Outsourcing Then Now Tomorrow

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Outsourcing Then , Now & Tomorrow

May 2008

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Confidential and proprietary - Not to be distributed without the prior written consent of Copal Partners

The )!ndustriali*ation of +ervice represents one of the biggest trends in the technology and services sectors

IN!"T#I$%I$TION O' "(#)IC("

Cheap

Transportation

-railroad

+tandardi*ation

of parts / mass

customi*ation

Cheap,

controllable energy

-steam power

T*(N

!nternet / global

networing

+tandardi*ation of

processes

Computing power /

global labor pool

NO+

Industrial #eolution Industrialied "erices #eolution

#epeatability .easurability /012 .ass customiation


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"$)IN

3"

*I3* CO.P%(4IT5 3(N(#$%%5 .($N" .O#( "$)IN3"

)alue $ddition

%ow .edium *igh

!ncreased

compleity can

lead to higher

savings withpotentially less

ris

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()O%!TION TO+$#" .O#( =NO+%(3( INT(N"I)( +O#= $N T*( >'#ONT (N?

=PO !ntellectualarbitrage allowsoutsourcing of coreprocesses

4epeat initialsuccesses bydeveloping robustnowledgemanagement

methodologies for5P"

@PO Cost 'rbitrage &mergence of6ualitycertifications lieCP"C

$ocus on businessdomains

$ocus ondeveloping robustnowledge

managementmethodologies

Multi7geographystrategies

ITO Cost 'rbitrage lobal %eliveryModel comes ofage with changingtelecom scenario

&mergence of6ualitycertifications -CMM,!+"

$ocus onnowledge

management

$ocus on businessdomains enablingaccess to complebusiness7facing !Tsystems

eographicaldiversification bysetting up deliverycentres in multiplelocations

&volve to provideend7to7endconsulting services

.id A7s B7-B6 B:-B 9777-9776 9776-977D 977A-97B7

Infancy 3rowth .aturity

Source: KPMG, Knowledge Process Outsourcing, February 2008


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=PO T*( (.(#3IN3 +$)(

Source: KPMG, Knowledge Process Outsourcing, February 2008

*igh

CompleEity

.oderate CompleEity

%ow CompleEity

10739

:9729

:07:2

T!&4! and !! M;', C',

C$', CP', Postraduates -$inance shadow personnel?

Create mechanisms and forums that facilitate an open eEchange

of information and obectie feedbacF

eeloping a contractual obligation for both parties to commit

appropriate eEecutie inolement

Create a summary process flow map and preent micro-

management

#egular reiew of "%$s as to their appropriateness

Contract must include proision for a fair eEit process

Thorough testing of the disaster-recoery and business-continuity

processes

%acF of (ffectie Communication

PIT'$%%" P#()(NTI)( .($"!#("

Source: Outsourcing Partners International


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Source: Gartner 2007, o!al "nalysis

"ne of the biggest challenges in an outsourcing contract is to ensure

that the customer continues to obtain the level of service it re?uires at

a competitive price

B iven the length of some outsourcing contracts, what starts out

as a competitively priced contract may not remain the same.

Contracts must therefore be drafted to effectively manage this ris

iven the dynamic nature of business re?uirements and the time

taen to negotiate an outsourcing contract, a signed contract may not

reflect all of the customers original re?uirements < additional ones

B Therefore, outsourcing contracts need to comprise of a control

mechanism which would contain procedures for proposing and

accepting changes, as well as an escalation process for resolving

disputes

%ata protection and related issues of security have always been areas

of concern for companies considering outsourcing

B +olutions to this issue include negotiations of any gaps between

the solution offered by the supplier and what the customer

believes is appropriate security for its needs

;oth parties in an "utsourcing contract need to draft an effective eit

strategy to avoid the possibility of being tied into an unfavorable

outsourcing deal. 4easons why a party might want to terminate an

outsourcing contract includeD

B Material breach by the other party

B !nsolvency, winding up or change of control of the other party

B 4ight for the buyer to terminate for convenience, where there is

no fault on the part of the supplier

Competitie Pricing Change Control

ata Protection Termination

Transferring analytics business processes to an eternal provider is a comple process that involves transitioning high7value data and

nowledge about a companyEs internal plans and ob@ectives. $or this reason, contractual issues relating to etensive due diligence on privacy

laws pertaining to that country, security < confidentiality aspects, and planning < documentation of nowledgeBtransfer processes become

absolutely critical

"(#)IC(" O!T"O!#CIN3 CONT#$CT!$% I""!("


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The global 5P" business is epected to grow to =+% :>.bn by

20:0B:: from appro. =+% 3.3bn in 200>B0, increasing at a

growth rate of 93G

!ndian 5P" industry is epected to grow to appro. =+% ::.2bn by

20:0B::, up from =+% 1.09bn in 200>B0. ;y 20:0B::, theindustry will employ appro. 299,000 professionals, increasing

from 9,300 in 200>B0

5P" is epected to contribute around :.8G to the !ndian service

sector by 20:0B::

!ndia is the leading destination for offshoring services, followed by

China and Malaysia

;usinesses outsource a growing proportion of their processes to

!ndia asD

B !ndia has a large, growing and highly educated &nglish7

speaing worforce

B &mployee costs in !ndia are appro. :9B20G of the =+ costs

B The business and regulatory environment is conducive to the

growth of the outsourcing industry

Source: "#$# Kearney, KPMG, Knowledge Process Outsourcing, February 2008

CountryCurrent

$ailability ofTalent

Potential$ailability of

Talent

CompensationCost "aings

InfrastructureCost "aings

Potential #isF Oerall

India ;;;

Canada '''

$ustralia ''

"ingapore ''

"outh $frica '

Ireland '''

+ales '''

Parameter is most faorable Parameter is least faorable

=PO Characteristics in =ey 'inancial "erices =PO estinations

INI$J C!##(NT%5 T*( ON%5 #($% P%$5(#


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=(5 T#(NJ "*I'T '#O. C$PTI)( TO


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There has been gradual shift in the sourcing model from establishment of captive units to @oint ventures or third

party outsourcing

HC( Technologies, a member of the =+% 30mn HC( roup, formed a @oint venture with %eutsche ;an ' by

ac?uiring a 9:G stae in the holding company of %eutsche +oftware, %eutsche ;anEs !T services subsidiary in!ndia

The call center operations of '"( were recently ac?uired by 'egis ;P", the business process outsourcing

company of the =+% 90bn &ssar roup in !ndia. 'egis ;P" will tae over customer service and technical

support, both voice7based and non7voice, for '"( s customers

The enpact transition is the sub@ect of considerable interest in the outsourcing world. The company moved to a

third party operation from a captive model. enpact began in :FF as the !ndia7based business process services

operation for & Capital. !n 2003, & Capital divested >0 per cent of its stae in its ;P" arm to eneral 'tlanticand "a Hill Capital Partners at an estimated price of =+% 900mn

Source: Gartner 2007, o!al "nalysis

=(5 T#(NJ "*I'T '#O. C$PTI)( TO


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=ey .&$ Transactions, 9770 & 977D

$cGuirer Type of "erice Proider Target /.erged Company2

(4% "erices ;P" !nductis -Iuly 200>

+N" ;P" Maretics -"ctober 200

Cogniant C+! Maret4 -"ctober 200

Copal Partners 5P" &evo -May 2008

=(5 T#(NJ INC#($"( .&$ $CTI)IT5 $N CON"O%I$TION

There have been a number of recent transactions in the ;P" / 5P" space

These transactions are primarily driven byD

B ;P"s needs to enter the 5P" space, as this space is epected to have higher growth and marginsmoving forward

B #eed to achieve greater scale by current 5P" providers

B #eed to develop epertise in new marets / segments

Outsourcing Then Now Tomorrow

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