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.

Global BPO/KPO Demand by Segments

5.0

27.0

19.0

30.0

7.0

12.0

14.2

23.5

5.7

29.9

20.7

32.8

7.6

13.5

16.2

25.6

KPO** (including Research & Analytics)

CRM

Supply Management (IncludesProcurement Outsourcing)

* Vertical Industry Operations

Administrative Services

Payment Services

F&A

HRO

20062005

Source: Gartner, Nasscom, Everest, Bernstein Research, Analyst Reports

Offshoring: The Global Arena

Mexico

Ireland

India

Malaysia

Philippines

Source: Booz Allen HamiltonNon PlayersCustomers Nascent In Transit Strong

Demand Base* Supply Base*

Emerging Locations are Gearing up to Replicate the India Story11

Financial Services - Outsourcing and Offshoring Survey

A majority of Financial Services companies have engaged in BPO & ITO activities

Captive units have primarily been setup for BPO rather than ITO with a few exceptions

For those with captives, the vast majority still complement their capabilities with BPO partners

Wachovia Global T T

Citigroup US C T

HSBC Global C C, T

JP Morgan Chase & Co. C C,T

Standard Chartered Global C T

American Express Global C, T T

ABN Amro Global C, T TDeutsche Bank Global C, T TBarclay's PLC Global C T

Bank of America Global C, T T

BNP Paribas Global

UBS Global C T

Credit Suisse Global

Other Players

Mellon Financial US & UK C T

Capital One US & UK T T

Wells Fargo US N N

Lloyds TSB UK T T

T

T

T

T

C - Outsourcing to Captive

T - Outsourcing to Third Party

N - Not Outsourcing Currently

Source: publicly available articles and information

Data is as of a certain date & strategies evolve

Washington Mutual US T T

US Bank N NUS

National City US T T

Top US Banks / S&L

Global Consumer Finance Co Global T C, T

Scope of Operations

Status of BPO

Status of ITO

Scope of Operations

Status of BPO

Status of ITO

Global

Financial Services Process Map and Trends

Core ServicesCore Services Supporting ServicesSupporting Services

Product Development & Marketing

Document Processing

Portfolio and Performance

Review

Loan Monitoring

Application / Loan

Processing

Customer Service Risk Mgt

Claims adjusting/

adjudication

Data Entry Validation and Investigation

Capital Allocation

Portfolio Management

Payment Processing

Collection

Billing

Regulatory Compliance

Termination

Finance & Accounting ITO

New Product Introduction

Study

Telemarketing

Market Assessment

Measuring Sales Force

Effectiveness

Identifying Cross Sell

Opportunities

Voice / email customer service

Disbursement

End User & Vendor

Management

Underwriting Requirements

Gathering

Analysis and Write-up

Closing & Reporting

AP/AR/T&L

ERP Implementation

Information Management

Market Entry Strategy

Competitor Mapping

Application Imaging and Data entry

Document Management /

Imaging

Treasury

Reconciliations & Accounting

Managing CRM Application

HelpdeskDecision Support Models

Underwriting Decision

Pricing Analysis Financial

Planning & Analysis

eLearning

Application Support/Maint

Network & Infrastructure

Mgmt

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

Large ELFCLarge ELFC

Multi LineMulti Line

Small ELFCSmall ELFC

Mono LineMono Line

As is As is ––Where isWhere is

ASP Web hosted

Standardization, Configuration,Standardization, Configuration,EfficiencyEfficiencyContinuous Continuous

ImprovementImprovementCustomization, Customization, Integration, StructureIntegration, Structure

Next Wave of BPO ModelsNext Wave of BPO Models

ASPASPVirtualVirtual

As is As is ––Where isWhere is

Next WaveNext Wave

On DemandOn DemandProcessingProcessing

SaaSSaaS

Location Systems ScopeScope Config PeoplePeople

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

companycompany

First Data Global Leasing

Type CaptiveCurrent Markets US, Canada, UK

Forecasted Markets Ireland, Poland, Austria, Australia, Spain

Annual lease volume - contracts 100,000

Current lessees 300,000

Average transaction size $1400

Term 36 - 48 months

Employees 120

Equipment leased POS terminals, ATMs

Parent’s business Electronic payment processing

Why Outsourcing Is A Serious Option.

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

Key Partnership Lessons LearnedKey Partnership Lessons Learned

• This is a long term partnership – not just a vendor relationship

• Cultural match, integration, soft issues will drive success or failure

• There will be many issues during transition and operations – technology, people, knowledge transfer

• Our people must feel like your people – and be aligned with your key goals – to drive maximum impact in the long term.

• Building the partnership requires terrific project leadership, buy-in at multiple levels

• This is an Evolution to the Corporation of the Future

Our Most Successful Partnerships Have Engagement atExecutive, Managerial and Operational Levels

Disadvantage and Obstacles Disadvantage and Obstacles to Outsourcingto Outsourcing

Business Model

1

2

3

4

5

The Customer

Scope

Value

Proposition

ProfitModel

Control

Control is one of the five components of any Business Model :

Control includes Business Processes

Procedures / FunctionsPolicies

Outcomes / StandardsDesign / Engineering

Management / AnalysisBusiness Processes

Getting Started Getting Started with BPOwith BPO

• 1.4mm assets under lease & services

• Earning assets of over $12 billion

• 3,400 employees throughout the world

Customers represent Fortune 500 companies, as well as small and regional businesses.

Our global locations include:

Integrated Services that focus on the entire life cycle of a vehicle:

• United States• Canada• Mexico• Europe

• Japan• Australia• New Zealand

VEHICLEFINANCING

VEHICLEREMARKETING

VEHICLE SELECTIONAND ACQUISITION

VEHICLE OPERATINGEXPENSES TAX, TITLE

AND LICENSING

GE Capital Solutions GE Capital Solutions –– Fleet ServicesFleet Services

Why Outsource?

• Proven model for nearly a decade

• Drives cost out and adds value

• Improves processes, metrics and visibility

• Leverages best practices

• Creates centers of excellence

Selection of OutsourceSelection of Outsource• Capabilities unique to

equipment leasing and finance companies.

• The BPO model that works best for the ELFC.

• Experience and reputation in delivering added value to ELFCs.

• Understanding of ELFC’sbusiness model and value proposition.

• Technology platform –compatibility, robustness and depth of support.

• Culture of innovation.• Scalability of capabilities.

• BPO transition strategy and plan.

• Ability to integrate with other specialized outsources.

• Pricing model – pricing structure and amounts, willingness to share risks and rewards.

• Personnel deployment.• Agreement T and C. Term of

the agreement such as performance standards, performance deadlines, breakup provisions, mutual responsibilities, work schedules, guarantees and more

PHASE I

PHASE II

PHASE III

Cost Arbitrage

Value Creation

Strategic Differentiator

Lower wages

Economies of Scale

Six Sigma

LEAN

Re-engineering

Platform Consolidation

Standardization

Higher Productivity

Product expertise

End-to-End Solution

Business Analytics/ Full Transparency

Digitization

Best in class

Re-engineering

Expand customer flexibility

Process Elimination

“Quick Hits” for simplification & standardization

SLA Introduction

Re-engineering

PHASE 0

Streamlining

Time

Sav

ings

/Val

ue C

reat

ion

Savings 5% - 40%Business Impact (Revenue, strategic value)

Process Innovation to Process Innovation to Drive Business ImpactDrive Business Impact

To outsource or not –risk, complexity, criticality

HI

R TI oS K E

LL FE CV E L

LO

LO COMPLEXITY LEVEL HIKnowledge Required – Interactions – Variables

HI CRITICAL IMPACT LO

HI CRITICAL IMPACT LO

HI CRITICAL IMPACT LO

HI CRITICAL IMPACT LO

1

6

5

8

7

42

3

Critical: HI / Principles Based LO / Rules Based

To Outsource a Process or Not?To Outsource a Process or Not?

HI

CostCost

LO

LO ProductivityProductivity HI

MissionMissionLO CriticalityLO Criticality HI

MissionMissionLO CriticalityLO Criticality HI

MissionMissionLO CriticalityLO Criticality HI

MissionMissionLO CriticalityLO Criticality HI

High Cost/High Cost/Low ProductivityLow Productivity

High Cost/High Cost/High ProductivityHigh Productivity

Low Cost/Low Cost/Low ProductivityLow Productivity

Low Cost/Low Cost/High ProductivityHigh Productivity

11

22

33

44

66

55

77

88

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.

Comparative advantage - Adequate staffing andtraining leads to better personnel performance.

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

competitive competitive advantage advantage externallyexternally

to drive growth to drive growth

REALITYREALITY

MYTHMYTH

The uncertainty The uncertainty of benefit is not of benefit is not worth the riskworth the risk

Risk can be Risk can be managed, the managed, the biggest risk to biggest risk to

business is business is inactioninaction

REALITYREALITY

MYTHMYTH

““MyMy”” business business processes are processes are

core, unique and core, unique and proprietaryproprietary

Most business Most business processes are processes are

generic, they do not generic, they do not differentiate nor add differentiate nor add comparative valuecomparative value

REALITYREALITY

MYTHMYTH

Outsourcing is Outsourcing is an all an all

processes or processes or none decisionnone decision

All or some All or some processes can be processes can be outsourced and to outsourced and to

multiple outsources multiple outsources with new technologywith new technology

REALITYREALITY

MYTHMYTH

Outsourcing is Outsourcing is an all at once an all at once

implementationimplementation

There is a master There is a master plan, but incremental plan, but incremental

implementation implementation allows learning and allows learning and

innovationinnovation

REALITYREALITY

MYTHMYTH

Lets DiscussLets Discuss

Thank YouThank You