AN INDEPENDENT SUPPLEMENT FROM MEDIAPLANET ABOUT BUSINESS PROCESS OUTSOURCING

17 MARCH 2008

BUSINESS PROCESSOUTSOURCING

How to find the right partnerships and achieve strategic goals

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Remarkable BPO progresstriggers new KPO trend Business Process Outsourcing (BPO) isthe leveraging of technology orspecialist process vendors to provideand manage an organisation’s enterpriseprocesses and applications.

The most common examples of BPOare call centres, human resourceadministration, accounting andpayroll outsourcing, although, asthis supplement will show, there area number of different types of BPOthat businesses can explore.

So why would companies considerBPO? There are several key factors thatwould lead a company to choose BPO:the need for external expertise; theneed to improve an in-house service;the need for speed to market; the lowercosts and the superior flexibility andscalability. Every company consider-ing BPO for the first time (and thereare many companies that have not en-tered the market yet,although numbersare increasing), mustcarefully weigh upin-house processesbefore consideringoutsourcing.

BPO is increasingat a phenomenal rateon a global scale.Recent NelsonHallresearch has shownthat in 2007 BPO ac-counted for 49 percent of overall out-sourcing contractvalue (if one includes two US militarymega contracts). The total contractvalue of new BPO signings increasedby nearly 150 per cent to over $36Bn.In contrast, IT outsourcing total con-tract value of new signings decreased

by 26 per cent to just over $37Bn. During 2005 and 2006 there was a

steady decline in the average value ofBPO contracts, particularly within thetop 50 contracts, mainly due to morecontracts being split amongst a num-ber of suppliers (multi-sourcing). How-ever, 2007 saw an increase in theaverage value of the top BPO con-tracts. Average contract value of thetop 20 contracts increased by 58 percent to $525m; in the top 50 contractsaverage contract value was up 47 percent to around $300m.

One new trend that has hit the out-sourcing market recently and is set toexplode in 2008 is knowledge process

outsourcing (KPO).The majority of endusers, if quizzed onKPO, would be hardpushed to explainits function. KPO isthe outsourcing ofhigh value-addfunctions, such asresearch and devel-opment. It is set tocapitalise on the in-creasing popularityof, and trust in,BPO. Now that com-panies have ob-

served the benefits of trusting othersto perform functions such as payroll,they have started to place faith in ex-ternal organisations to carry out mis-sion critical operations.

Another trend that the outsourcing

market has seen come into force in2007 is that end users are trying to addvalue through their outsourcing con-tracts. But the debate over whether in-novation in outsourcing can truly existrages on. Some believe that the factthat outsourcing is too tightly boundby a commercial contract stifles anypotential for innovation within theproject. Others believe that the heavyinvolvement of the procurement de-partment, with its principal focus oncost and little regard for quality orservice transformation, is also an in-hibitor to innovative outsourcing.

If the outsourcing project is ‘lockeddown’ from a commercial standpointand too strictly governed by servicelevel agreements and key performanceindicators, neither the supplier nor theend user organisation will feel the in-centive to identify opportunities forinnovation. This ensures that anyscope for innovation is scuppered.

Firms contracting outsourcing sup-pliers should be under no illusion thatsimply by outsourcing a function, in-novative changes will manifest. Whendeveloping an outsourcing contract,

both the supplier and end user needto identify what is expected of bothparties. If there is no explicit state-ment that the end user wants processand technology improvement, thesupplier cannot be expected to pro-vide this. Therefore it is crucial tomake it clear from the very start if in-novation is expected.

In a recent survey by Deloitte, 89per cent of respondents claimed thattheir outsourcing contract deliveredat least 25 per cent return on invest-ment. It seems that outsourcing isflourishing as the primary focus ofoutsourcing deals, which remains costsaving, is certainly being achieved.With the looming economic down-turn, outsourcing objectives willagain be solidly aligned to cost ascompanies try to tighten their belts.Given this situation, the return on in-vestment that outsourcing is deliver-ing will ensure that it continues toflourish.

If you need more information onthe subject, please see our website(www.noa.co.uk) or come along to oneof the NOA monthly seminars.

CONTENTS

Business followinggovernment’s leadwith BPO 4

Higher skills in 4demand

Why outsource 6

On-shore, off-shore 7

IT efficiency 8

Key Topics 9

Solid foundations crucial for constructingBPO deals

10

BUSINESS PROCESS OUTSOURCINGA TITLE FROM MEDIAPLANET

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IntroductionBUSINESS PROCESS OUTSOURCING

“The totalcontract value ofnew BPO signings

increased bynearly 150 percent to over$36Bn”

BY MARTYN HART, CHAIRMAN, NATIONAL OUTSOURCING ASSOCIATION (NOA)

CUSTOMER MANAGEMENT / BACK OFFICE PROCESSING / IT SOLUTIONS / DEBT MANAGEMENT / DISTRIBUTION AND WAREHOUSING

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We're experts in outsourcing. With proven onshore and offshore models,10,000+ employees, advanced technology and a nationwide distributionand warehousing network, your business processes are in safe hands.

Contact us to find out how your vision can become our objective.

Tel. +44 (0)113 207 3820www.ventura-uk.com

Outsource with theexperts

interesting thing now is it’s moving into what we call the middle office, thepart of a business that defines the client,the part that is what they do.”

Knowledge jobsThis shift in to the middle office, intoroles that are integral to a business’performance are being noticed bymany providers, according to PaulMorrison, senior manager at BPO ad-visory service Alsbridge. He points toBPO developing a new sphere of in-terest, KPO.

“We advise clients on how to out-source and which providers would

make a good fit and this area of KPO issomething more and more clients arecoming to us with,” he says.

“Basically they want to extend BPOagreements to, typically, take in moreanalytical roles. They need people tolook at their figures and research theindustry they’re in and the company’splace within that industry. It’s an ex-citing development because it’s mark-ing a shift for BPO from administrativeroles to analytical.”

According to the country’s majorBPO providers this is a trend that isset to continue, raising the profile,and value of the BPO industry.

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BUSINESS PROCESS OUTSOURCING The evolution of BPO

Business following government’slead with BPO

the departments could be saving a lot ofmoney by pooling their staff in sharedservice centres themselves or getting anoutsourcer to do so for them.”

Middle officeThe evolution of BPO cannot betracked without considering the im-portance of how private businesses,particularly global enterprises, realisethat they could contract a third partyto take on its administrative roles andreduce costs, allowing their staff to dowhat they do best and still improvethe bottom line.

This early realisation led to the infa-mous phrase of ‘your mess for less’which summed up BPO’s early promiseof taking a company’s ‘grunt’ work soit did not have to worry about it.

However, BPO is evolving and Mahesh Desai, business developmentdirector of Global Outsourcing at Logica, believes that the three areaswhere companies deploy a BPOprovider are now maturing and con-verging, literally, in the middle.

“Traditionally BPO has been allabout the front office and the back of-fice,” he suggests.

“Growth has come from customerfacing roles, such as call centres andit’s come from the back office, in ac-counts, HR and procurement. The really

publication of the Gershon Reportwhich called for local and nationalgovernment to make large savings inadministration costs.

Rob Devlen, director of BusinessConsulting at Fujitsu Services wasformerly employed by the Cabinet Of-fice to help research the Gershon Re-port and he believes its findings aregoing to create growth for the BPOindustry for some years to come.

“The basic premise is that govern-ment, at local and national level, canhave something like 1,200 depart-ments which will all carry out thesame HR or accounting functions,” hesays.

“It stands to reason that this is ineffi-cient and that, with pressure on budgets,

“The roots of the success we’re hav-ing today were all down to compul-sory competitive purchasing whichforced government departments toseek better quotes for the servicesthey buy,” he says.

“Government being so proactivekick-started this industry and the pri-vate businesses took it up to a pointwhere we reckon there’s now a 50:50split between the two. Perhaps, moreinteresting, when we pitch for govern-ment business today, we’re talkingabout a dozen departments at one go,instead of just one.”

Government efficiencyGovernment’s role in BPO was furtheremphasised four years ago with the

real noticeable shift now for providerslike us to be able to provide qualifiedaccountants and management ac-countants.”

Better prospectsThis is changing not only the relation-ship between suppliers and clients butalso between outsourcing companiesand their own staff, Beaton is noticing.

“It gives a supplier like us, a lot moreopportunity to grow people and providethem with a career path,” he says.

“It’s underlined by the fact wespent $700m globally on training lastyear. Clients don’t just want the jun-ior roles filled. Across all the majorsectors - but particularly with finance

As clients come to consider renewingcontract providers are finding that inaddition to the standard administra-tive roles they are asked to take on,there are more senior tasks being in-cluded in contracts.

It is the one major change MarkBeaton, Accenture’s head of outsourc-ing for the UK and Ireland, points towhen summing up the most notablerecent developments in BPO.

“Finance and accounts have alwaysbeen a huge area of growth in our in-dustry and that’s where I think every-one is seeing the biggest moves towardsmore highly skilled jobs,” he says.

“The bulk of work is still for stan-dard administrative work but there’s a

Providers of outsourced services are agreed that thebiggest change to BPO today from just a few yearsago is its move up the proverbial ‘value chain’.

If the BPO industry has one personto thank for its early acceptanceand then huge growth it isMargaret Thatcher and theConservative Government of the1980s, according to Paul Pindar,chief executive officer (CEO) of thecountry’s largest provider, Capita.

BY SEAN HARGREAVE

BY SEAN HARGREAVE

Rob Devlen

“A largearea for us now

is account management.Firms tend to want their sales-

people out there selling so we are tak-ing on the account management workof putting in monthly calls to cus-tomers and finding out if they haveany new needs. It’s certainly liftingrevenues for the companies we pro-vide the service for.”

Post servicesIn addition to new job roles, there arealso new processes that BPO providersare beginning to offer, such as PitneyBowes, moving beyond documentmanagement services to running post

rooms on behalf of large companiesand government departments.

Whilst having letters and parcelschecked by security devices before beingopened and then scanned in to a com-puter so the contents can be emailed tothe relevant person saves time for theclient’s staff, there is a serious safety ad-vantage to outsourced mail rooms, ac-cording to Pitney Bowes’ managingdirector Richard Thompson.

“One need only think back to theletter bomb campaign of last year andto the numerous reports of suspiciouspowders through the mail to under-stand why mail security is becominga serious outsourcing considerationfor many,” he says.

“Aside from the risk to life, site con-tamination can cost businesses millionsin downtime and business critical doc-uments may be quarantined or even de-stroyed. Even hoax attacks can disablebuildings and lose companies millions.”

To put the problem into perspectiveThompson claims that just cleaningup two American mail centres con-taminated by anthrax in 2001 tookmore than two years and cost $150m.

Higher skills in demand

a n daccounts, HR,IT and call centres -clients want a BPO provider tobe able to provide the general admin-istrative staff but they increasinglywant our people to help with strategyand in making decisions. It’s not justabout cost savings now, it’s about abetter service as well and so the staffproviding those services are beinggiven more responsible roles.”

Neil Robinson, head of business de-velopment at BPO provider Convergys,has certainly noticed this trend and alsoseen it move in to new business areas.

“We’re getting a lot of growth inbusiness to business areas,” he says.

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BUSINESS PROCESS OUTSOURCING Why outsource

Why it pays to use a spe cialistCompanies spend a lot of time carrying outadministrative tasks which they know are a drain onresources but they have to be done to keep the papertrail running. Without those everyday business processroles of filling out the accounts, running the payroll,dealing with customer enquiries and reconcilingpurchase orders against deliveries, to name just a few,businesses would soon grind to a halt.

The BPO industry has grown up aroundthe realisation among companies that itwould a lot more efficient to sign a con-tract with a specialist supplier than tokeep certain administrative roles in-house. Outsourcing a business processto experts means a company can expectto get the same, or a better, service forless and allow the business and its staffto focus on what they do best.

It is exactly the same principle ofcompanies and self-employed peopleemploying an accountant to do their ac-counts, so the hours they would havespent learning how to enter profit and

loss figures and then entering them onto official forms can instead be spentdoing what they do best.

Three reasonsAccording to Paul Pindar, CEO of theUK’s largest business process outsourcer,Capita, there are three main reasons tooutsource cost, service improvementand business or brand improvement.

Although he believes cost is stillnormally high on the agenda, heclaims the other two reasons are farbigger motivators than they were justa couple of years ago.

own right, it also has the added ben-efit of improving the public’s experi-ence of a brand or a governmentdepartment and it leaves a client’sown staff to improve their own per-formance and drive growth.

“If a company or government depart-ment can get their processes performingbetter for less cost, there’s the very realbenefit that the public’s perception ofthe brand or the organisation will im-prove and that should be reflected inimproved sales of their products or serv-ices,” Pindar continues.

“In the case of the public sector,they obviously don’t sell more butthey do end up with saving cashwhich can be spent on front line serv-ices. Alongside the improvement inservices outsourcing can provide itcan give a boost to the public’s per-ception of the organisation.”

Whilst cost will always remain aprime motivator, for at least theshort and medium term, feedbackfrom BPO providers is suggestingthat service improvement andbranding improvement are gainingin importance every year.

“Most outsourcing is about cost re-duction and when you consider we be-lieve we can save between 10-40 percent on most processes, it’s not an in-substantial amount,” he says.

“Improving the quality of that processis a very close second consideration forpeople and it’s closing the gap on cost asthe prime motivator for outsourcing.

When things are done in-house it’s hardto know how well they are done butwhen you outsource, it’s a little easier toset measures of quality against whichthe BPO provider can be ranked.”

Improved perceptionA more efficient and improved serviceis not only a desirable outcome in its

BY SEAN HARGREAVE

Initially Alsbridge supported Centricain a traditional outsourcing advisorrole – helping to define requirements,select potential suppliers, facilitatesupplier visits, assess proposals, anddevelop the final contract.

But it was after the contract wassigned that Alsbridge really made a crit-ical difference. Centrica realised that thetransition would require more supportthan they had originally anticipated,mainly because of the complexity andcriticality of the finance and accountingfunctions to be outsourced. Alsbridgewas asked to play a facilitative role,working collaboratively with both clientand supplier to ensure that the work wastransitioned properly, that both partiesunderstood their responsibilities andcould meet them and that the intentions

Alsbridge supports Centricain F&A outsourcing deal

of the contract could be realised in prac-tice. This required a rare mixture of fi-nance expertise, outsourcing experienceand cultural sensitivity, as Alsbridge hadto work with both in-house staff manyof whom were shortly due to leave, andwith WNS staff who were new to theprocesses.

The overall objectives of Alsbridge’srole were to ensure that the work wassuccessfully transitioned to WNS and,critically, that both parties agreed serv-ice levels. The main challenge wasthat, in common with many in-houseorganisations, there was no clear his-tory of the level of service which hadbeen delivered to the business beforethe outsourcing deal. And this led to afundamental problem when combinedwith that other common feature ofoutsourcing contracts, the commit-ment by the supplier to deliver thesame level of service as the in-houseteam had delivered before. But whatwas that level of service? The in-houseteam intuitively knew what they haddelivered, and how well, but there wasno written record. UnderstandablyWNS was reluctant to contract on thisbasis. Alsbridge had to find a way tobridge the gap and there were relatedchallenges.

The finance and accounting workhad been delivered for years by astrong, experienced, competent team.They knew what they were doing andthey did it well. They didn’t document

everything because they were an in-house team and they didn’t need to. Butthe model had changed – WNS was athird party with a contract and soeverything which had been unwrittenand “understood” now needed to beclearly documented and agreed. Manyof the individuals involved were leav-ing or changing roles as a result of theorganisational restructure. But thesewere the people with the knowledge –without their co-operation there was nochance of success. This fact was par-ticularly pertinent for those managerswho formed the retained organisation.Their roles and responsibilities hadchanged significantly, which is so oftenover-looked. Alsbridge worked withthe retained managers to help themthrough this change from being Opera-tions Managers with direct control oftheir team to an off-shore environmentwhere operations are managed using acontract and through service levels.

Nikki Flanders, head of offshoringfor Centrica said: “We didn’t want ourmanagers to abdicate their responsi-bilities for getting this right, but at thesame time we recognised that they hadto keep ‘business as usual’ going, andalso our managers had limited experi-ence of this kind of transaction. Als-bridge were able to bring priorexperience of offshore F&A deals, anexisting relationship with WNS, and arange of templates and tools whichhelped to accelerate the process.

Centrica has a strong track record in offshoring. Like many companiesoperating in highly competitive markets, there are constant cost savingand efficiency pressures to meet both customer and shareholderexpectations. Having already successfully outsourced payments, cash anddebt processes in British Gas Retail, Centrica took the decision to offshorefinancial reporting and financial accounting.

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On- shore, off-shore BUSINESS PROCESS OUTSOURCING

Once the crucial decision has beentaken to consider BPO as anoption, the next major question aclient must begin to answer iswhere?

Typically, there are three options; on-shore, near-shore or off-shore. As thesesuggest, they represent the choice of aUK location, premises in Europe (oftenEastern Europe) and further afield, suchas the Philippines or India.

Every region will have a good reasonto claim it could be the next India. EastEurope has highly trained IT and ad-ministrative staff working at lower ratesthan the UK and the Philippines has avery good record for English languageskills whilst South Africa offers low coststaff with English as their first language.In fact, even within India there are nowcities and regions within the countryclaiming to be the next Hyderabad orMumbai, competing on the fact wagelevels in the well known outsourcing

cities have grown so fast they are not ascompetitive as India’s emerging secondlevel of outsourcing cities and towns,such as Pune, 150km north of Mumbai.

Client needsAccording to Kirstyn Boyle, associatedirector of Global Location Solutionsat DTZ Consulting and Research, thechoice over where to relocate businessprocesses basically comes down toweighing up the roles that are to beoutsourced and the relative strengthand weaknesses of each on-shore,near-shore or off-shore location.

“When selecting a location, themost important factors relate not tothe regions, but to what the individ-ual company is wanting to achieve,

their sensitivity to risk, the complex-ity of the processes, language re-quirements, skill requirements andscaling options,” she says.

“Following the herd is a dangeroustactic because you compete for thesame staff and start to inflate labourcosts. This is exactly what happened inDublin, Prague and then Brno. It’s nowhappening in Krakow and Bucharest.

“Staying still does not work either, lo-cation decisions should be frequentlyreassessed and companies should al-ways keep an eye on their exit strategy.If entering emerging countries, the longterm view is particularly important be-cause political change, new entrants andinflationary pressures can erode fore-casted cost savings and the sustainabil-ity of labour supply.”

Whose law applies?When a location, or blend of locationsare being evaluated, one of the majorconsiderations, which may not be ap-parent to businesses in the first instance,is whose law is going to apply to thedeal? This is a primary considerationbecause BPO is, by its very nature,

global and so a UK company could be discussing a contract with an Americanprovider for work that is to be carriedout in Asia and East Europe.

Hence, Angela Cha, partner at lawfirm Pinsent Masons, which specialisesin BPO contracts, suggests companiesget good legal advice on varying juris-dictions before they commit to consid-ering a region for its BPO.

“It’s pretty much a given that alawyer will insist that if you are a UKbusiness UK law applies to the con-tract,” she points out.

“However, as you’d imagine, youcan apply UK law to everything whenthe work is being carried out abroad.Normally wherever the BPO activity isactually taking place, that country’semployment laws will apply and sowill their tax laws.

Your place or mine?

“In a place like Hong Kong thatmeans that a BPO provider could, ifthey choose, dismiss staff veryquickly with virtually no warningwhereas at the other end of the spec-trum, if the work were being carriedout in Holland, where many Ameri-can businesses set up their Europeanheadquarters, the staff would have farmore rights.”

As with all aspects of BPO, allproviders seem agreed the best adviceto potential clients is for them to taketheir time and weigh up their variousoptions rather than rush in to placingprocesses in a region which turns outnot to be ideal for their needs.

According to Capgemini’sHead of BPO Solutions, PaulNiven, “It all depends onwhere you are starting from.”

CFO’s tend to be riskaverse and prefer the warmfeeling of control apparentfrom owning the SharedService Centre (SSC). If you

already have an SSC you might be looking to op-timise or commercialise it and understandably re-tain ownership of your assets and your know-how.But by taking this approach you may actually bewiping wealth off the bottom-line.

BPO could be a better option. You may have al-ready decided that BPO is the right route and areseeking the right partner or you might need help inmaking the decision. The partner you choose needspractical experience, in-depth industry knowledgeand the business insight to achieve your goals.Staying fully informed of all the BPO options is dif-ficult but … for the cost of an economy flight youcould see with your own eyes what serviceproviders now have to offer in nearshore centres ofexcellence. You’ll be surprised at the openness,knowledge sharing and best practice tips and hintsin such a half day visit.

The right partner can help you decide what isthe best path to take and then take you on that

journey, whether it’s from SSC to BPO, developingan innovative, combined transformational agendaor creating a more optimised, more commercialand professional SSC.

WHY BPO IS LEADING THE RACE?The risks associated with outsourcing have now beenwell addressed by Capgemini and other tier one play-ers and BPO has matured into being seen as both asafe and reliable route to adding value. Historicallyearly adopters based their outsourcing decisions oncost savings and were willing to take the risk of beinga first-mover, as the opportunity cost was deemedmuch greater than the risks involved.

This was followed by transformational led out-sourcing, where operational savings were re-in-vested in ERP upgrades, tools and technology andin return a world-class service was promised byvendors. A key difference here was that the BPOprovider also shared the risk of change as theycould leverage better intelligence, deliver betteraccess to tools and 3rd party service partners tobetter ensure success.

Recently, we have seen a subtle shift:Organisations are increasingly going straight to

BPO. It bypasses constraints like set-up costs, scarcemanagement time and specialist skills required to en-sure value is actually delivered. Productivity is guar-anteed as part of the contract process and “hard

coded” into the commercial pricing over contract life.We are seeing more and more SSC’s being sold

for their intrinsic value as organisations are moti-vated to move these operations away from thecore and cannot realise the economies of scalethat companies such as Capgemini can attain.

With the additional pressure caused by theprospect of a widely expected recession, I predict thatmore organisations will start to put cost back on topof their agendas, with BPO becoming an insurancepolicy protecting the business against the slowdown.

KEY TAKEAWAYNo matter where you are starting from and nomatter where you want to go, make sure you areeducated in what providers now have on offer. En-gage with a partner you can trust, who has done itbefore and has the depth of knowledge, expertiseand Business Insight to successfully align to yourbusiness need.

For any further information, please visit:www.capgemini.com/bpo

SHARED SERVICES OR BPO - CAPTURING VALUE FROM F & A OUTSOURCINGOrganizations can improve value by reducing their cost structures andtightening up processes for improved cash flow. There are many ways toachieve this but if you are a CFO, which way is the best way?

Paul Niven

� Angela Cha Call centres are only one exampleof companies taking advantage ofcheaper costs abroad

BY SEAN HARGREAVE

Many IT outsourcers, however, arestarting to realise the value in takingon the administrative tasks their in-frastructure has been set up to sup-port and so IT outsourcers arebecoming BPO providers.

That is certainly the experience ofDave Carmichael, senior product mar-keting manager at Sterling Commercewho reveals there is a single majordriver pushing IT outsourcers to becomeinvolved in business processes.

“Supply chain management can be acomplex part of any business,” he says.

“You need the right infrastructure in

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Getting computer networks, hardware andsoftware working seamlessly so businesses candeliver high level services is, understandably, anarea where most companies realise they do nothave the skills in-house and so outsource the role.

provider with its roots in technology.“The first phase of BPO was mainly

about ‘lift and shift’, getting other peo-ple to take on administrative functions,”says Gareth Evans, the company’s con-sulting director.

“It was basically a case of moving arole from one company to outsourcer.Now, however, there’s a much biggeremphasis on using technology todrive efficiencies and so companieswith technology competencies, likeus, are well placed to build systemson industrial scales and then tailorthem to individual clients.”

Certainly Martin Kochman, head ofBPO in Europe for IT specialist Cog-nizant has noticed a rise in highervalue work.

“Cost is normally the prime motivatorbut adding value is a close second nowwith IT BPO,” he says.

“Support, development and main-tenance are all still key areas but a lotof our growth is now coming fromthe consultancy side, where clientswant to use our skills to drive furtherefficiencies through IT. We’re seeinga cycle now as companies who signeddeals five or ten years ago are now re-newing those contracts and areadding these consulting and strategicroles to their future contracts, whichis obviously very encouraging for thewhole sector.”

BUSINESS PROCESS OUTSOURCING IT efficiency

From networks toconsultants

place to ensure that purchase orders‘talk’ to stock level systems and thentalk to delivery manifests and reconcileorders against shipping details and in-voice requests. So that’s been the maindriver for us to become involved inbusiness process outsourcing, as it’s sotechnology-based it makes sense for aclient to let us run part, or all, of theprocess.”

Taking stockSupply chain and procurement systemsare certainly a major source of growthfor Fujitsu Services, a global BPO

East Europe tippedfor huge BPO gains

However, India’s success has not goneunnoticed and many different parts ofthe world are pitching themselves as analternative to India. Part of the problemis that the more successful a region be-comes the more upward pressure is puton wages and so the area loses some ofits competitive edge.

This has certainly caused many UKcompanies to follow in America’s foot-steps and use the Philippines. The USAhas had long military links with the is-lands and so English skills are veryhigh whilst wage costs, although ris-ing, are still competitive.

Crucial communicationsOne such contact centre and BPOcompany, is Sitel. It employs 67,000people in 150 sites around the worldand, according to its European presi-dent, Dale Saville, a region’s successin becoming a popular location foroutsourcing lies in its telecommuni-cations infrastructure.

“A lot of places are talked about allthe time but they don’t always have areliable infrastructure,” he says.

“South Africa is a great example.There’s a highly educated Englishspeaking work force there who are farcheaper than UK staff but it’s let downby people not fully trusting its infra-structure.”

Hence Saville believes most growthwill occur a little closer to home.

“We do most of our European workin the UK, France, Germany, Spain andItaly. The really hot area is starting tobecome East Europe because it has theinfrastructure and excellent languageskills, particularly for German.

“Outside East Europe, Latin Americawill continue to be huge for Spanishlanguage service and there’s also po-tential for the Caribbean, I think forEnglish, French and Spanish services.The big risk will be the weather. No-

body would want to rely on it totallywithout a continuity plan because asingle hurricane could cut the telecomsand stop people getting to work.”

China a top tipWhilst these areas are often talked aboutin BPO circles, there is giant that fewmention today but which could wellovertake India within a generation.Angle Cha, a BPO lawyer and partner atPinsent Masons, believes China is set forphenomenal growth.

“We have offices in Shanghai andBeijing which are mainly involvedwith companies in manufacturing,”she says.

“The overriding expectation is thatthe country will move in to services aswell and so will become a major re-gion for BPO because language skillsare very high and wages are relativelylow. It’s not expected to happenovernight, but it’s seen over there asinevitability.”

Think of BPO and most people naturally thinkof India. It is hardly surprising as it is the world’sleading country for BPO services.

“Part of theproblem is that

the moresuccessful a

region becomesthe more upwardpressure is put onwages and so thearea loses some of

its competitiveedge.”

BY SEAN HARGREAVE

BY SEAN HARGREAVE

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Promotional feature BUSINESS PROCESS OUTSOURCING

European organisations are steadilyincreasing their utilisation of out-sourcing and external services to en-hance their performance and improvetheir competitiveness. While many or-ganisations have matured in their abil-ity to structure outsourcing deals andmanage external providers, this matu-ration has been overwhelmed by theincreasing number of services and

provider options and the growing ex-pectations of business leaders.

Gartner has introduced multisourcingas the key discipline for successful out-sourcing strategies and has identifiedstrategies for applying multisourcing todeliver real business results.

The forthcoming Gartner Outsourcing& IT Services Summit will provide youwith strategies to help you to deliver thebest possible outcome for all yoursourcing initiatives. IT outsourcing,vendor management, transformationprojects, business process outsourcing,offshore and global delivery – we’ll ex-plore it all. And for the first time, we’llidentify the alternative delivery modelssuch as software as a service, infra-structure utilities and services “in thecloud” that will radically transform theIT marketplace.

Don’t miss this unique opportunity! 2-4 June, Royal Lancaster Hotel, Londonwww.europe.gartner.com/outsourcing

● Top outsourcing drivers: Achieving agility,profitability and competitive advantage

● Alternative delivery models: Understandinghow they fit in your sourcing strategy

● Defining a multisourcing strategy: Evaluatingthe impact and making the business case

● Gaining Visibility into KPI’s: Understandingthe performance of outsourcing providers

● Getting contracts right: Structuring forchange and innovation

● Understanding the multisourcing roadmap:Future trends and converging strategies

● Globalising your sourcing: For maximumreturn and maturing your sourcingcompetency

● Developing the right governance:Understanding the critical role of sourcinggovernance

● Developing the right BPO strategy: Defining which processes to outsource

● Vendor management: Managing thecontract, relationship and performance

● Network outsourcing: Managed networkservices vs. network outsourcing

Mastering multisourcing – a business imperative

JOE DOYLE, MARKETING DIRECTOR FOR SITEL EMEAGIVES THE TOP FIVE REASONS TO OUTSOURCE● Lower costs - Gartner Group claim 80 per cent of outsourcing

cuts costs. One Inernet Service Provider (ISP) outsourced in Amer-ica as a cost-reduction initiative. Seeing strong results, it offshoredselected operations, saving $30 million annually without diminish-ing service quality.

● Up-sell/cross-sell opportunities - one investment bank tapped out-sourcing to generate additional revenue and leads and managescredit card enquiries. Results: up-selling $50 million in balance trans-fers, ranking first among service centres in customer satisfaction andgenerating $600 million additional revenue.

● Retention - outsourcers use sympathetic agents and incentives to in-crease retention. Emerging industries offer their services as a freetrial. These companies need talented customer care associates to en-sure the customer starts payin g for the service at trial end.

● Scale - global outsourcers respond quickly to demands created byseasonality or marketing promotions. One company outsourcing holi-day calls experiences a 500 per cent volume increase, requiring sev-eral hundred temporary agents. A wireless company ran a promotionon QVC, introducing 100 agents within two weeks.

● Diversification - blending internal call centres with outsourcedexpertise or geographies, diversification helps companies maintaininternal benchmarks, maximising outsourced results. One financialservices provider’s key differentiator is customer support and off-shored a trial for its prepaid debit cards.

KEY TOPICS

mand for BPO should go up.“One interesting aspect will be if

this encourages BPO to be taken upbeyond large companies and govern-ment departments. If the creditcrunch really bites, it could see BPOextending in to SME’s, which will bevery exciting for the industry. ”

If, or when, this happens, she believesthis will emphasise the BPO industry’sneed to ensure these new entrants areenthused by the service they receive andcost reduction they obtain so they renewat later dates when the financial climatemay have improved .

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Solid foundations crucialfor constructing BPO deals

To ensure the right decisions aremade, and are properly maintained,the best advice from those who drawup BPO contracts is for each side totake its time and define exactly whatis to be outsourced and how eachparty is going to measure, and re-ward, success. For this, the crucial in-gredient is time.

“The one thing you can’t get awayfrom with BPO is that it is not a quickfix,” advises Margaret Harvey, a part-ner at law firm Addleshaw Goddard’soutsourcing division.

“The most fundamental question isif something’s always been done in-house, then how do you attach avalue to it? How do you know howmuch a task costs you to perform soyou know if it’s cheaper elsewhereand how do you know how well youdo it, so you can then judge if some-one else is doing it better for you. Thisis what takes a lot of time to get rightbut it’s worth spending the extra timeto clearly define the service and de-cide how to measure any potentialimprovement.”Shorter termsThis does not stop once a deal issigned but is an on-going process thatwill be punctuated by many externalfactors which are now leading busi-nesses to consider shorter contracts.

“We used to do contracts for ten ortwelve years or more but now some-thing like five to seven years is morecommon,” she continues.

“The problem with long term con-tracts is not just that the client can feelthe provider may become complacent if

they know they have the job for manyyears but also when you take two com-panies, they will often be unrecognis-able ten years further down the line.Mergers and acquisitions happen andinternal changes are brought in thatchange a company’s approach andstrategy. So to make sure that client andpartner cannot grow apart, like this, weare now seeing clients going for shortercontracts that are regularly reviewed.”

Always movingIndeed Mark Beaton, UK head of out-sourcing at Accenture underlines themain premise of BPO that it cannot beallowed to be left ‘static’ by either party.

“The most important thing with BPOis that you accept that there is no suchthing as a ‘one size fits all’ approach andthat every contract is unique,” he says.

“Once you’ve invested the time inthe process of client and supplier get-ting to know one another and gettingaccustomed to each other’s businessculture you then have to commit your-selves to not standing still. It’s a globalbusiness and so there’s no reason whycircumstances may change and bothparties have to be committed to un-derstanding and working with that.”

Credit crunchWhilst much of the advice offered bylawyers and BPO providers is todayfocussed on ensuring that clients geta performance improvement as wellas the reduction in costs clients wouldexpect as standard, the next stage ofBPO’s growth looks set to come fromthe current credit crunch that is likely

to encourage companies to revert toprioritising costs savings over per-formance issues.

Hence, Fiona Czerniawska, directorof the Management Consultant Asso-ciation’s Think Tank believes BPO

BUSINESS PROCESS OUTSOURCING In summary

should be well placed this year but itmust rise to the challenge of ensuringnew entrants are well served.

“The credit crunch is going to seemore and more companies asking themost basic questions of whethersomeone else can do a better job withtheir administrative roles for less,” shesums up.

“For non-core competencies, ifsomeone else can bring a cost saving,and potentially improve a service, it’slikely those roles will be offered forBPO providers to pitch for. The harderthe credit crunch bites, the higher de-

There are so many variables in BPO thatpotential clients, as well as those renewingcontracts, could be forgiven for sometimes beingslightly confused by the choices in front of them.

� Mark BeatonBY SEAN HARGREAVE

Mastering Multisourcing - A Business ImperativeOutsourcing using several suppliers is a model that is increasingly being used by many organizations toenhance performance and improve competitiveness. Whilst reaping the immediate benefits gained, it isimperative that you put in place processes and plans to avoid any pitfalls that may be encountered.

The Gartner Outsourcing & IT Services Summit, 2-4 June 2008 , London focuses onmastering multisourcing. In four tracks, plus two virtual tracks spread across three days,nineteen Gartner analysts will present the latest research and advice on how to make themultisourced environment operate at peak performance.

europe.gartner.com/outsourcing

2-4 June 2008Royal Lancaster HotelLondon

• 19 Gartner analysts• More than 80 conference sessions• Keynotes, panels, interviews, case studies, workshops, Analyst

One-on-Ones• The Solution Showcase with more than 25 leading Outsourcing

service providers• More than 650 Outsourcing executives from across Europe

and all industries

Register before 4 April and receive €300off the standard delegate price.

To register please call +44 (0) 208 879 2430 or emailemea.registration@gartner.com

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