- 1. The Future of Business Process Outsourcing
2. The BPO Hype Cycle Source: Gartner Group, The Hype Cycle for
IT Services, June 6, 2003.
- Explosion in # of new entrants
- Market CAGR estimates range from 50% - 80% for the next five
years
3. Long-Term Business Pressures Drive More Outsourcing 4. Moving
Up the Value Chain Source: Edelweiss Capital, Business Process
Outsourcing: Coming of Age?, May 2003 Future Simple Processes
Complex Processes Business Functions 5. The Evolution of BPO Models
TransformationalOnshore BPO Example: Sabre (Travel Services)
Onshore Offshore Commodity BPO Transformational BPO
CommodityOnshore BPO Example: CSC, EDS(IT Services)
CommodityOffshore BPO Example: GE Capital (Payroll Services)
TransformationalOffshore BPO 6. Approaches to BPO Simple bulk
transactions processing Broad shared services High-volume vertical
processes Niche vertical apps Bottom-Up Approach Top-Down Approach
Source: Cognizant Analysis of Forrester Research Report: BPOs
Fragmented Future, August, 2003.
- Labor arbitrage opportunities
- Best-of-breed commodity services
- Flawless process execution
- Identify complex processes that require industry / domain
expertise
- Build differentiated competencies that boost market
position
- Deep process expertise in vertical industries
- Trusted partner relationships and reputations
- Highly customized, industry-specific services
- Long-term differentiation / competitive advantage
- Leverage outsourcing competency to reduce costs and boost
performance throughout value chain
- Consider retailing services to competitors
7. Emerging Offshore BPO Opportunities
- Credit Card / Check processing
- Insurance application processing
- Claims processing & adjudication
- Member management services
- Claims processing & adjudication
- Member management services
Banking / Financial Services Insurance Healthcare
- Revenue Accounting (Airlines)
Other Verticals Sales and Marketing Contact centers,
telesales/telemarketing, customer care, web sales and marketing,
market analysis Human ResourcesPayroll processing, benefits
administration, HR administration Finance and AccountingAccounts
receivables / payables / general accounting, financial reporting,
shareholder services 8. Possible BPO StructuresService Arrangement
Joint Venture Outsourced Service Build Operate Transfer Service
Management People & Investment Pros Cons
- Lower client management overhead
- Higher ongoing P&L cost vs. alternatives
- Limited value creation potential for client
- Eases entry into offshore operation with experienced
partner
- Limited value creation (captive)
- Leverage partners offshore infrastructure and experience
- Lower costs (initial and long-term)
- Limited value creation (captive)
- Leverage partners offshore infrastructure and experience
- Value creation opportunity (if non-captive)
9. Offshoring and Reengineering Can Lead to Dramatic Performance
Improvements 10.
- Bank card processing/ receivables
Opportunity for Value Creation - FDC (FORMERLY AMEX INFORMATION
SERVICES)
-
- Provides bank card processing, payment products for Mastercard,
Visa, American Express, and numerous private-label cards
-
- Recent expansion in receivables management (American Creditors
Bureau, Ingram)
-
- Provides inbound and outbound telemarketing services and,
through joint venture with AT&T, interactive services for
800/900 telephone industry
-
- Manages the processing for 20 million mutual fund shareholder
accounts
-
- 2002 Revenues: $7.636 billion 2002 Earnings: $1.238
billion
-
- AMEX sold 40 million shares (40% ownership) in early 1992 for
$22/share; recently traded at $160/share (split-adjusted)
-
- AMEX further reduced stake to 22% through second offering worth
approximately $1 billion in 1993
-
- Acquired FFMC (August 1995) for expanded operation and greater
economies of scale
-
- Finalizing acquisition of Concord EFS
Source: FDC annual reports; industry articles; Datamation 11.
Cognizants Initial Approach
- Industry Competitive Forces
- Company Core Competencies
- Company Outsourcing Readiness
- Excellence in Offshore Recruiting/People,
Processes/Infrastructure
- Excellence in Delivering High-quality Services Remotely
- Established Market Leader in the India Space
Clients Cognizant Joint Analysis Transformational
Outsourcing
- Strategic Outsourcing Decisions
- Highly Customized Service Offerings
- Long-term Competitive Advantage
12. Strategy To Drive BPO DecisionsScope Discovery Analysis
Feasibility Assessment
- Inventory key business processes and current SLA
parameters
- Catalog support technology platform requirements and skill sets
of support staff
- Identify root drivers of process costs and inefficiencies
- Gather transaction volume data and model across processes
- Map underlying support systems
- Determine BPO structure model
- Determine resource requirements
- Identify changes to support process in onshore/offshore
model
- Determine cost savings per business process based on task
migration and improvement
- Identify costs of process migrations
- Identify any key sequencing needs
Undertake a BPO strategy assessment to determine which processes
to outsource, financial impact and implementation plan 13.
Cognizant Service Offering
- Cognizants Business Technology Consulting Group in concert with
its vertical practices, works with clients in BPO strategy
engagements
- These engagements last from 8-12 weeks, depending upon scope
typically deliver:
-
- An assessmentof suitability of select business process
outsourcing based on economics, integration with other processes,
systems and skill requirements
-
- A step-by-step plan for creating a BPO operation that mitigates
risk and provides senior management focused measures and controls
for BPO management
- For for information, contact:
- VP, Business Technology Consulting