla, drug cartels and location. It is key that these projections are assumed inhigh crime rates has slowed investments by corporations. the business model to ensure benefits realization in theHowever, during Alvaro uribe’s presidential period, secu- long term.rity and crime rates have improved significantly. Today, 5. Mexico: Ranking: 2.70countries like Brazil and Mexico are ranked as even more Biggest call center industry in the region after Brazil.dangerous and risky locations. With a good combination Proximity to uS attracts uS customers. GSSource: Wipro consulting research (5=Most cost effective)23 Globalservices www.globalservicesmedia.com April 2011
  • All Eyes on Latin America“We look out for oversaturationin markets where we competefor resources”Excerpts from an interview with don Berryman, general manager ofAmericas at sitelby Smriti SharmaGS: what are the main growth areas for this region? the established free trade zone regime, Sitel sees the con-DB: In the past few years, Sitel has experienced great tinued investment as a sustainable win-win for our clientgrowth in Brazil, Nicaragua and Panama. Additionally, Sitel base and employees.has cultivated aggressive development with our English- speaking agents in GS: How does your client feel about your chosen desti- Bogota, Colombia. nation in latin America? We have seen the DB: Sitel has an expansive footprint in Latin America. Brazilian domestic Choosing one specific location can be an interesting market growing rap- dynamic—when Sitel recommends specific locations idly, and business to our clients, many have preconceived ideas about opportunities are certain markets without experiencing the destination expanding by 20-25% firsthand. But, as we tour the markets with our clients, a year. In fact, Sitel and they are able to see our skilled staff in action, plus opened a state-of-the- the existing clients we are servicing in those regions, art facility located in the perceptions are immediately replaced with a much the city of Sao Paulo different reality. in January 2011, dou- Colombia is a great example of a market that clients bling our capacity in tend to have perceived opinions, mostly generated from Brazil, and bringing news stories about crime or corruption. Don berryman Sitel’s total employee However, once they experience the real Colombia, itscount in Latin America to over 11,000. outstanding workers and the vibrant infrastructure, they Managua, Nicaragua continues to explode with growth, are able to shape a more accurate depiction of the truefocusing on the service of English and Spanish-speaking opportunity.u.S. consumers. As an innovator, Sitel first enteredNicaragua in 2008 to provide customer and tech sup- GS: How has this destination helped you offer specificport for Fortune 1,000 companies in wireless, consumer advantages to your clients?electronics, media services, banking and other financial DB: The biggest advantage for our clients is convenientproduct lines. Three years later, we continue to expand travel time and time zone alignment. It takes a full day toin this area due to the location’s unique ability to offer travel to the Philippines or India, and clients are forced toculturally aligned, multilingual talent for a wide range of work a night shift to align with the North American work-u.S. consumer markets. Today we are the largest contact day. So, call centers and business functions requiring workcenter provider in this country. And with the ongoing to be completed during uS business hours lend themselvessupport of organizations such as ProNicaragua, as well as to a working location in this general time zone.24 Globalservices www.globalservicesmedia.com April 2011
  • Special ReportGS: what challenges are you facing? If any, what are GS: what’s the methodology followed at a companyyour barriers to increased investment? like Sitel?DB: Sitel is always on the lookout for oversaturation DB: Great talent. Agents and front line supervisors arein a market where we are competing for resources with the foundation of our business and Sitel always builds ourour competitors or local providers. However, an inter- operations from the ground up.esting development is surfacing where our clients desire We have an outstanding real estate group at Sitel, andto enter markets that we see as slightly oversaturated. they do a great job of analyzing these locations and mar-This may be happening because of regional promo- kets. In some cases, we are looking at the quality of people,tion directly to our clients or even the loss of expertise quality of education and the support in the call center.within the contact center industry. The key is creating Other times, Sitel looks at the role of government to see ifa great work environment and offering incentives like they are active in terms of subsidies, credits or opportuni-continuing education to become the most desirable ties for job training in preparation for positions in a newplace to work in these areas. But, at the same time, you call center. Sitel believes it’s not just the quantity and qual-need to consider other markets so you don’t saturate ity of the people; it’s also the participation of the govern-an area. We work with our clients to provide an honest ment on a local and national level that can elevate a desti-assessment of the situation. nation’s capabilities. GS25 Globalservices www.globalservicesmedia.com April 2011
  • xperts by Kumar Parakala, KPMG New Face of the BPo sector traditionally, BPo industry has been synonymous with the ‘lifting and shifting’ non-core tasks to a vendor shop for benefits such as cost arbitrage and abundance of cheaper workforce. the BPo industry has successfully enabled buyers, across the globe, to improve their bottom-line while growing into $158B industry.t he last few years have been and market is flooded with service automate processes. Automation of defining in several ways providers pushing services in similar processes has helped service provid- for both; the supply and price band. ers to reduce the process cycle time the demand end of the These pressures have led the way and attain higher productivity. Backindustry. On demand end, cost arbi- for shift of BPO industry from office operations such as invoicingtrage has become baseline for the “commodity behavior” to “partner- processes gained from improved andbuyers and now they are expect- ing behavior”. In this new phase, optimized processes. Analytic modelsing new initiatives to attain higher the business objectives of buyers and created through technology automa-thresholds of productivity, efficiency service providers are better aligned tion gave a huge boost to customerand revenue growth. On supply end, and focus of industry has moved to analytic service providers. With tech-service provision has commoditized “value creation” instead of only “cost nology advancements, complex proc- arbitrage”. esses are also being automated by service providers. Lever of the Other key benefits of Automation new face of Initiatives – BPO • Reduces of risk of operations Some of the from offshore model key words that • Provides buyers with real will resound in time control over operation the new phase of through portals BPO sector will be • Enables service provid- automation, proc- ers to attain higher quality ess improvement, standards innovative business Continuous improvement model and pricing programs– After attaining deeper models. understanding of the buyer’s business Automation and processes, service providers are initiatives– Most increasingly adopting best practices of the leading such as “six sigma” and “lean”. These service provid- processes are enabling service provid- ers are leveraging ers to attain higher efficiency, better their technologi- resource utilization and improved Commodity Vs Partnering cal competency to skill index of service provider. Buyers27 Globalservices www.globalservicesmedia.com April 2011
  • BPO service provider’s pre-config- ured business processes, pre- built deployment accelera- tors and organization change management. • Allows smaller buyers to lev- erage best IT infrastructure to support their business processes. Business process as a service (BPaaS) is the umbrella term that is being increasingly used to capture the whole range of ‘Cloud-enabled’ innovation within the BPO mar- ketplace. With wider acceptance of “Cloud” technologies in most ofFeatures of Platform based BPO the industries, BPaaS might prove to be the biggest game-changer in the BPO space. BPaaS proposi-have gained through reduced risk in application, people and infrastruc- tion may include Infrastructureoperation and increased throughput ture. It also allows the delivery from as a Service (IaaS), Platform as aof operations. Back office operations being “people centric”, as in the Service (PaaS), and SaaS as wellthat are highly process-driven, gain traditional ‘lift and shift’ model to as the traditional benefits of out-most from implementation of these being platform centric. BPO service sourcing such as process expertisepractices. providers, which have strong pres- and labor arbitrage. In addition, Other key benefits of improve- ence in IT application development BPaaS offerings will provide ament programs – and maintenance, could comfortably cost, sales, and delivery model to • Enables service providers to adopt this model. They are offer- reach the medium-sized enterprise move up the value chain ing HRO platform, F&A platform, market. • Minimizes risk of operations procurement platform and analytic Other key benefits of BPaaS - Innovative business models- platform BPO solutions. • Allows service providers to As the BPO industry evolves from Platform based services became spread their investments acrosshigh growth phase to mature phase, popular during the global recession, multiple customers.the challenge of delivering services when clients were looking for higher • Enables buyers to enjoy will be replaced by delivering them efficiency in services without incur- financial benefits by reducingeffectively. Evolution of new business ring large upfront transformational operating costs up to 30 per-models - “Platform based service” and cost. cent, thereby cutting capital“Business Process as a Service” - to Other key advantage of Platform expenditures. They do this bycater to dynamic needs of buyers will based services are – using a pay-as-you-go pricingplay a significant role in imminent • Assures higher compliance model.future. with standardized processes, • Enables buyers to get fast- Platform based services is an stringent security regulations, er payback, quick return oninnovative business model that local statutory norms and investments, and solutionsindustry is very excited about. The internal controls. where they do not have tomatured service providers undertake • Defines the ownership and think about infrastructure,the management and execution of accountability of the processes software, and process services.client’s business processes on their by resting ownership of all • Provides benefits particularly own technology platforms such as aspects of BPO with the serv- to small and mid-sized capi-CRM and ERP. The model ena- ice provider. tal-starved firms.bles service provider to own proc- • Allows buyers to reduce In future, the cloud will provideesses, the underlying platform and time-to-market by leveraging the platform for service providers of28 Globalservices www.globalservicesmedia.com April 2011
  • BPOall shapes and sizes to re-energize tra-ditional outsourcing services and alsoto launch new services. There will besignificant traction. BPaaS will forcepeople to standardize their processes.Infrastructure and software becomemore of a choice that allows buyersto leverage the right ecosystem. Innovation in pricing models-Traditionally, business propositionof most of the service providers cen-tered around cost arbitrage, whichled to widespread adoption of “inputbased” or “FTE based” pricing. Withcustomer focus moving to achievinghigher efficiency and productivityas well as sharing risks, innovativepricing models are becoming increas-ingly significant. transaction based pricing is onesuch innovative pricing methodol-ogy that is catching up in the indus-try. Pricing of the deal is based onnumber of transaction processed bythe service provider. A well defined Other key benefits of transaction outcome based pricing is“transaction”, with a definite begin- based pricing model – likely to be the most impactfulning and end point, is essential for • Offers buyers flexibility change that BPO industry mightimplementation of transaction based and scalability as pricing is undergo in next five years. As perpricing model. Deep understanding dependent on consumption this model, the service provider isof processes, well defined methodol- • Enables buyers to effectively paid as per contribution made byogy and unambiguous service level monitor costs due to enhanced services to achieve buyer’s businessagreements are required defining visibility of consumption objective. Outcome-based models“transaction” with such certainty. pattern. become relevant when the objec- The model enables service provid- • Results in lower per unit cost tive of the outsourcing relationshiper to decide the number of resourc- due to higher efficiency goes beyond cost. They deliveres and time allocated to execute • Creates more value and own- a measurable impact on the enda “transaction”, while meeting the ing more risk, service providers business result, and align the inter-quality standards and service level can increase profit margins ests of both the customer and theagreements. Service provider man- • Gives service providers higher service provider, enabling them toages the risk of ownership by utiliz- control over operation through work towards the same goal.ing the resources efficiently across freedom of ramp up/down As “value creation” is at the coremultiple customers and by charging and reallocation of resources of this model, it requires service pro-an appropriate risk premium in the Despite of it’s benefits, for wide- vider to have in-depth understandingprice of transaction. It also motivates spread adoption of this model the of buyer’s industry. Along with this,service provider to increase efficiency industry needs mechanisms to predict strong service level agreement andof every resource through innovative volume of transactions with some well defined scope of contract aredelivery models and by leveraging degree of accuracy and standardiza- essential to measure outcome of thebetter technology. tion of processes and technology. services.29 Globalservices www.globalservicesmedia.com April 2011
  • BPO Also, it is extremely important a model in which the responsibilities absorb the risk involved with innova-that the buyer understands the level for risk mitigation and maximizing tion, niche players find it tough toof risk the provider must take to returns on investment are shared. initiate innovation. But increasinghelp the buyers achieve the desired Other key benefits of outcome pressure to differentiate themselvesbusiness outcome. It requires that based pricing models – from the peer will drive niche playersthe buyer have a deep level of trust • Redu to join the innovation wave. Imaginein the provider — not only its capa- • Enables service providers to rise the transformed face of the BPO sec-bilities but also its continual dem- in the value chain tor when innovations would be driv-onstration of partnering. It requires • Encourages “value creation” en from players across the bands of“partnership” relationship between and “innovation” in delivery BPO sector. The industry is eagerlythe buyer and service provider with models looking forwards to this phase of thestrong governance and relationship • Enables buyer and service BPO market. GSmanagement. The senior leadership providers to align businessof both sides requires higher degree objectives kumar Parakala is head of it advisory,of collaboration. To further solidify Most of these innovations are kPMG EMa & india and chief Operatingthe commitment of both parties to a being led by the leaders in the BPO Officer, advisory in kPMG in india. he isvalue-adding partnership, employing market. Due to lesser capacity to also a global head for Sourcing advisory.30 Globalservices www.globalservicesmedia.com April 2011
  • xperts by Vineet Ramachandran, Analyst at ValueNotes Sourcing Practice Keeping Pace with technology is Key for LPos technology has played an integral role in the outsourcing industry. in the knowledge services outsourcing segment especially, there has been a quick evolution of technology, tailored to multiple verticals and services.t he egal process outsourc- from third party software vendors. A LPOs differentiate themselves in this ing (LPO) industry is one small percentage of LPOs have also segment however, is the manner by such segment that has seen developed proprietary platforms that which they are able to integrate these tremendous growth in are available for their clients should industry generic tools into their exist-terms of technology from its incep- they choose. As these platforms con- ing LPO specific software platforms.tion. Technology is now a focal point tinue to evolve ever so rapidly, the This is primarily to streamline andin almost every facet of LPO services, automation of lower value work will make their processes more efficientfrom being an enabler of services to increase thereby leaving lawyers with and cost effective.monitoring workflow. It offers service the opportunity to tackle medium to Within LPO service offerings,providers the opportunity to widen high value services. technology is used for workflow man-their scope of offerings. The inclusion of workflow manage- agement. Various LPOs have differ- Technology’s greatest impact on ment and data security, two elements ent work flows tools ranging fromLPO services is through its ability where technology once again rears tracking attendance of employees toto facilitate easier and more thor- its head, are not limited to the LPO something as advanced as monitoringough delivery of their services. Legal space. These tools are commonly used employee productivity. For example,services such as contract manage- across businesses and services. How for clients that are being billed by thement or litigation support make useof software platforms for a varietyof reasons. With document reviewspecifically, having to sift throughthousands of documents manuallywould take up too much lawyer time.With a software platform, docu-ments can be scanned fairly quicklyto determine which of them mightbe relevant to the litigation suit theclient is involved in. This automa-tion of high volume work increasesthe time lawyers can spend on othertasks for the client. Having a singleplatform for managing multiple cli-ent contracts can drastically can makethe task of abstraction or redliningeasier for employees. Platforms usedfor such services are generally sourced31 Globalservices www.globalservicesmedia.com April 2011
  • LPO the completion of work LPOs also have dedicated bandwidth to ensure smooth uploads and downloads by their employees. The points above serve as testament to the fact that technology is an impor- tant asset across levels in LPO serv- ices. Going forward, technology tools will help broaden the range of services offered. Healthy competition amongst software vendors to remain market lead- ers will also benefit clients by giving them greater flexibility and variety when choosing software platforms. The opportunity costs for parties involved in this technological progres- sion should not be overlooked. With LPOs having their pick of cutting edge platforms, costs will continue tohour, there are software tools in the in-house at times based on client decrease while the efficiency and speedmarket that enable LPOs to monitor requirements. by which they are able to deliver legalexactly how many hours an employee Technology also plays a huge role services globally will increase. This inspends on a particular project or task. with respect to data security. With turn will put added pressure on soft-This makes billing the client easier by the constant upload of documents, ware developers to keep themselvesensuring that the number of hours often in the hundreds of thousands, updated on the requirements of buy-required by the client has been ful- maintaining the confidentiality and ers to remain competitive. IT/BPOfilled and being able to offer the client ensuring safe storage of these docu- players, the true technology giants,cost predictability from the start of ments becomes a key concern for should have an advantage by beingthe project. Managers also use tools to clients. Technology from the side of able to churn out highly sophisticatedkeep themselves updated on the status the LPO ensures this information home-grown software that can beof projects being worked on to ensure is stored on secure servers with the used internally and licensed for exter-deadlines are met. These tools, much ability by either party to access any nal use as well. GSlike software platforms, can yet again or all files at any given point in timebe sourced from third party vendors, using encrypted passwords. With a vineet ramachandran is analyst at valueprovided by the client or developed constant reliance for client files for Notes Sourcing Practice32 Globalservices www.globalservicesmedia.com April 2011
  • xperts By Nigel Hughes, Global Services Director, Compass Management Consulting BPo: Where’s the innovation? recent surveys suggest that organizations seeking innova- tion from BPo initiatives often fail to achieve desired results. A variety of factors are at play, including mismatched expec- tations, poorly defined objectives and governance structures, and a lack of clear measures to chart progress. What can clients and service providers do to more effectively drive innovation from BPo arrangements?F or client organization execu- The topic of innovation was central tives managing BPO rela- to a recent BPO Executive Roundtable tionships, the goal of “inno- discussion held in conjunction with vation” continues to be elu- the Sourcing Interests Group Summitsive. Part of the challenge lies in “Specifically, a in Amelia Island, Florida. Thedefining innovation and recognizing Roundtable comprised senior execu-and quantifying it after the fact. Then “30/70” approach tives, primarily from financial serv-there’s the issue of mixed signals andunrealistic expectations – “but we to client/service ices organizations, and focused on key challenges and opportunities in thewant cost reduction and innovation.” provider resourcing BPO space. Bill Huber, Partner andAnd, there’s always the sticky question Director of CPO Services at sourc-of who’s responsible for delivering was seen as ing advisory firm TPI, co-chaired theinnovation, and who’s to blame when discussion and shared his and par-it doesn’t happen. necessary to ticipants’ observations. (Compass and address the cultural TPI are both owned by ISG, Inc.) According to Huber, the Roundtable challenges posed by participants collectively defined inno- vation as “a dramatic game changer a bPo engagement, exemplified by improved margins, while the “10/90” reduced risk, delighting customers, and new capabilities.” Agreeing on resourcing model what is meant by innovation may seem like a minor point, but it’s actu- typically used ally central to the overall discussion. for ito was not For one thing, as one participant said, “Sometimes we confuse productivity appropriate improvements with innovation.” There’s a somewhat related issue of for bPo. ” unrealistic expectations. According to one participant, “How can we33 Globalservices www.globalservicesmedia.com April 2011
  • BPO the customer’s fault. Thirty percent, speed and effectiveness of both the meanwhile, felt it was the shared service provider’s innovation genera- responsibility of client and service tion and the client’s disposition cycle. provider, and a somewhat surprising Process efficiency – specifically the 0 percent blamed the provider. application of technology to eliminate So what are the keys to a suc- process inefficiency – was also cited cessfully innovative BPO arrange- as an area of opportunity. Indeed, ment? At a high level, the Roundtable Compass analyses of outsourced busi- concluded that innovation requires ness process operations in the financial partnering and mutual commitment services sector confirm that significant – no surprise there. More specifically, improvements can be made in many says Huber, the participants discussed environments to streamline redun- possible ways to build shared incen- dant and unnecessarily people-inten- tives into BPO agreements. “For sive processes, as well as to improve example,” says Huber, “you might processes where technology has beenexpect providers to reduce our costs build X number of Provider consult- applied to simply automate inefficientby 30 percent, deal with 30 percent ing hours into the contract to identify ways of doing things.attrition, and understand our busi- and quantify opportunities for process The Roundtable concluded thatness sufficiently to innovate?” Well, transformation or creating new sourc- effective BPO required moreone could argue that clients’ unreal- es of value. “Gainshare” approaches hands-on management than ITistic expectations are often fueled by for both the service provider and the outsourcing. Specifically, a “30/70”vendors’ unrealistic promises. That customer to share in the benefits of approach to client/service providersaid, it’s certainly true – as one par- innovation provide another powerful resourcing was seen as necessary toticipant pointed out – that the cost incentive.” address the cultural challengesreduction pressures faced by BPO Another critical issue is measur- posed by a BPO engagement, whileservice providers trump opportunities ing innovation and its impact on the the “10/90” resourcing model typi-to innovate. business. Roundtable participants cally used for ITO was not appro- The Roundtable participants (all of discussed ideas around how to track priate for BPO GSwhom were client organization execu- the acceptance rate of innovative ideastives) were clearly not in an accusa- introduced by the service provider Nigel hughes is Director of Global Servicetory mood when assessing blame. team through an innovation review Development at compass Management con-When asked, “When innovation fails and dispositioning process as part of sulting. Bill huber is Partner and Directorto occur, whose fault is it?” 70 per- the strategic governance framework. of cPO Services at tPi.cent responded that it was entirely The best frameworks will report the34 Globalservices www.globalservicesmedia.com February 2011 April