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Thanks to these Gold Level Sponsors:

  1. 1. Thanks to these Gold Level Sponsors:
  2. 2. Presents: The Economics of Managed Outsourcing
  3. 3. <ul><li>Project Management </li></ul><ul><li>Finance & Accounting Support </li></ul><ul><li>System conversion and integration </li></ul><ul><li>Due Diligence Analysis </li></ul><ul><li>Litigation Support </li></ul><ul><li>Year End Support </li></ul><ul><li>Start Up Services </li></ul><ul><li>Mergers & Acquisition Integration </li></ul>Accounting & Finance <ul><li>Project Management </li></ul><ul><li>Internal Audit Services </li></ul><ul><li>Business Risk & Compliance Services </li></ul><ul><li>Technology Risk Management Services </li></ul><ul><li>Information Technology Audit </li></ul><ul><li>Quality Assessment Reviews </li></ul><ul><li>Fraud & Forensic Reviews </li></ul><ul><li>Audit Committee Advisory </li></ul>Enterprise Governance Business & Technology <ul><li>Solutions Delivery </li></ul><ul><li>Project & Program Management </li></ul><ul><li>Business Process Improvement </li></ul><ul><li>IT Strategy </li></ul><ul><li>Solutions Delivery </li></ul><ul><li>Enterprise Systems </li></ul><ul><li>Organization & Human Performance </li></ul><ul><li>Interim IT Management </li></ul><ul><li>Instructional Design & Training </li></ul><ul><li>Merger & Acquisition and Divesture Services </li></ul><ul><li>IT Quality Management </li></ul>Established in 1981 , Horn Murdock Cole is a national professional services firm providing non-attest accounting, tax, finance and corporate governance services with a staff of over 1,100 experienced professionals. HMC is an Accretive Solutions, Inc. company.
  4. 4. &quot;Large firm expertise, midsize firm value, small firm responsiveness&quot; <ul><li>Tax planning and controversy </li></ul><ul><li>Business litigation </li></ul><ul><li>Construction law </li></ul><ul><li>Corporate, securities & finance </li></ul><ul><li>Commercial real estate </li></ul><ul><li>Estate planning </li></ul>
  5. 5. The Economics of Business Process Outsourcing: Measuring the potential impact for high technology organizations
  6. 6. Don Campbell – President/CEO Virtual Management Technologies Tom Savini – CFO AirDefense Mike Drapeau – President The Drapeau Group Karen Cobb – Small Business Advocate Administaff Scott Kriscovich – Market Leader Horn Murdock Cole Mike Janis – Senior Vice President The Hackett Group
  7. 7. <ul><li>Topics Today: </li></ul><ul><li>The state of the BPO market </li></ul><ul><li>The key benefits of BPO </li></ul><ul><li>The impact of BPO on stages of growth </li></ul><ul><li>The financial impact of BPO </li></ul><ul><li>Guidelines on what functions to outsource </li></ul>
  8. 8. <ul><li>BPO Terminology: </li></ul><ul><li>Business Process Outsourcing: “leveraging of technology or specialist process vendors to provide and manage an organization's critical and/or non-critical enterprise processes and applications” </li></ul><ul><li>Outsourcing: “delegation of non-core operations to a third party” </li></ul><ul><li>Offshoring: “delegation of non-core operations to a third party in another country” </li></ul><ul><li>Insourcing: “importation of knowledge worker talent to an organization (often used in economics to depict inflow of talent or exchange of talent among countries)” </li></ul>Digital Health Group
  9. 9. The BPO Revolution Broadband Internet Business Specialization Educational Attainment Inexpensive Data Storage Online Analytical Processing Internet Security BPO Drivers Essentials of Business Process Outsourcing Thomas N. Duening, Rick L. Click 2005
  10. 10. <ul><li>BPO is a $400 billion business (Plunkett Research Ltd.) </li></ul><ul><li>Largest sectors: </li></ul><ul><ul><li>Logistics, sourcing and distribution services </li></ul></ul><ul><ul><li>Information technology services </li></ul></ul><ul><ul><ul><li>Creation of Software </li></ul></ul></ul><ul><ul><ul><li>Computer Center Management </li></ul></ul></ul><ul><ul><li>Call centers </li></ul></ul><ul><ul><li>Financial transaction processing </li></ul></ul><ul><ul><li>Human resources management </li></ul></ul>
  11. 12. <ul><li>Outsourcing for small to mid-size companies: </li></ul><ul><li>Market value >$15 Billion (Gartner) </li></ul><ul><li>Cost savings ranging from 10-40 percent </li></ul><ul><li>Advantage: Level the playing field (cutting operational costs and leveling the playing field) </li></ul><ul><li>Challenges: </li></ul><ul><ul><li>Selection process </li></ul></ul><ul><ul><li>Negotiating contract </li></ul></ul><ul><ul><li>Managing the ongoing relationship </li></ul></ul><ul><ul><li>Measuring the business value </li></ul></ul><ul><ul><li>Security and privacy </li></ul></ul>
  12. 13. “ In 2005, according to the findings in the report, Georgia outpaced the national growth rate for total high-tech establishments with a 2.2% increase vs. the 1.8% national growth rate. The state also posted impressive gains in total high-tech payroll growth with a 6.2% gain vs. the 6.0% realized nationally.” Tino Mantella President,TAG State of the Industry Report, 2006
  13. 14. <ul><li>Why do organizations outsource? </li></ul><ul><li>Gain access to expertise </li></ul><ul><li>Allow staff to focus on core business </li></ul><ul><li>Get rid of routine work </li></ul><ul><li>Reduce internal organizational costs </li></ul><ul><li>Reduce growth risk </li></ul><ul><li>Increase flexibility </li></ul>
  14. 15. <ul><li>What is the core of your business? </li></ul><ul><li>Patentable technology </li></ul><ul><li>Intellectual property </li></ul><ul><li>Manufacturing process </li></ul><ul><li>Software logic </li></ul><ul><li>Business process </li></ul>core
  15. 16. <ul><li>What can be outsourced beyond your core competency? </li></ul><ul><li>Finance </li></ul><ul><li>Human Resources </li></ul><ul><li>Marketing </li></ul><ul><li>IT </li></ul><ul><li>Supply Chain Management </li></ul><ul><li>Call Center Operations </li></ul>core HR MFG SCM IT
  16. 17. <ul><li>When should you outsource? Ask these questions: </li></ul><ul><li>Is the function strategic to running the business, or is it a commodity? </li></ul><ul><ul><li>If the function is strategic, it should not be outsourced. </li></ul></ul><ul><li>Is the function large enough to warrant outsourcing? </li></ul><ul><ul><li>If the function is too small, the company may not get enough leverage from the outsourcing relationship. </li></ul></ul><ul><li>Can the function be easily reproduced off site? </li></ul><ul><ul><li>If it is too unique, outsourcing may not work. </li></ul></ul><ul><li>Do you have the data necessary to write an intelligent contract with measurable objectives? </li></ul><ul><li>Can you manage the outsourcing relationship? </li></ul>
  17. 18. <ul><li>Is BPO working? </li></ul><ul><li>80% of companies claim that outsourcing has increased their competitiveness </li></ul><ul><li>87% of companies say that by outsourcing services have helped in improving the quality of their internal processes </li></ul><ul><li>77% of companies say they could see a significant drop in their process cost by outsourcing </li></ul><ul><li>NOA/NelsonHall, 2006 </li></ul>
  18. 19. ROI Net Margin Sales per Employee Inventory Turns ROI Gross Revenues Market Share Customer Acquisition Cost Cost Reduction BPO Strategic BPO Financial Performance Metrics Essentials of Business Process Outsourcing Thomas N. Duening, Rick L. Click 2005
  19. 20. Total Cost Management Analyze Opportunity Select Vendor Develop Contract Transition Operate Direct Costs Hidden Costs Opportunity Costs BPO Total Cost Management Project Phases Project Costs Mitigates Results in Essentials of Business Process Outsourcing Thomas N. Duening, Rick L. Click 2005
  20. 21. Hype Cycle A Hype Cycle is a graphic representation of the maturity, adoption and business application of specific technologies. Gartner Group
  21. 22. <ul><li>On the Rise: </li></ul><ul><li>Knowledge Process </li></ul><ul><li>Core Banking </li></ul><ul><li>Direct Procurement BPO </li></ul><ul><li>Payment Service BPO </li></ul><ul><li>Insurance Closed-Book BPO </li></ul><ul><li>Multifunction CRM BPO </li></ul><ul><li>Comprehensive Finance and Accounting </li></ul><ul><li>Accounts Receivable BPO </li></ul><ul><li>Revenue Cycle Management </li></ul><ul><li>At the Peak: </li></ul><ul><li>Comprehensive HR BPO </li></ul><ul><li>Mortgage origination </li></ul><ul><li>Accounts Receivable BPO </li></ul><ul><li>Payment Services BPO </li></ul><ul><li>Global Contact Center </li></ul><ul><li>Sliding into Trough: </li></ul><ul><li>Billing BPO for Telecom </li></ul><ul><li>Tele-radiology </li></ul><ul><li>Climbing the Slope: </li></ul><ul><li>Contact Center BPO </li></ul><ul><li>Payroll Outsourcing </li></ul><ul><li>Benefits Administration </li></ul><ul><li>Transaction Print Services </li></ul><ul><li>Billing BPO </li></ul><ul><li>Entering the Plateau </li></ul><ul><li>Telesales/Telemarketing </li></ul><ul><li>Credit Card Processing </li></ul>Gartner Group
  22. 23. BPO: Focus on Finance and Administration
  23. 24. <ul><li>Industry Best Practices: </li></ul><ul><li>“ Finance Shared Services to drive Cost Savings of Over 20%” </li></ul><ul><li>“ Offshoring of Back-Office Functions Could Generate $58 Billion in Annual Savings for Fortune 500” </li></ul><ul><li>“ Despite the Hype, Few Companies Outsourcing Finance While Shared Service Centers Remain the Preferred Option” </li></ul><ul><li>“ Outsourcing Increases HR Costs at Typical Companies, While World-Class Use it to Cut Transaction Processing Costs” </li></ul><ul><li>“ World-Class IT Organizations Spend Less Yet Deliver More – Effective Outsourcing Among Success Factors” </li></ul>
  24. 25. Accounting and finance BPO: - 9% of total outsourcing market in U.S. - Growing at 11% annually Benefits Management What Finance Functions are Outsourced Today? 51 49 38 28 26 22 8 Payroll Claims Administration Tax Compliance Internal Auditing Sourcing Procurement Finance/Accounting Research: Yanlelovich Partners for PwC
  25. 26. <ul><li>Drill Down: Accounts Payable Functions </li></ul><ul><li>Outsourcing is a leading strategy </li></ul><ul><li>Enterprises that outsource reported cost savings approaching 10% for all invoice processing </li></ul><ul><li>20% of enterprises currently outsource some part of their A/P operations </li></ul><ul><li>Another 15% intend to outsource in the near-term </li></ul><ul><li>A/P Automation offers compelling returns but is not widely adopted </li></ul><ul><li>Paper invoices cost between 68% - 76% more to process </li></ul><ul><li>22.7% of invoices are received electronically </li></ul><ul><li>35.4% of invoices are paid electronically </li></ul>
  26. 27. Measuring BPO ROI
  27. 28. Essentials of Business Process Outsourcing Thomas N. Duening, Rick L. Click 2005 High High Low Low High Cost / Low Productivity High Cost / High Productivity Low Cost / Low Productivity Low Cost / High Productivity Hi Hi Hi Hi Lo Lo Lo Lo Mission Criticality Mission Criticality Mission Criticality Mission Criticality Accounting Marketing Shipping EDI IT Productivity Cost BPO Selection Matrix – Manufacturing Co. Example
  28. 29. Source: Strassmann Inc. Source: Strassmann, Inc. 83.2% 71.1% Bottom-ranked 277 firms by return on shareholder equity (median ROE = minus 55.4% ) 54.6% 49.1% Top-ranked 277 firms by return on shareholder equity (median ROE = 18.0% ) Median ratio for low-ranking half Median ratio for high-ranking half Comparison of Outsourcing Ratios for 1,100 Firms OUTSOURCED WORK as a percentage of sales Cheaper, But Not Better
  29. 30. Where do you go from here?
  30. 31. <ul><li>The New Shape of Business: </li></ul><ul><li>Common business processes will continue to standardize </li></ul><ul><li>Technology platforms supporting these processes will standardize – especially in software </li></ul><ul><li>The cost of BPO – as measured by transaction fee – will drop as standardization occurs </li></ul><ul><li>Organizations will gain competitive advantages earlier in the their life cycle </li></ul><ul><li>The definition of an organization’s ‘core’ business will be refined and narrowed </li></ul>
  31. 32. High tech companies should compare the investment necessary to improve their capabilities in the function vs. the amount they would pay an outsourcing partner for the same level of capability.
  32. 33. <ul><li>Summary and Takeaways: </li></ul><ul><li>Understand your ‘core’ </li></ul><ul><li>Keep your knowledge close </li></ul><ul><li>Consider outsourcing non-core or non-critical processes </li></ul><ul><li>Be pragmatic in analyzing your options </li></ul><ul><li>Understand your cost structure – at transaction level </li></ul><ul><li>BPO should add value, not just reduce costs </li></ul><ul><li>A BPO relationship is strategic </li></ul><ul><li>Use industry metrics </li></ul><ul><li>BPO is not a panacea </li></ul><ul><li>Always apply good management </li></ul>core HR MFG SCM IT
  33. 34. Don Campbell – President/CEO Virtual Management Technologies Tom Savini – CFO AirDefense Mike Drapeau – President The Drapeau Group Karen Cobb – Small Business Advocate Administaff Scott Kriscovich – Market Leader Horn Murdock Cole Mike Janis – Senior Vice President The Hackett Group
  34. 35. Thanks to these Gold Level Sponsors: