BPO: 3 Rules To Live By

Everest Report Forecasts 20% All Eyes Are on Latin New Face of The BPO
Growth in FAO Pg 8 America Pg 20 Sector Pg 27

www.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 matters

For more information write to niketac@cybermedia.co.in

Global ServiceS
A CYBERMEDIA PuBlICAtIon
An integrated media platform which connects the
various 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 Mathew
NewSletter President

A regular digest of key industry happenings. Ed nair
Editor
DiGital MaGaziNe
ed@cybermedia.co.in
The fortnightly digital magazine features research
reports, articles and experts’ views. Available on Satish Gupta
www.globalservicesmedia.com Associate Vice President

webiNarS satishg@cybermedia.co.in

Global Services’ web-based seminars aim to impart Smriti Sharma
useful information related to outsourcing indus- smritis@cybermedia.co.in
try in the form of presentations and discussions
by industry specialists. niketa Chauhan
niketac@cybermedia.co.in
reSearch
We deliver indepth analysis and research reports Global Services
on sourcing subjects. Cyber Media (India) Ltd.
CyberHouse, B- 35, Sector 32
MicroSiteS
Gurgaon-122001, India
Online resource center designed to provide
Tel: +911 24 4822222
focused content on special subjects to the out-
sourcing community. Fax: +911 24 2380694

Contact:
eveNtS
globalservices@cybermedia.co.in
From multi-day, high-level, resort conferences to
intimate breakfast discussions we offer a number
Disclaimer
of opportunities that connects the outsourcing
community. All rights reserved. No part of this publication may be reproduced
by any means without prior written permission from the publisher.
cUStoM ProGraM
Customized services rendered through different letterS to the eDitor
media platforms. Send letters to ed@cybermedia.co.in, or to
any of our writers. We reserve the right to edit
oSoUrce booK all letters. Postings submitted to our blogs and
A directory of global outsourcing service providers. letters to the editor may be published in our
www.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 xperts
EVEREST REPORT FORECASTS 20% NEW FacE OF thE BPO SEctOr 27
GROWTH IN FAO
by kumar Parakala, kPMG
by Smriti Sharma
FAO market growth continues to see strong adoption across
most industries with manufacturing, financial services, retail,
kEEPiNG PacE With EvOlviNG
travel and logistics, and energy and utilities accounting. tEchNOlOGy kEy FOr lPOS 31
by vineet ramachandran, analyst at valueNotes Sourcing
15 Practice
What’S DriviNG thE FaO MarkEt? BPO: WhErE iS thE iNNOvatiON? 33
by Smriti Sharma By Nigel hughes, Global Services Director, compass
FAO demand will continue to come from late adopters; the
Management consulting
mid-market also has strong potential

18
DElivEriNG PrODuct Quality aS a MaNaGED
SErvicE iN OutcOME-BaSED MODEl
by Ed Nair
Outsourced product development is no longer about engineering
at lower cost. The process of product engineering is now more
value-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.

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, although
BPO 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 have
Things 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 Outsourcing

Everest report Forecasts
20% Growth in FAo
FAo market growth continues to see strong adoption across most
industries with manufacturing, financial services, retail, travel and
logistics, and energy and utilities accounting for 70-75 percent of
total FAo spending in 2010.

by Smriti Sharma

t
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 more
percent 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,” added
contracts 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 a
contract 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 5-10
Capgemini, Infosys BPO and HP as leading service providers. percent of the overall potential, implying a significant value
Other service providers in the analysis include TCS, Wipro, creation opportunity.
WNS, ACS-Xerox, Steria, Vengroff Williams
& Associates (VWA), Outsource Partners
International, Cognizant, EXL Services and
Intelenet. Also included in the report are emerg-
ing providers: iGate-Patni, Minacs, HCL and
KPIT Cummins Infosystems.
According to the study, in 2010, ACV grew
almost 15 percent in comparison to about 10
percent growth during 2009, and total contract
values (TCV) of new engagements reached $5
B. The FAO market reached $3.5 B in ACV in
2010, representing about $28.5B in total FAO
spending.
“Last year saw a strong rebound in multi-
process FAO adoption, which we expect to
continue this year as buyers look to reduce costs
and optimize processes. However, buyers remain
cautious and adopt a more phased approach
rather than going in for big-bang solutions,”
articulated Gaurav Gupta, managing partner,
Everest Group.

8 Globalservices www.globalservicesmedia.com April 2011


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-based
sented 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 locations
or 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. GS


3
Tools & Technologies

bpo: Rules to
Live by

10 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.


Special Report

BPo: 3 rules to Live By
Convergence, process performance, and analytics define the vector for
the growth of BPo.

by Ed Nair

t
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) or
stantly compared to its other famous cousin, the IT serv-
financial management and accounting software, payments, or
ices industry. Once very dissimilar with each other, there
a billing system, for example.
is now more similarity than ever. Comprised of a motley
set of horizontal and vertical industry-specific processes Platform-based BPO usually involves the development
or 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 services
dispersion and yet presents dense clusters of strengtOver- are delivered using a per transaction-based pricing model
laying all the varied dynamics of business and underlying (rather than per FTE-based). Consequently, platform BPO
all the varied forces of economic change, there are three can be thought of having four stages: hosting (involves
rules 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 retrieval
systems, and such had speeded up work in
many document-intensive processes. But the
advent of IT-based solutions that automate
specific parts of the process lent further
improvement in efficiency. For example,
solutions dedicated to processing insurance
claims or processing mortgage applications,
automated the process to deliver better effi-
ciency and required lesser resources. At one
level, this could be called as the integration
of process with technology, but at another
level, it could be called as the integration of
IT with operations.
There is a shift in approach by BPO vendors
to having increased focus on technology devel-
opment. BPO vendors with the parentage of an


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 in
limit. It is now time to relook
the survey place equal
at the process from the point
importance on improv-
of view of business outcomes
ing overall company
and tie it into delivering some
performance and on
of the performance goals.
improving the efficiency
Check 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, lower
by CFO Research Services
cost, less rework) are a
and Genpact, the respond-
high priority for their
ents showed that they take
improvement initia-
a broad view of the benefits
tives, but just as many
of process improvement
(55%) place a high pri-
throughout their organiza-
ority on the ability of process improvements to improve
tions. Many of them link process improvement to overall
company performance overall.
company performance—not just to process efficiency.

Source: cFO Research Service Report 2010


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 of
Analytics is about tapping into the embedded intelligence
the BPO deal unless business outcomes are specified as
of a system. Analytics helps in identifying patterns in
part of the deal deliverables. A
behavior and performance and
recent report on analytics offshor-
is both diagnostic and prescrip-
ing by HfS Research, titled ‘Where
tive. The application of analytics
Offshore Analytics is Heading in
in other spheres like marketing
2011’, states:
and engineering have yielded
“Analytics straddles across data
results that go beyond improv-
management, MIS reporting, pre-
ing efficiency to delivering
dictive model development, and
better outcomes and therefore
business consulting. We explored
higher 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 recommend
decision-making power and
tjat the business need ultimately
agility from analytics that run
must determine the nature of bun-
across various business func-
dling for clients, along with the
tions, but it is a very challeng-
organization’s level of experience
ing proposition to put into
with analytics. When analytics is
practice. 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-level
parameters 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.” GS



What’s driving the FAo Market?
FAo demand will continue to come from late adopters; the mid-mar-
ket also has strong potential

by Smriti Sharma

J
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 reason
ing FAO service providers tracked by Everest, 18 have being a lot of multinationals - which are uS and
delivery presence in India with close to 80 delivery continental Europe based- have done their first
centers when taken together. Gaurav Gupta, managing wave of FAO, where they obviously focused on high
partner, Everest Group, said “India continues to be the impact geographies like uS or uK or continental
location of choice for offshoring F&A services.In 2010, Europe are now focusing on their second or third
the maximum FTE growth took place in Indian tier-2 wave outsourcing through the new market. These
locations, followed by South East Asia, and Central & economies are creating companies that are growing
South 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 also
vider 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 growth
years India has also emerged as a buyer geography for FAO. platforms along with delivering process excellence
Last 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 in



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 time



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 to
GS: 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 led
pure play BPO players and F&A technology providers. FAO solutions and end-to-end managed platform for
There are multiple drivers behind this strategy including Automating Legacy Processes
the need for non-linear growth, higher revenue productiv- * Blue Ocean Strategy is a business strategy book first
ity & ability to provide value added services. This would published in 2005 and written by W. chan kim and renée
also result in additional platform based offerings, mostly Mauborgne. Blue oceans denote all the industries not in
targeted 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 than
services (e.g. FP&A type services).Service providers will have fought over. There is ample opportunity for growth that is both
to develop industry specific analytics capabilities in order to profitable and rapid. in blue oceans, competition is irrelevant
show 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 market
captive FAO SSCs by third party service providers and also space that is not yet explored. GS


Product Development

delivering Product Quality
as a Managed service in an
outcome-Based Model
outsourced product development is no longer about engineering at
lower cost. the process of product engineering is now more value-
driven and quality-focused.

by Ed Nair

o
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 frenetic
new outcomes. In an interview with Global Services,Sunil pace to deliver
Gupta, Head of PQM, Symphony Services offers his per- innovative soft-
spective on product quality management and how these ware releases to
new 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 innovation
ally 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 developments
including 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:


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 reducing
at 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 and
and 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 for
ability is key companies with a multi-site build model.
d. Managed process- to ensure continuous evolution b. Dynamic automation and regression testing–Faster
and improvement and frequent testing ensures that you meet commercial
e. Managed service model -for sustained and continu- grade software requirements for performance, scale and
ous 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 8-10
GS: 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–Symphony
tools and infrastructure. However, realizing the down works to enable optimum utilization of IT infrastructures
fall in this, ISVs have later moved to a managed service by moving to a cloud-based model for development and
model to achieve the desired resulting and benefits, testing. This results in 1.) optimizing cost and 2.) moving
where the focus is still on managing outgoing metrics from a CAPEX to OPEX model and from fixed, dedicated
of QA phase rather than managing quality at each environments to flexible and on-demand provisioning of
stage. 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 conduct
mize PQM? fine-tuning of product quality by performing a causal
SG: 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. GS


Special Report

All Eyes Are on Latin America
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 on how to
make forays into this region.

by Smriti Sharma

R
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 clients
Business process outsourcing (BPO), shared service look at Latin America they look for Spanish language
centers (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 the
ple, 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, and
America 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 term
Similarly, many of the global leaders have presence in in that case, it is going to be probably same cost for
countries 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 same
ment outsourcing have still not started to make best use to go from Europe to India or from Europe to go
of 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.


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 who
look at large global companies, they also see domestic are operating in this location, they are the ones who
business opportunities in Latin America. This is irrespec- know the region and they are the ones who know
tive of outsourcing. which are the countries that bring the best benefit
Speaking of how Genpact’s client feels about their depending on what you want to do.”
chosen locations -Juarez, Mexico and Guatemala. Mary
Korthuis, vice president and operations lead, Mexico Recommendations for buyers
and 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 significant
Other customers are fine and continue to travel in and differences across the region in terms of cost and labor
out with no concern. Besides the city issues, customers pool. For example, between Brazil and Argentina, Brazil
are 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 zeroing
resources 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 of
Technology is all in the uS, so for all intensive pur- talent pool in skills and language capabilities across
poses – 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 fairly
reflect 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.”


All Eyes on Latin America

Recommendations 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 mistake
as 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 America
America fits in the global play needs to be very clear and that might not make good call center locations because they
there are lots of differences across the cities and countries don’t have the workforce in place, so service providers need
so people need to be very clear on how they need to to carefully assess what kind of business they want to put in
use 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 to
nity, 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 all
ask 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, 2011


Special Report

Country 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 Latin
just mix what you have in terms of talent, what you have America, especially in Call Centers. The number of local
in terms of cost, infrastructure, countries been stable.. if and foreign BPO suppliers operating in Colombia and
you 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 confidence
is 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: 3.08
the 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 in
huge potential there.” operation and 50% of households linked to broadband
The report, a New World Option for Offshoring, states by the end of 2011
Wipro has developed a ranking methodology to help 3. Chile: Ranking 2.98
organizations decide which of these countries would offer Chile is ranked as one of the best Spanish-speaking
the greatest benefits based on their needs and priorities. delivery locations. It’s pushing to grow in the sector by
The 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: 2.91
business 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 in
high crime rates has slowed investments by corporations. the business model to ensure benefits realization in the
However, during Alvaro uribe’s presidential period, secu- long term.
rity and crime rates have improved significantly. Today, 5. Mexico: Ranking: 2.70
countries 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. GS

Source: Wipro consulting research (5=Most cost effective)


All Eyes on Latin America

“We look out for oversaturation
in markets where we compete
for resources”
Excerpts from an interview with don Berryman, general manager of
Americas at sitel

by Smriti Sharma

GS: 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 client
growth 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, its
count 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 true
focusing on the service of English and Spanish-speaking opportunity.
u.S. consumers. As an innovator, Sitel first entered
Nicaragua in 2008 to provide customer and tech sup- GS: How has this destination helped you offer specific
port 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 convenient
product lines. Three years later, we continue to expand travel time and time zone alignment. It takes a full day to
in this area due to the location’s unique ability to offer travel to the Philippines or India, and clients are forced to
culturally 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 work
center provider in this country. And with the ongoing to be completed during uS business hours lend themselves
support of organizations such as ProNicaragua, as well as to a working location in this general time zone.


Special Report

GS: what challenges are you facing? If any, what are GS: what’s the methodology followed at a company
your barriers to increased investment? like Sitel?
DB: Sitel is always on the lookout for oversaturation DB: Great talent. Agents and front line supervisors are
in a market where we are competing for resources with the foundation of our business and Sitel always builds our
our 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, and
to 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 if
a 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 new
place 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. GS


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. Back
industry. On demand end, cost arbi- for shift of BPO industry from office operations such as invoicing
trage has become baseline for the “commodity behavior” to “partner- processes gained from improved and
buyers and now they are expect- ing behavior”. In this new phase, optimized processes. Analytic models
ing 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 customer
and 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. Buyers


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 of
Features 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 Infrastructure
operation and increased throughput ture. It also allows the delivery from as a Service (IaaS), Platform as a
of operations. Back office operations being “people centric”, as in the Service (PaaS), and SaaS as well
that 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 expertise
practices. providers, which have strong pres- and labor arbitrage. In addition,
Other key benefits of improve- ence in IT application development BPaaS offerings will provide a
ment 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 across
high 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 reducing
effectively. 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 by
cater to dynamic needs of buyers will based services are – using a pay-as-you-go pricing
play 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 on
innovative business model that local statutory norms and investments, and solutions
industry is very excited about. The internal controls. where they do not have to
matured 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 provide
esses, the underlying platform and time-to-market by leveraging the platform for service providers of


BPO

all shapes and sizes to re-energize tra-
ditional outsourcing services and also
to launch new services. There will be
significant traction. BPaaS will force
people to standardize their processes.
Infrastructure and software become
more of a choice that allows buyers
to leverage the right ecosystem.
Innovation in pricing models-
Traditionally, business proposition
of most of the service providers cen-
tered around cost arbitrage, which
led to widespread adoption of “input
based” or “FTE based” pricing. With
customer focus moving to achieving
higher efficiency and productivity
as well as sharing risks, innovative
pricing models are becoming increas-
ingly significant.
transaction based pricing is one
such innovative pricing methodol-
ogy that is catching up in the indus-
try. Pricing of the deal is based on
number of transaction processed by
the 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 impactful
ning and end point, is essential for • Offers buyers flexibility change that BPO industry might
implementation of transaction based and scalability as pricing is undergo in next five years. As per
pricing model. Deep understanding dependent on consumption this model, the service provider is
of processes, well defined methodol- • Enables buyers to effectively paid as per contribution made by
ogy and unambiguous service level monitor costs due to enhanced services to achieve buyer’s business
agreements 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 relationship
er to decide the number of resourc- due to higher efficiency goes beyond cost. They deliver
es and time allocated to execute • Creates more value and own- a measurable impact on the end
a “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 the
agreements. Service provider man- • Gives service providers higher service provider, enabling them to
ages 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 core
multiple 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 understanding
price 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 and
of every resource through innovative volume of transactions with some well defined scope of contract are
delivery models and by leveraging degree of accuracy and standardiza- essential to measure outcome of the
better technology. tion of processes and technology. services.


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 to
of risk the provider must take to returns on investment are shared. initiate innovation. But increasing
help the buyers achieve the desired Other key benefits of outcome pressure to differentiate themselves
business outcome. It requires that based pricing models – from the peer will drive niche players
the buyer have a deep level of trust • Redu to join the innovation wave. Imagine
in 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 eagerly
the buyer and service provider with models looking forwards to this phase of the
strong governance and relationship • Enables buyer and service BPO market. GS
management. The senior leadership providers to align business
of 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 Operating
the commitment of both parties to a being led by the leaders in the BPO Officer, advisory in kPMG in india. he is
value-adding partnership, employing market. Due to lesser capacity to also a global head for Sourcing advisory.


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 and
in almost every facet of LPO services, automation of lower value work will make their processes more efficient
from 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 from
LPO services is through its ability where technology once again rears tracking attendance of employees to
to facilitate easier and more thor- its head, are not limited to the LPO something as advanced as monitoring
ough 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 the
ment or litigation support make use
of software platforms for a variety
of reasons. With document review
specifically, having to sift through
thousands of documents manually
would take up too much lawyer time.
With a software platform, docu-
ments can be scanned fairly quickly
to determine which of them might
be relevant to the litigation suit the
client is involved in. This automa-
tion of high volume work increases
the time lawyers can spend on other
tasks for the client. Having a single
platform for managing multiple cli-
ent contracts can drastically can make
the task of abstraction or redlining
easier for employees. Platforms used
for such services are generally sourced


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 to
hour, there are software tools in the in-house at times based on client decrease while the efficiency and speed
market that enable LPOs to monitor requirements. by which they are able to deliver legal
exactly how many hours an employee Technology also plays a huge role services globally will increase. This in
spends 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 themselves
ensuring 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/BPO
filled 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 being
the project. Managers also use tools to clients. Technology from the side of able to churn out highly sophisticated
keep themselves updated on the status the LPO ensures this information home-grown software that can be
of 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. GS
like software platforms, can yet again or all files at any given point in time
be sourced from third party vendors, using encrypted passwords. With a vineet ramachandran is analyst at value
provided by the client or developed constant reliance for client files for Notes Sourcing Practice


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 Summit
sive. Part of the challenge lies in “Specifically, a in Amelia Island, Florida. The
defining 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 and
unrealistic expectations – “but we
to client/service ices organizations, and focused on key
challenges and opportunities in the
want cost reduction and innovation.” provider resourcing BPO space. Bill Huber, Partner and
And, 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 the
innovation, 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 we


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 been
expect providers to reduce our costs build X number of Provider consult- applied to simply automate inefficient
by 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 that
ness sufficiently to innovate?” Well, transformation or creating new sourc- effective BPO required more
one could argue that clients’ unreal- es of value. “Gainshare” approaches hands-on management than IT
istic 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 provider
said, it’s certainly true – as one par- innovation provide another powerful resourcing was seen as necessary to
ticipant pointed out – that the cost incentive.” address the cultural challenges
reduction pressures faced by BPO Another critical issue is measur- posed by a BPO engagement, while
service 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 GS
whom were client organization execu- the acceptance rate of innovative ideas
tives) were clearly not in an accusa- introduced by the service provider Nigel hughes is Director of Global Service
tory 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 Director
to 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 the

April

BPO: 3 Rules To Live By

More Related Content

What's hot

Similar to BPO: 3 Rules To Live By

More from Niketa Chauhan

Recently uploaded

BPO: 3 Rules To Live By