Business Process Outsourcing: Business Process Outsourcing: Improving Your Company Improving Your Company ’ ’ s Business s Business Workflow Process Workflow Process What is BPO, BPO Models, What is BPO, BPO Models, Impediments, Getting Started & Impediments, Getting Started & Recognizing Myths Recognizing Myths
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Business Process Outsourcing: Business Process Outsourcing: Improving Your CompanyImproving Your Company’’s Businesss Business
Workflow ProcessWorkflow Process
What is BPO, BPO Models, What is BPO, BPO Models, Impediments, Getting Started & Impediments, Getting Started &
Recognizing MythsRecognizing Myths
or . . . .or . . . .
optimizing youroptimizing yourbusiness workflow business workflow
processesprocesses
Michael Fleming, ModeratorPrincipal The Alta Group
Joseph FrancoSenior Practice DirectorOracle USA
Carol HagarGlobalization Leader - Fleet ServicesGE Capital Solutions
Jim HumphreyVice President-Business DevelopmentGenpact
Robert NeagleSenior VP and General ManagerFirst Data Global Leasing
What did you come to learn What did you come to learn ––to share today?to share today?
•• Your biggest concerns about BPO?Your biggest concerns about BPO?•• Your major questions about BPO?Your major questions about BPO?•• What you want from BP Outsource What you want from BP Outsource
vendors?vendors?
What Is Business Process Outsourcing? How and
Why Is It Growing?
BPO is contracting with an external Business Process specialist to
conduct some or all of the processes in the
business workflow
Outsourcing Terminology
• ITO • BPO• KPO
• On Shore• Near Shore• Off Shore
“Off Shoring” and “BPO/KPO” Are Driving The Growth of “Outsourcing”
BPO/KPO Is Much More Than Cheap Labor
Buyer Values **Top Drivers **
Achieving Lowest Total Cost On Delivery of Services
Improving Service Quality
Standardization/Gain Process Knowledge
Access To Best Practices
Access to Leading Edge Technology
Operational Transformation
Financial Services Domain Expertise
End to End Service Delivery
Mitigation of Risks of Transition and Service Delivery
Regulatory Compliance and Data Privacy/Security
Gain Sharing and Other Economic Incentives
Global Delivery Capabilities** Gartner study commissioned by Genpact and
marketplace feedback
9
Characteristics
US accounts for largest segment
Long decision cycles
Growing adoption among SMBs
Characteristics
Companies in larger Western European nations are beginning to adopt BPO
UK leads with ~50% market share
Key issues in Europe
*Projections for 2006.
Revenues: US$99 B CAGR: ~10%
Revenues: US$45 BCAGR: ~9%
Revenues: US$8 BCAGR: ~13%
Global BPO/KPO Demand* in 2006
Global Market for BPO and KPO Increased From US $138B in 2005 to ~ US$152B in 2006
NORTH AMERICA EUROPE ASIA-PACIFIC
65% 30%5%
Characteristics
Asia market growing fast from a smaller base
Large BPO contracts are few
Language and country specific statutory requirements
Market Breakup by Functions ($US B) Trends
Offshore Outsourcing Growth Is Being Driven By New, Higher End Services
Hybrid delivery models are favored by most buyers
Majority of buyers focus on “best in class” vs. multi-domain capabilities
Value levers differ between the outsourced functions
*Includes activities like Mortgage Processing, Insurance claim processing, asset management/ brokerage operations etc.
** Includes the outsourcing of knowledge intensive services including R&D in Pharmaceutical/Biotechnology, Design Services, Analytics, Market Research, Legal, Intellectual Property, Publishing, Education, Training, Animation and more.
Trend to Perform in-houseTrend to Outsource On-Shore/ Near ShoreTrend to Outsource or Staff Augment Off-Shore
Indicative Trends, Companies Are In Varying Stages of Maturity
Today, Offshore Outsourcing Is An Established Best Practice
Cost savings has shifted from being the only motivation to an important benefitEvolved from basic call center and transactional tasks to core processes that are integral to the client’s businessSize, duration and complexity of outsourcing deals is growingService Level Agreements (SLA’s) are getting more specific and customized to mirror the closer nature of the outsourcing relationshipsNow that the Fortune 500 have taken the lead, others are also moving forward
What if your competitors figure it out first?
Business Process Business Process Outsourcing ModelsOutsourcing Models
Build or BuyBuild or Buy
Buy the businessBuy the businessWorkflow systemWorkflow system
Build the businessBuild the businessworkflow systemworkflow system
variations
variations
variations
variations
Location Systems ScopeScope Config PeoplePeople
Outsourcing ModelsOutsourcing Models
•• Models vary based on . . . .Models vary based on . . . .–– Location Location (where work performed)(where work performed)–– Systems Systems (technology platform / software)(technology platform / software)–– Scope Scope (# of process, Outsource specialization, (# of process, Outsource specialization,
functionality)functionality)–– Configuration Configuration (degree of differentiation (degree of differentiation
required)required)–– People People (whose employees, training, capabilities, (whose employees, training, capabilities,
management)management)
BPO Model Selection:BPO Model Selection:GENERAL TRENDSGENERAL TRENDS
Business Impact of Work Flow ManagementBusiness Impact of Work Flow Management
ProcessProcessManagementManagement
ContinuousContinuousImprovementImprovement
Best inBest inClassClass
BusinessImpact
Initial statusInitial status
PredictablePredictableperformanceperformance
MetricMetricperformanceperformance
LearnLearn
EliminateEliminatewastewaste
DigitizeDigitize
Six SigmaSix Sigma
RemoveRemovevariationsvariations
BenchmarkedBenchmarked
CompetitiveCompetitiveAdvantageAdvantage
fromfromwork flowwork flow
engineeringengineering
As is As is ––Where isWhere is
Entirelynew work
flow designMigrationMigration
Deployment Options and TechnologyA Gradual Trend
Options and Value PropositionOptions and Value Proposition
•• PProvide deployment rovide deployment optionsoptions for applications and for applications and technologytechnology–– On PremiseOn Premise–– Managed ServicesManaged Services–– BPOBPO–– On DemandOn Demand
•• Allows customers to focus on core business and Allows customers to focus on core business and process improvements process improvements -- instead of backinstead of back--office office processes, applications, and infrastructure processes, applications, and infrastructure managementmanagement
Deployment Options Deployment Options -- BPOBPO
ITO ITO –– Technology as a Technology as a Strategic AdvantageStrategic Advantage
•• Why? Why? –– IT no longer a cost IT no longer a cost
centercenter–– IT no longer operates IT no longer operates
in a vacuumin a vacuum–– IT alignment and IT alignment and
governancegovernance–– Convergence of Convergence of
software and servicessoftware and services
•• Cautions?Cautions?–– Beware of generalistsBeware of generalists–– Must find a suitable Must find a suitable
partnerpartner–– Maintain staff that Maintain staff that
understands your understands your business goalsbusiness goals
–– Requires a change Requires a change management strategymanagement strategy
Best PracticesBest Practices
• Identify the components of success (skills and knowledge)
• Retain the skills to manage the vendor• Establish a governance process• Determine the cause of shortfalls and
problems be prepared to change• Map the benefits to business improvement• Continue to improve
Why Business Process Why Business Process Outsourcing is important to our Outsourcing is important to our
Double digit growth trends and plans Track record of profitability motivated accelerated investment. Parent company international expansion created opportunity for greater growth outside the US.
Small Transaction size Micro ticket size limits absolute dollars of margin.
High transaction volume Approximately 10,000 leases per month
Global expansion Need to cover wide geographic areaControl/reduce per unit cost while expanding
Continual need for process improvement Process was manually intensive and built for boarding an account versus efficiency, productivity and customer focus.
Basic customer support services required
Large portfolio creates need for considerable post-commencement contact
Why Business Process Outsourcing Is Important To Our Company.
Getting closer to the business and data where process perspectives converge to the point where the customer relationships, business process and knowledge are dealt with concurrently.
Needed to be aligned with FD companies and other customers, their need for client services and our commitment to profitability - high service/low touch
TechnologyManagement
Understanding Your
Relationships
KnowledgeManagement
ProcessManagement
Simplify complex manual processes - hire Capgemini to assist in a process and technology
review - faster to conclusion and more objective assessment
Hire, train and transfer knowledge across the
company - leasing specific where appropriate. Real commitment to training
Automate as much as possible for ease of access/use for all parties - employees and customers.
To Outsource a Process or Not?
HighHigh
Unique/Unique/Central toCentral to
ValueValue
LowLow
Lease AdminCollections
Customer ServiceRisk ManagementSystems Support
Help Desk Services
Low Low GenericGeneric High High
PoorPoorCandidateCandidate
CandidateCandidate
Outsource ItOutsource ItCandidateCandidate
Some Results• Review produced 100+ recommendations for process improvement.
95% actionable.
• Significantly more low touch today - file feeds from 25 other systems -data input once moves around the company.
• Service levels up significantly.
• Risk management tools in place to reduce write-offs
• Much more integrated into parent company and part of the value proposition.
• More open to utilize best in class systems built for other purposes with rules that are unique to leasing problems.
• Future business model that is significantly out- and in-sourced
To Outsource a Process or Not?To Outsource a Process or Not?
5. Prime Candidate• High cost• Low productivity
6. Prime Candidate• High cost• Low productivity• Low critical
7. Neutral• Nothing compelling
8. Poor Candidate• All indicators low
1. Difficult to Outsource2. Prime Candidate
• Low critical• High cost
3. Low Candidate• Low cost• High critical
4. Prime Candidate• Low cost, lower
productivity• Low critical
How Companies Can Get The Most Value From Their Outsource Relationship
Critical Elements for SuccessCritical Elements for SuccessView it as a journey:
– Prioritization strategy
– Transition planning
– MGPP
– Measure success
– Communicate benefits
• Leadership commitment
• Investment
– Up front resources
– Top talent engaged
– HR strategy
– IT strategy
– Training Strategy
Lessons LearnedLessons Learned
• Invest in training– Documentation of processes and S.O.P.s– On the job training in U.S.– Cross cultural training
• Invest in reward and recognition• Build a “One Team” culture
• Go slow to go fast
Transition ManagementTransition Management
Solution Identification Transition Operation
Project Planning
ProcessBaseline
SolutionDesign
Pre –Transition Transition Pilot Steady
Operation
Trust
Understanding
Collaboration
Transition - 3 Stages
Phase 1. Letting go of the Phase 1. Letting go of the ““old waysold ways””.. The first phase is the end of the old. Ending, losing, letting go. • What do we want to let go?• What do we want to retain?
Phase 2. The Phase 2. The ““neutralneutral”” stage.stage. The old is gone but the new is not operational.• Aligning new authorities and responsibilities.• Developing new synergisms.• Building controls – standards, measures and reports.• Team building
Phase 3. Making a Phase 3. Making a ““New beginningNew beginning”” –– the outcome.the outcome. Experience new reality and purpose that make the change work.• Learning• Solutions• Clarifying
Roadmap for a Successful Strategic Partnership
Senior Management Buy-In
Joint Ownership with Customer
Relationship Manager
Dedicated “Champion” at Customer
Begin with repetitive & scalable processes
Establish a well-defined roadmap, including key performance metrics
Invest in and work to retain people
“Voice of Customer” feedback
Aggressive Ramp-ups
Multiple Handoffs
Very High Contextual Knowledge
Lack of Flexibility/Scalability
Poor Project Management
Lack of Communication
Lack of Cultural Understanding
What Works Well What Does Not
Real Success Lies In Partnership and Collaboration
Labor Arbitration Value - The complete picture!
For ConsiderationFor Consideration
Level 1
Level 3
Level 2
Level 5
Level 4
Level 6
Cost savings - Lower wage per employee based onlocation / labor market.
Competency - Based on “this is our business”, greater training occurs on a regular basis.
Culture of continuous improvement - Work seen asprofessional core business – continuity and knowledgebased. Customer Centric - Knowledgeable about customer’sbusiness, collaborative culture.
Adequate staffing levels - Cost savings used in partto add numbers / capabilities to do what has to be done.
Unique Unique –– Generic Business ProcessesGeneric Business Processes
Market Analysis
Origination &Underwriting /
Funding
TransactionEndLease Administration
SmallTicket
MiddleMarket
Large /Structured
Market
Generic Unique
Addressing the certainty of BPO benefitAddressing the certainty of BPO benefit
$
Time
TodayCostAvoidance
RevenueIncrease
RevenueProtection
CostReduction
Economic Benefitof the Investment
Economic Risk of No Action
MoreMoreCertainCertain
LessCertain
MYTHS MYTHS regarding BPOregarding BPO•• Outsourcing is about reducing costsOutsourcing is about reducing costs•• In outsourcing, you give up control of your business In outsourcing, you give up control of your business
operationsoperations•• Business needs always drive technology decisionsBusiness needs always drive technology decisions•• The primary benefit of Outsourcing is lower labor costsThe primary benefit of Outsourcing is lower labor costs•• Outsourcing is about looking inward to build competitive Outsourcing is about looking inward to build competitive
advantageadvantage•• The uncertainty of benefit is not worth the riskThe uncertainty of benefit is not worth the risk•• ““MyMy”” business processes are core, unique and proprietarybusiness processes are core, unique and proprietary•• Outsourcing is an all processes or none decisionOutsourcing is an all processes or none decision•• Outsourcing is an all at once implementation.Outsourcing is an all at once implementation.
Outsourcing isOutsourcing isabout reducing about reducing
costscosts
Outsourcing is Outsourcing is about improvingabout improvingprocesses and processes and
practicespractices
REALITYREALITY
MYTHMYTH
In outsourcing, In outsourcing, you give up you give up
control of your control of your business business
operationsoperations
Outsourcing is Outsourcing is about sharing about sharing and learningand learning
REALITYREALITY
MYTHMYTH
Business needs Business needs always drive always drive technology technology decisionsdecisions
True to a point, True to a point, but technology but technology
enables business enables business to do more to do more
thingsthings
REALITYREALITY
MYTHMYTH
The primary The primary benefit of benefit of
Outsourcing is Outsourcing is lower labor costslower labor costs
Labor is more Labor is more productive and productive and knowledgeable. knowledgeable.
Capabilities Capabilities alignedaligned
REALITYREALITY
MYTHMYTH
Outsourcing is Outsourcing is about looking about looking inwardinward to build to build
competitive competitive advantageadvantage
Outsourcing is Outsourcing is about using this about using this