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NASSCOM BPO Summit 2012 Session6: Verticalization - Gaurav Gupta
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NASSCOM BPO Summit 2012 Session6: Verticalization - Gaurav Gupta

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  • 1. Verticalization: Going beyondOrganization StructureAjay Gupta – Principal, A.T. Kearney
  • 2. Large contribution of horizontal services in the rapidindustry growth has driven current business modelExport revenue split of Indian BPOs(USD billion) 15.9 Core Operation Organizational focus 2.2 processes Relatively on horizontal services 12.4 Industry traditionally led to 2.8 Knowledge Specific 1.8 Services 9.9 1.4 2.0 • Inability to infuse Customer industry specific 1.7 6.7 Interaction thinking Services Relatively 5.4 Industry • Limited impact on 4.3 business outcomes Finance and Agnostic Accounting • Inefficient decision- 3.6 2.7 Others 2.1 making when dealing 0.6 (HR, PO etc.) with diverse client 0.4 0.5 stakeholders 2008 2010 2012E 2
  • 3. Vertical specific process are witnessing higheradoption, as “Proof of Concept” has been establishedCase example – BPO activities in Telecom Payroll Training & Pensions, FiHorizontal Support & hiring nancial Emerging Areas Overhead Procurement, reporting, et F&A Logistics c. Customer data Customer Billing, Cred management Mgmt. QRC it & Activation / Collection, ProvisioningVertical Outbound Lead generation, Sales sales analytics Marketing & Product Campaign Market Pricing analytics and Product lifecycle Management research product design Development management High Low Adoption Level of outsourcing AdoptionMore than one-third of the future market opportunity in Telecom will bedominated by industry specific requirements 3
  • 4. With the maturity of market, Indian BPO areprogressing towards becoming transformation partnersStrategic Indian BPOs Today Core Functions Transactional Scope Transformation Partner Support Client NeedTactical Level of Client Need • Reduce cost of • Value added services operations • Strategic partnership • Need for client • Outsource non-core • Innovative solutions specific solutions functions • Outcome-based Implications • Service offering for • Vertical expertise in • Process for BPOs back-end operations focus areas transformation • Competitive pricing • Customized solutions • Integrate technology with BPO offerings TimeIndustry knowledge is key for BPOs to drive transformation for their clients 4
  • 5. BPOs have started verticalization to develop industryrelevant value propositions • Alignment with future customer needs Company • Articulation of horizontal and vertical strategy Strategy • Leadership development• Depth of • Defining market and services based verticalization in Service Offering on strategy Sales, • Platform development Solutioning, Delivery and Organizational KPIs and • KPIs to enable change – defining Support Structure Governance accountabilities and control• Reporting • Skill sets, knowledge and relationships Organizational Capability competencies development Enablers • Managing behavioral change • Alignment of hiring, training with Strategy and Org. Structure • Talent managementVerticalization by BPOs is defined as alignment of their strategy, offering andoperating model to meet the needs of specific industry verticals 5
  • 6. However, the approach to verticalization has beenpiece-mealState of Verticalization – Indian BPO players Horizontally aligned model Vertically aligned model Company Company Strategy Strategy Service Service Offering Offering Organizational KPIs and Organizational KPIs and Structure Governance Structure Governance Organizational Organizational Capability Capability Enablers Enablers 6
  • 7. Indian BPOs need to take a comprehensive view to re-align the overall business model Vertically aligned model • Only some players have vertical specific goals and investment targets Company Strategy Service • Few are able to offer end-to-end industry solutions Offering • Most BPOs have verticalized the only the sales Organizational KPIs and function Structure Governance Organizational • KPIs and Governance have kept pace with Capability organization structure • Shift towards developing vertical specific Enablers capabilities • Largely aligned to evolution in organization structure 7
  • 8. Verticalization efforts of Indian BPOs so far havelargely been limited to Organization Structure Fully Horizontal Model 10-15% Verticals 50-60% Verticals V1 V2 V3 V1 V2 V3 Organization Organization Sales Sales Solution Solution Delivery Delivery Support Support Fully Vertical Model ~15% Verticals 10-15% Verticals V1 V2 V3 V1 V2 V3 Organization Organization Sales Sales Solution Solution Delivery Delivery Support SupportThe depth of verticalization varies across BPOs; verticalization of Sales is amore secular trend now 8
  • 9. Industry is at cross roads and BPOs need to makedefinitive strategic choicesImperatives and Implications • 2-5% erosion in rates; Status Quo - reduced volume growth Diffused vertical & • More easily replicable horizontal offering business model; greater competition Strategic Develop Vertical • 5-8% higher top-line growth options Capability based compared to market Differentiation Become a • Non-linear revenues Horizontal • Need for scale and Specialist efficiencyThe industry is at a cross-road - Clear selection, articulation andimplementation of a strategic path is necessary 9
  • 10. Horizontal players will need to differentiate based onservice capabilities while balancing any vertical needsAction themes• Differentiated • Vertical front-end to capabilities based on enable translation of client tools, platforms, Develop deep Develop vertical needs processes horizontal focused sales • Embed vertical focus in• End-to-end horizontal capabilities and and solution- solution design capabilities platforms design Key Action Themes• Leverage learning from • Develop strategy to other industries to Drive value Create address process-scope create customer value through cross- incubation centers beyond horizontal Industry for sub-scale learnings processes 10
  • 11. To evolve to a sustainable verticalized structure, BPOsneed to develop capabilities to deliver increased valueAction themes for Vertical Play Strategic Create/ Enhance alignment verticalized toward higher operating model verticalization and enablers Increasing Virtuous circle Align entire Customer demand organization to by delivering of Successful higher higher value Verticalization verticalization Create value for Develop customers industry specific through industry capabilities and insights platformsBPOs will need to continuously innovate as increasing competition will negatedifferentiation even in vertical offerings 11

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