Business Process as a Service: What can it do for my Mid-Market Company?

July 31, 2012

Business Process as a Service (BPaaS):What Can It Do for My Mid-Market Company?

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Today’s Speakers

David is the Senior Vice President of Client Engagement for Sutherland’s Finance & Accounting Outsourcing Practice. With over 30 years of experience, David has worked as a Partner with Capgemini, and has served as General Manager of Worldwide Financial Services for Microsoft Corporation. During David’s 9 year tenure at Microsoft, his responsibilities were split between running two global businesses as Chief Credit Officer of Microsoft Corporation and President of Microsoft Capital Corporation.  David and his team of 400 professionals managed a global asset of $8 billion in more than 180 countries. 

David Kaminski, SVPSutherland Global Services

F&A Services

Saurabh Gupta, VPEverest GroupBPO Research

Saurabh Gupta leads Everest Group’s BPO research practice. His areas of expertise spans both horizontal BPO services (like F&A and procurement) as well as industry-specific BPO. Saurabh utilizes his strong analytical background and international research experience to create intellectual property and insights into outsourcing trends, implications and industry best practices. He is a published author in leading global services publications, and is a frequent speaker on the subject. He brings an all-rounded perspective on the BPO market leveraging his experience of working with all stakeholders in the global services market including end-clients, service providers, and other influencers like investors, industry associations, and technology providers.

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The Paradox of FAO Adoption in SMBs—BPaaS Emerging as the Answer

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The FAO market is growing at a healthy rate

Sample size: 692 multi-process FAO contracts signed as of December 2011

80+ new FAO contract signings in 2011Number of contracts

2010 2011

516 611

9581

692611

Active 2011 ACV increased by 12% to US$3.9 billionUS$ billion

2010 2011

3.53.9

18%13%

18%12%

FAO contract extensions in 2011 increasedNumber of contracts

2010 2011

138243

105

126

369

243

Cumulative TCV in 2011 increased by 18% to US$32.1 billion US$ billion

2010 2011

21.727.3

5.64.8

76%

52%

26%18%

32.127.3

Activity in current yearCumulative activity to date xx% Annual growth

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FAO adoption in SMBs is starting to increase

Up to 2007 2008-2010 2011

67% 63%

44%

23% 28%

36%

10% 9%20%

341 252 70

Large buyers (Revenue greater than US$5 billion)

Mid-market (Revenue between

US$1-5 billion)

SMB(Revenue less than

US$1 billion

100% =

FAO market adoption by buyer size over timeNumber of contracts

Sample size: 672 multi-process FAO contracts signed as of December 2011

The FAO market has been pioneered and dominated by large buyers

More recently, the mid-market and SMBs has started to emerge

SMBs accounted for 20% of the total contracts signed in 2011 compared to ~10% in previous years

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FAO offers an attractive value proposition to SMBs

Typical F&A related challenges faced by SMBs

How FAO helps SMBs to overcome these challenges

Twin pressures of revenue growth and cost reduction

Flexible, scalable and low cost option

Unpredictable operational environment both in terms of costs and service quality

Stable F&A operational environment with structured pricing, contracted service levels, and KPIs

Low F&A maturity; fragmented and broken processes

Best practice F&A process with built-in productivity gains

Manual processes with lack of robust technology

Access to best-in-class F&A tools and technology with minimal upfront costs

Cash flow issues combined with low levels of data visibility and compliance resulting in unfavorable business outcomes (sub-optimal DSO, EPD, and closing of books)

Decision-making support leveraging the power of analytics. Potential to create positive business and cash flow impact

Resource constraints in both recruitment and retention. F&A leadership involved in operational F&A

Access to new talent pools and greater ability to focus on core area of business

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While SMBs account for 85% of all organizations across the globe, the contribution of SMBs to the global FAO market is only 10%

Total number of organizations1 by sizeNumber of companies

Total number of FAO contracts by sizeNumber of contracts

Mid-market3

100% = ~116,000

11%

27%

63%

100% = 672

SMB4

Mid-market3

Large buyers2

1 Companies with revenue greater than ~US$100 million, subsidiaries in other businesses and countries have been considered as separate companies2 Revenue greater than US$5 billion3 Revenue between US$1 billion and US$5 billion4 Revenue less than US$1 billion

86%

10%3%

SMB4

Large buyers2

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Lack of scale economies is the single biggest reason behind low FAO adoption in SMBs

Savings InvestmentsProductivity

Scale

Costs

Factors influencing savings1 Factors influencing costs

1 Assumes no constraints on use of off-shore solutions

Centralization

Standardization

Transition

Systems

The right balance between savings and investments is a major challenge in mid market Client acquisition and cost of sales for a service provider is also relatively high for SMBs as compared to

large clients SMBs often lack expertise and maturity required for successful transition and change management

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F&A BPaaS offerings hold a lot of potential especially for SMBs

Lower TCO

Faster payback period

Flexibility

Single throat to

choke

Access to best

practices

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BPaaS is fundamentally different from traditional FAO models

Infrastructure

BPaaS layers

Application

Business processes

Traditional FAO IT+FAO F&A BPaaS

Owned and maintained by buyer

Owned by buyer and maintained by service provider

Owned and maintained by service provider

Owned and maintained by buyer

Owned by buyer and maintained by service provider

Owned and maintained by service provider

Responsibility is on service provider

Responsibility is on service provider

Responsibility is on service provider

Degree of standardization

Low High

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BPaaS offers a 30-40% reduction in TCO over traditional FAO for SMBs

TCO comparison between traditional vs. BPaaS model for SMBs

Traditional FTE-driven model

BPaaS

55%

20%

45%

80%Technology

costs

Process services costs

30-40%

Factors contributing to lower TCO in a BPaaS model versus traditional FAO

Access to technology that would otherwise be expensive to implement for SMBs

Minimizes ongoing support, maintenance, and software upgrade costs

Ability to leverage cloud economics

Greater leverage of shared resources across clients

Higher offshoring potential given greater standardization

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Reduction in deployment time because of highly standardized solution

Consequently, SMBs start realizing benefits quickly – more relevant in the current economic scenario

Beyond TCO reduction, BPaaS offers additional benefits

Faster payback period

Pay-as-you-drink allows SMBs– Scale up / down

based on changing business needs

– Minimize CAPEX and makes OPEX proportional to business volumes

– Accommodate rapid growth and proactively downturns

Flexibility

Combines best-in-class process services with best-in-class technology solutions

Earlier difficult for SMBs to procure these services/solutions

Access to best

practices

Single hand-off with service provider reduces governance and integration effort

Perfect for SMBs that lack scale

Additionally,

enables SMBs to redeploy their resources to more critical activities

Single throat to

choke

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Best-practices in leveraging a BPaaS solution for F&A

Brief description

Consider a holistic framework that includes all three layers – infrastructure, application, and business processes

However, magnitude of savings depends on various other factors

Build a TCO business case

Understand limitations of standardized solutions. BPaaS model imposes some constraints on service delivery flexibility

Industry / client-specific customization would increase cost and implementation time

Trade-off between TCO reduction and flexibility

Implementation involves significant changes at both technology and operational level, requiring a strong governance process with strong stakeholder alignment, top-management buy-in, and focus on change management

Be ready for change and have realistic expectations

Evaluate service provider carefully across each BPaaS component individually as well as collectively

Things to consider – underlying software application, workflows / application wrappers, look-and-feel, service provider’s commitment and financial stability

Holistic assessment of BPaaS provider

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CLARITY es—A Practical Solution for SMBs

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SolutionsKey Concerns

Efficient Processes & a Lowered Cost Base with Adequate Support Systems are Pressing Needs

• Inadequate systems to support business

process for growth strategies

• Employees, customers and partners need

remote access (mobile, web)

• Require expertise across transformed

functions and controls

• Require Business Insights through Analytics

• Need optimized & transformational business

processes

• Need to control costs across the enterprise

• Need to enable global/regional expansion with

cross-culture & multi-jurisdiction business

processes

• Next-generation solutions with scalable

systems & processes designed to catapult

growth

• Cloud systems for anywhere, anytime data

access; Integrated systems providing real time

visibility to processes

• Partner with specialized entities to leverage

expertise

• Function specific tools to aid decision

making with key insights

• Implement best-practice processes with higher

efficiency

• Explore outsourcing activities to lower costs

and complexity

• Partner with an entity with global network,

expertise and the right solution portfolio

1

2

3

4

6

5

7

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CLARITY es Addresses Real SMB Market Needs by Combining ERP, Outsourcing & Procurement Optimization

Cloud ERP BPO Services

FINANCIAL MANAGEMENT

• General Ledger• Accounts Receivable & Payable• Bank Management• Budgetary Control• Shared Service Support• Compliance Management…

HUMAN CAPITAL MANAGEMENT

• Organizational & Workforce Management• Recruitment & Selection• Development, Training & Performance

Management• Employee Self Service Portal• Expense Management…

PROCUREMENT & SOURCING

• Direct & Indirect Procurement• Purchase Requisitions• Supplier Relationship Management• Vendor Self Service Portal…

CUSTOMER CARE

• Inbound/ Outbound Sales• Help Desk• Collections…

Cloud ERP

Regionaloutlets

Corporate center

CLARITY es Cloud SOLUTION• ERP Modules:

- Financial Management- Human Capital Management- Procurement & Sourcing- Sales & Marketing (CRM)- Project Management & Accounting- Project Management- Supply Chain Management- Production/Manufacturing- Business Intelligence & Reporting

• Managed Network Services• Infrastructure Services

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CLARITY es Delivers Significant Additional Benefits Compared to Any Other Competing Solution

• Faster implementation due to the ‘Rapid On’ model- ‘Go Live’ in as little as 30 days

• Reduced IT costs, complexity and maintenance- Elimination of all on-premise ERP hardware

• Anywhere, anytime access to critical information

• Greater control resulting from improved real-time visibility

• Global, scalable and customizable to system

• Gain simplicity, agility and efficiency- Adoption of best practices based on a proven

methodology

• Significantly reduced ERP implementation risk- Business processes will be handled by trained

personnel

• Labor cost arbitrage and perpetual operational efficiency- Ongoing cost reduction

• Access to insightful and powerful F&A technology, resulting in a platform for rapid growth

Cloud ERP

BPO Services

Sutherland will contract to agreed business case savings

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What Differentiates Microsoft Dynamics AX

Familiar Look and Feel “Enterprise applications have traditionally been at cross purposes: the more complex the

processes they support, the more difficult they are for users to learn and adopt. With Dynamics AX 2012, Microsoft adds support for greater complexity while making work simpler for administrators, developers, and end users.” Nucleus Research (April 2011)

Named an ERP Leader “Microsoft Dynamics AX is positioned as one of two solutions in the Leaders quadrant of this

Magic Quadrant. Its ability to execute is proven by a long track record and above-average growth rates in the midmarket, its intuitive and easy-to-learn and use Microsoft Office-like UI, and by its functionality, which is a healthy mix of strong out-of-the-box functionality for the selected industries, combined with industry- and customer-specific functionality built by or together with partners.” Gartner Inc. (Dec. 2010)

“Microsoft (Dynamics AX) enters the Leader band for the first time based principally on the strength of its strategy, including a top three product and go-to-market strategy as well as market-leading ownership costs.” Forrester Research (August 2010)

Targeting Tier 1 ERP “The product's enhanced flexibility and usability will position it well in deals at the margins of the

enterprise category—companies with $500 million to $2 billion in revenues.” Forrester Research (May 2011)

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Established Partner

Guaranteed Solution

Why CLARITY es?

• Leading provider of BPO services since 1986 for Retail, Tech., Telecommunications, Financial Services and other industry verticals

- Profitable and strong balance sheet; zero debt- Globally distributed delivery capacity across four

geographies

• ~3000 FTE across Finance & Accounting, Human Capital Mgmt. & Procurement, ~30K FTE in CRM practice delivering services from four geographies with industry certifications

PCI

• Time-tested solution Microsoft Dynamics AX from trusted vendor with full service support from Microsoft Gold certified partner

• Easy integration with MS Windows; convenience of upgrades

• 12,000 installations globally

• 50+ installations on cloud growing at triple digit rates

• Industry specific Dynamics AX solutions

• Familiar to your people, easy to adopt, enjoyable to use

“As a CFO, it is easy to be drawn into the day to day back office activities when I really need to be focused on our core competencies to grow the business, and our partnership with Sutherland allows me to focus more on strategy.”Leading Real Estate Firm

“After working with Sutherland for the past year I am extremely impressed with their ability to provide great talent and world class results. Sutherland has proven committed, reliable and greatly increased our efficiency.”

Leading Global Software Solution provider

Impeccable Industry References

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What CLARITY es Can Do for You

Lower TCO for ERP due to elimination of on-premise hardware costs

Greater control through “on-demand” reports across activities

Better planning leading to consolidated procurement and reduced indirect spend

Higher centralization eliminating regional FTEs

G&A reduction due to outsourcing of back office operations

Lean corporate office reducing FTE costs and associated overheads

Access to state-of-the-art technology

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Thank You for Your Time & Please Download Our Most Recent Whitepaper

David Kaminski—Moderator Senior Vice President, Client EngagementFinance & Accounting OutsourcingSutherland Global [email protected]

Saurabh Gupta—Speaker Vice PresidentBPO Research PracticeEverest [email protected]

The Paradox of FAO Adoption in SMBs: BPaaS Emerging as the Answer