www.neoIT.

com

Moving Up the Value Chain:

Non-Core to Core
Business Process Outsourcing
NASSCOM: ITES/BPO Strategy Summit 2003
June 12, 2003
Avinash Vashistha

Copyright 2003 neoIT | All Rights Reserved.

Overview
The Offshore ITES/BPO Market
Market is sizable and growing
Deals are happening across a wide ranging set of scopes and price points
Numerous buyers have been signing full service BPO transactions

Not all suppliers are created equal

- ITES/BPO suppliers are coming from a variety of backgrounds
- Diverse backgrounds will influence the different supplier value propositions

and there is road to travel before it can be considered a mature market

- Todays value propositions are fairly tactical in nature versus transformational
- Most deals are still cost-driven versus total value based
- Buyers and global suppliers alike are looking at ownership options
- Domain knowledge and business process knowledge maturity is still a concern for many
offshore suppliers
- How will the market change and what does this mean for the global- minded organization?
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Complexity of Business Process

The Evolution of Offshore ITES/BPO

complex banking transactions
human resources

finance and accounting

claims processing
technical support, collections

2008

data entry, call centers

2003

Time to Offshore Maturity of Business Process

Source: neoIT

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ITES/BPO: Transactional to Full Service

The offshore ITES/BPO marketplace can be segmented into two
distinct pieces transactional and full service/transformational
relationships
Strategy
Core Process
Non-core Process

Corporate
Strategy

Transformational
BPO

HR: Information Mgmt., Performance

Mgmt., Employee Administration
F&A: Regulatory & Compliance, Tax
Mgmt.
Customer Care: Customer
extension/selection
HR: Payroll Processing, Benefits Processing, Recruiting, Education &
Training
F&A: Billing, Accounts Receivable, Accounts Payable
Customer Care: Help desk, customer retention/acquisition

Information Technology
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Transactional
BPO

A Maturing Offshore ITES/BPO Market

Current
Current Market
Market

Technology

People

Processes

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Scanner, Filenet, ACD

CTI, Links, Switch, CRM, OCRs
Technology Parks
Education
Experience
Domain Knowledge
Cultural Compatibility
Quality Improvement Processes
Reengineering
Training
Certification Level Achievements

Mature
Mature Market
Market
Reduced Risk

The MarketOffshore Locations

...there are a wealth of viable offshore locations
Ireland

Total Labor Costs

Israel

Singapore

Canada

Mexico
Hungary

Malaysia

Philippines
China

Russia

India

Quality of Supply (availability, cultural fit, skills, processes)

Source: neoIT

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BPO Country-specific Capabilities

Source: neoIT

a look into what buyers are evaluating today.

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Leveraging the Value Chain

The offshore ITES/BPO marketplace is attracting a swarm of
supplier models- all leveraging different parts of the value chain
Consulting firms leveraging strategy
relationships e.g. Accenture, Deloitte

Corporate
Strategy
Pure-play firms
e.g. Exult, Convergys, Hewitt

Attacking from both ends

e.g. IBM with PWC acquisition
EDS w/AT Kearney & Solutions Consulting

Core Processes

Specialist firms adding services

e.g. Carreker / Caretek

IT firms moving up to protect /

leverage IT business
e.g. Wipro, Infosys, SVI

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Non- Core Processes

Information Technology

Offshore firms moving up the

value chain
e.g. e-Telecare, eFunds, EXL,
WNS

Addressing the Growth Challenges

Key
Key Challenges
Challenges
Financial
HR/Organization/
Culture

Mitigation
Mitigation Options
Options
Develop financial business case for offshoring initiatives and programs.
Understand relative financial requirements of business and determine role that offshore

capabilities and cost savings should play in meeting those needs.

Identify and work with key stakeholders to determine offshore requirements and emerging

needs.
Assess HR and organizational requirements for offshore HR policies and guidelines (company
facilities offshore, contractor / partner requirements, transition of employees to outsourcer).
Complexity of processes determine ease and speed of offshoring.

Operations

Core or non-core to business.

Internal readiness to offshoring and level of maturity.
Determine objectives and review operations against best in class parameters.

Technology and
Business Process
Competition and
Marketplace

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Review the current status of various service-lines (IT, BPO, Infrastructure, etc.) and their

inclusion in offshore strategy.

Understand future needs and relative ability of the business to meet them (major upgrades,
projects, platform requirements, etc.).
Understand offshore activity of key competitors, partners, and customers.
Evaluate competitive advantages/disadvantages created by above activities.
Determine relative positioning for company (leading, following, conservative).

Addressing the Growth Challenges

Key
Key Challenges
Challenges
Community,
Shareholders and
Brand

Mitigation
Mitigation Options
Options
Review relative position and offshoring perception with key stakeholders and community.
Ensure any impacts to brand are adequately incorporated and where necessary mitigated.
Communicate position pro-actively.

Review customer requirements and align them with offshore plans (I.e., how would customer

Customers

Regulatory
Compliance and
Legal

base react to offshore projects, call-center support, etc.).

Review sources of competitive advantage/disadvantage.
Determine unique customer requirements and plans (I.e, high net worth individuals, complex
business support knowledge, etc.) in relation to offshore strategy.
Work with key regulatory bodies to understand key compliance requirements.
Proactively determine risk areas, industry-wide standards, and overall compliance profile and

legal requirements.
Deliver a gap analysis and resolution plan between offshore and corporate standards.
Create a consistent offshore message and approach to be used for communications to

Communications

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employees, external parties, shareholders, media queries, etc.

Manage external requests (I.e., does company want to discuss experience, industry
organizations, etc.) or policies.

Addressing the Growth Challenges

Key
Key Challenges
Challenges

Mitigation
Mitigation Options
Options
Keep current on future trends and key issues like emerging offshore locations, state of offshore

Offshore
Knowledge and
Strategic Roadmap
Offshore
Sourcing/Build

markets currently deployed, and key factors like labor rates, capabilities, capabilities.
Determine key requirements for offshore that need to be incorporated into current and future
offshore sourcing.
Develop overall offshore strategic road-map and planning horizons, including periodic offshore
reviews, assessments, etc.
Manage future sourcing requirements (RFIs, RFPs, Contracting, etc.) and changing

scope/projects for existing projects and partnerships.

Provide framework and process to use across organization for offshore initiatives, including
offshore models, transition plans, partnering and sourcing strategy (# of suppliers, JVs, etc.).

Offshore
Management

Determine processes (on-site, 3rd party, etc.) and scope for offshore PMO.

Supplier
Management

Determine financial and performance standards for potential and current offshore vendors.

Risk Mitigation and

Compliance

Maintain positions and management plan on offshore compliance and risk mitigation standards,

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Ensure performance (financial, service level, contractual) of existing offshore initiatives.

Set standards and benchmarks to measure offshore activity and portfolio.

Vendor rationalization and determination of requirements (best in breed, single vs. multi-source

suppliers).

including Geographic Diversity, Disaster Recovery / Business Continuity, Security, IP, Audits,
Regulatory Compliance (I.e, OCC, FDIC, OTS, etc.) for Offshore

Lessons Learned
There is substantial value for organizations in the short term
Cost savings are real and range from 15-50% depending on the situation
Improvements to service levels can be assured with the right supplier / captives

There are suppliers ready to meet the challenge

Numerous suppliers have the right emerging capabilities for clients
A few suppliers are willing to step up to a value proposition that delivers real

transformational improvements to your organization

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What Should We Do To Get Started?

Guiding Principles
Ensure internal alignment and support at

the executive management layer is

obtained to seriously evaluate sourcing
Build a Business Case through an

Assessment
Develop the sourcing materials to survey

the market
Develop a strong project team made

up of A players
Focus on the real business objectives

and how sourcing can help

address them
Get organized up-front and begin with the

end in mind
Manage risks and culture on ALL sides of

the ocean
Dont approach the marketplace until you

are prepared

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Source: neoIT

Great Offshore Outsourcing Resources

For outsourcing and offshore outsourcing knowledge, visit

neoIT:

www.neoIT.com
www.neoOffshore.com

Firmbuilder:

www.firmbuilder.com

TPI:

www.tpi.net

Outsourcing Journal:

www.outsourcingjournal.com

Philippines:

www.digitalphilippines.org

India:

www.nasscom.org

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Contact Information
Avinash Vashistha
Co-founder and Managing Director
avinash@neoIT.com
925.918.0102
98.45.030405
2603 Camino Ramon, Ste. 200
San Ramon, CA 94583
No.210, Bellary Road
Upper Palace Orchards
Bangalore 560080, India
www.neoIT.com

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