Global Services A CYBERMEDIA Publication

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various constituents of the global technology and Pradeep Gupta
Chairman & Managing Director
business processing services industry ecosystem.
Cyber Media (India) Ltd.
E. Abraham Mathew
Directory of Services President
Ed Nair
Newsletter
Editor
A regular digest of key industry happenings. ed@cybermedia.co.in
Satish Gupta
Digital Magazine Associate Vice President
The fortnightly digital magazine features research satishg@cybermedia.co.in
reports, articles and experts’ views. Available on Smriti Sharma
www.globalservicesmedia.com smritis@cybermedia.co.in
Sruthi Ramakrishnan
Webinars sruthir@cybermedia.co.in
Global Services’ web-based seminars aim to impart Niketa Chauhan
useful information related to outsourcing indus- niketac@cybermedia.co.in
try in the form of presentations and discussions Virendra Kumar
by industry specialists. virendrap@cybermedia.co.in

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3 GlobalServices www.globalservicesmedia.com January 2011

 January 2011 Volume 2, Issue 2

features

10
Utility Computing:
the Reality Check
by Ed Nair
Virtualization and cloud computing has
brought utility back into the discussion
though neither of them are a precondition
for a utility-based model of IT delivery

8 18 xperts
Emerging from the Eye of the Engineering Services - an
Storm, Waking Up to Changed Outsourcing Evolution
Rules
by Runa Mookerjee, Analyst, ValueNotes Sourcing
by Sruthi Ramakrishnan Practice
The main challenge the MPO (mortgage process outsourcing) An increasingly competitive market for engineering services has
industry faces today is the changed environment it finds itself in made outsourcing indispensable to the industry, more so follow-
ing the downturn

16 20
The Next Stage A New Role for Benchmarks
in Managed Print by Max Staines, President of North America,
Services is Here Compass Management Consultingn
by Sruthi Ramakrishnan Traditionally a bargaining tool for clients to set pricing targets for
Managed print services and IT- BPO proc- service providers, outsourcing benchmarks are increasingly being
esses traditionally stood at different ends of used to collaboratively drive transformational initiatives.
the services spectrum. Not anymore.

22 Global Services LIVE!

Finance and Accounting Solutions 23 Message Migration and Management 25

Client: Coca-Cola Enterprises Provider: Capgemini Client: A Fortune 100 company Provider: Microland Limited

‘Lift & Shift’ Migration 24 Streamlining Operational WorkfloW 26

Client: Owens & Minor Provider: Dell Services Client: Metlife Provider: Ci&T

4 GlobalServices www.globalservicesmedia.com January 2011

 Global Services LIVE!
Q1, 2011 EDITION

Releasing March 2011

Case studies are invited from service providers.
For more details click here or contact Satish Gupta at satishg@cybermedia.co.in
Editor’s Note
Dawn of a
New Decade
F irst things first, let me point towards two articles in this issue that deal
with significant shifts in IT and BPO.

Utility computing used to be one of those buzzwords thrown around

in the IT circles a few years ago. It was supposed to be a game changer
on the IT infrastructure delivery side (which it is), but the IT world got
swayed by other developments like service-oriented architecture, virtuali-
zation, and business process management. Years later we are once again at
a point where virtualization, SaaS, IT standards, managed services model,
and cloud have come together to change the way IT infrastructure serv-
ices are delivered. This has renewed the interest in standards-based utility
model where the pricing is based on consumption of services.

Ed Nair In this issue, we take a reality check on where utility computing stands
today. One key message is that it is not about technology or the sourcing
Editor
model; rather it is about the behavioral changes needed (on the client
ed@cybermedia.co.in
side) and the realization that revenue per client would decrease but mar-
gins would increase (on the provider side).

As we look back Another exciting trend we examine in this issue is about the evolution
to the decade and convergence of MPS (managed print services) into broader IT serv-
ices and BPO markets. This has implications for many document-driven
that went by, the industries like mortgage, insurance, healthcare, and others. The article
outsourcing industry traces the antecedents of this trend, explains the realignment of service
or the global services providers, and presents the possible dynamics of this convergence and its
impact on the industry.
industry had many
momentous shifts As we look back to the decade that went by, the outsourcing industry
or the global services industry had many momentous shifts. The transi-
tion from the previous decade was marked by the culmination of a fren-
zied programming effort called Y2K, the shift into developing e-business
applications, and the boom in call centers in India and the Philippines.

We are once again at the start of a new decade.

The transition this time is marked by mature global delivery, the

promise of the cloud, the convergence of IT and BPO, the quest for
transformation, and the clear recognition of global sourcing as a strategic
lever.

Wish everyone a great and rocking year 2011!   GS

7 GlobalServices www.globalservicesmedia.com January 2011

 Industry- specific Processes

Emerging from the Eye

of the Storm, Waking Up
to Changed Rules
The main challenge the MPO (mortgage process outsourcing)
industry faces today is the changed environment it finds itself in

by Sruthi Ramakrishnan

M
ortgage processing was one of the verticals
directly affected by the economic collapse
in the US. Now that the economy seems to
be on the path of recovery, this industry too
is attempting to find its feet.
But the main challenge faced by the industry is the
changed environment it finds itself in -- one of increased
regulation and caution, not to mention the general para-
noia that the economy might slip into recession again. As
Taylor Woods, president and CEO, Genpact Mortgage
Services, puts it, “ The post- recession period saw a bit of
overreaction to the type of lending that was seen, and that
created a very difficult environment for people to borrow,
versus what we’d seen in the run-up where everybody
could get loans. As a result of the fewer eligible people in
that space, it resulted in lower (origination) volume.” Taylor Woods
Changes Wrought by the Crisis President and CEO, Genpact
Keshav R. Murugesh, Group CEO, WNS Global Services, Mortgage Services
sees two major changes in mortgage processing since reces-
sion began. One, changes in the appraisal process that was
much abused in the pre- recession time, and second, the value caused significant pricing stress that quickly began to
rigor around verifying earnings, debt ratio calculations affect the entire market,” he says.
and sub-prime mortgages. “Historically household income “Much stricter rules have been brought into play to
reported on mortgage applications were checked with a prevent a reoccurrence. To correct the inflationary apprais-
reasonable amount of rigor. But in the early 2000s, with al scam, strict regulations have now been enforced on how
the value of real estate climbing steadily, the rigor was often a house can be appraised and also many strict guide-
loosened in favor of faster processing. This lack of rigor led lines and review processes have been put in place. The
to many families taking on too much debt backed by hous- increase in processing rigor has had an effect on the MPO
ing that dropped in value once the bubble burst. With a market, requiring better training of processors, significant
number of families overextended, a small drop in housing increase in quality reviews, and financial penalties if proper
controls and reviews are ignored.”

8 GlobalServices www.globalservicesmedia.com January 2011

 Industry- specific Processes

Back in Business about for now. “Due to the recession and the number of
A MarketsandMarkets report ‘Post Crisis Changes in mortgage companies that closed down entirely, I think the
Mortgage Lending in U.S. - Forecast & Analysis 2010- amount of work being offshored went down dramatically,”
2015 ‘ says that currently, conventional fixed rates are says Woods. “But the pressure around costs is very critical.
at their lowest in decades, with pricing of 30-year and More work is starting to be offshored and we are seeing a
15-year fixed-rate mortgage at its lowest. Such low rates are recovery now.”
generating significant refinance activity in the housing sec-
tor. Refinance in 2009 increased by approximately 78% to Strong Opportunities, New Investments
$1,364 B, indicating that borrowers have been responding Companies are looking at the new opportunities presented
to low mortgage rates. by the changed industry scenario. “Firstly, there continues
Genpact saw its business pick up the same year. “In to be strong opportunity for mortgage origination and
2009, the market sort of stabilized in volume and activity within that, the strongest components seem to be areas like
started increasing,” says Woods. “Those outsourcing part- underwriting, processing and even sales. The loan officer or
ners who were able to survive during the downturn for the origination activity- these are the highly skilled elements
last couple of years were able to pick up business”. of the origination process that are in really high demand,”
The various mortgage modification programmes says Woods. “Number two, there is very significant pres-
(Countrywide, Making Home Affordable Program con- sure on existing portfolio, existing investments in real
sisting of HAMP and HARP) estate. The demand comes from
— started to help borrowers pay the number of people strug-
back their mortgages through There have been two major gling to make their mortgage
loan modification, provided payments.”
they met certain criteria— have changes in mortgage process-
also, to some extent, helped ing since recession began- one, Genpact expects its invest-
third party providers garner ments in technology over the
business. “The government is in the appraisal process which past couple of years to pay off
running its programmes pri- was much abused in the pre- now. “We invested in two major
marily through Fanny Mae and ways. First, we have a propri-
Freddie Mac. Through these recession time, and second, in etary platform within our origi-
two entities there’s tremendous
work that is being outsourced
the rigor around verifying earn- nation offering. In our platform
we have tremendous amount
primarily through components ings, debt ratio calculations of pipeline management, work-
serving individual companies to flow management and automat-
provide very specific services,
and sub-prime mortgages. ed communication. Secondly,
much of which have been along we made an investment early in
loan modification and mortgage 2010 for automation of proc-
origination,” says Woods. esses that takes the processing time down. Our investment
allowed us to gain a very strong additional market activity
Not a Cakewalk and also loan origination that we are taking into the next
But such programmes have also run into rough weather, decade,” says Woods.
with allegations, among others, of mistakes in the review WNS looks to grow by utilizing its “collective knowl-
process of foreclosures. This had led some accusing fingers edge that is transferrable across WNS clients” and “pro-
to point at third party servicers, but the latter are unper- viding cost margins that can only be realized by using an
turbed. “Those who are negative on outsourcing may experienced and trusted MPO provider” which would
attempt to blame an MPO for the issues that have been help offset the pricing and margin pressures that occur in
encountered in the processing of mortgage origination a down market.
documents. In reality MPOs like ours carefully follow So while the third- party MP servicers are hoping for
regulatory and client policies and procedures. It is always some sunshine after the recession storm, how they will fare
possible for a human error to occur, but that is true of any in the coming year is linked to the fate of the mortgage
process, business or industry,” says Murugesh. industry. GS
The US government’s anti-outsourcing stance,
which could potentially affect offshore servicers, is also
something they are not choosing to worry too much

9 GlobalServices www.globalservicesmedia.com January 2011

Special Report Utility Computing: the Reality Check
 Special Report Utility Computing: the Reality Check

utility computing:
the reality check
Max Staines, in a chat with
Ed Nair makes the case for
utility computing
 Special Report Utility Computing: the Reality Check

Utility Computing:
The Reality Check
The concept of utility computing is not new. In the first phase, it failed to become
mainstream. Virtualization and cloud computing has brought utility back into the
discussion though neither of them are a precondition for a utility-based model
of IT delivery. On the other side, from the sourcing world, managed services of
various types rose to maturity and popularity and it contained some flavors of utility
computing. But we learn here that utility computing is sourcing agnostic.
Regardless, by whatever name you call it, IT delivery is increasingly moving towards
a multi-tenant, consumption-based, standardized services model. Like a utility. So let’s
once again call it utility computing.
Max Staines, President-North America, Compass Management Consulting (recently
acquired by ISG which also owns sourcing advisory company, TPI) advises leading
organizations on performance management and benchmarking of service providers
and brings in unique insights into the value creation process in service delivery. Here,
in a chat with Ed Nair, Max Staines makes the case for utility computing and reveals
the nature of its evolving dynamics.

G
S: What’s the case now for utility comput-
ing?
MS: Traditional improvement initiatives drive
incremental efficiency gains within the exist-
ing operational environment, typically resulting in savings
of between 10 percent and 20 percent. A transformational
approach to improvement establishes a new, optimized IT
delivery model that fully leverages the benefits of stand-
ardization and utility computing, often yielding overall
cost savings of up to 40 percent.
Regardless of your business, 90 percent of your IT is
standard and common. Once an organization recognizes
that most of its IT requirements can be addressed through
standard services, it can develop and implement appropri-
ately tensioned pricing mechanisms that create incentives
to drive standardization and increased efficiency.
For the rest of 10 percent, by identifying the cost of
specialization, the business can make value-based decisions
and support comprehensive demand management.
The important point here is the recognition by
business that defining IT requirements in consump-
tion-based, utilitarian terms yields a critical competitive
advantage.
For example, rather than managing the TCO of
10,000 desktops, a client organization can now define
its requirements as follows: access to desktop resources
for 10,000 users, from between 9:00 a.m. and 5:00 p.m.
Eastern. Under this approach, importantly, the client pays
only for those resources that are actually used. Managing
the infrastructure to deliver those resources is left to the
internal or external IT service provider.
GS: What’s your best argument about utility
computing?
MS: It is my opinion that the largest component of a prop-
erly structured utility-based compute model of standard
service offerings is that technology capabilities are not the
only drivers in making the dreams of utility consumption
based computing services come true. Rather it is the abil-
ity for IT provisioner (in-house or outsourced does not
matter) to have a very pragmatic conversation with their
customers about behavior, about proper demand manage-
ment, about educated demand management. These discus-
sions are based on clear and well- articulated understand-
ing of what is cost and what value is derived from various
kinds of service delivery.
As such, utility computing is less a technical innova-
tion than it is a reflection of a maturing marketplace that
produces more effective commercial agreements for the
delivery of services.

12 GlobalServices www.globalservicesmedia.com January 2011

Special Report Utility Computing: the Reality Check

GS: How far does the buyer community or
the provider community understand this?
How much of the former’s understanding
is colored by the latter’s tall promises?
MS: It is like once bitten twice shy. Service
vendors need to know and accept that rev-
enue per client is likely to go down. But,
what they get in return is margin control
and they are willing to take less revenue if it
means they can control margin. They’re will-
ing to do so for a number of reasons. One
of which is that they believe that if they can
start to get people to standardize, and yes,
charge less for it, then they can attract more
clients on to that virtualized state of IT
infrastructure. That’s a key point in the
outsourcing view of this.
When it comes to the internal view,
the most progressive IT operations - the
ones who already have a better than
average relationship with their business
customers - are the ones who are going to
have an easier time taking it further.
Clients who have implemented a well
defined catalog of services are going to be
able to take the next step of removing the
constraints. There needs to be a discus-
sion about demarcating who does what or
who is responsible for what (between the
vendor and the client). It is going to be
a tough decision in some cases, because
some business units through the hard
knocks that they have gone through with
their IT provisioners (even internal), are
used to having a quite a bit of say.
Now, if you can have a discussion that
says are you sure you need that or are you
sure you can’t let us do that for you or
make those decisions for you, so that we
can standardize across the much broader
set of IT assets – application infrastruc-
ture so on- to get the cost of producing it
down. If you can make that business case,
that’s the decision those CIOs and CFOs
want to happen, that’s for sure.
GS: What are some of those sub-trends
that are making utility computing a real possibility?
MS: Governance tools are making it possible, as well ana-
lytical agents are making it possible to properly understand
consumption in a meaningful way. There is a new mindset
that 90% of what is accomplished in the IT shop, you
could easily consider it to be ‘commodity’.
The rest need special attention.
This generic, one-size-fits-all approach
to service delivery is becoming increas-
ingly viable, thanks to growing business
acceptance of the proposition that up to
90 percent of the IT requirements of most
organizations can be addressed through
standardized services. In other words,
while a bank’s activities are obviously very
different from the activities of a retail
manufacturer, the basic IT functional-
ity that each business requires to support
critical processes and systems is largely
identical.
There is bound to be a real paradigm
“As standardized shift; you will have historic premiums.
service deliv- There will be initially a barrier to get
to a truly standard utility based model.
ery continues to As time goes, those historic hurdles will
be out. The mind set shift will start to
grow, key sourc- take hold. At a conference in October
ing decisions will , a group of vendors were talking about
their ability to deliver their services on a
be around how consumption model and they were even
best to drive willing, in right commercial circum-
stances, to have virtually no contract—
standardization which means pay-as-you-play and opt-
and utility-based in and opt-out as you wish. If they are
going to do that kind of a model, then
consumption of IT they are going to have to have an eco-
as extensively as nomic base of a very large estate where
they can leverage enough. So, invest-
possible.” ments are being made in setting up that
kind of estate to let people come in,
plug in, plug out. That’s another shift
Max Staines happening, another enabler.
President-North GS: When you approach an organiza-
America, Compass tion with this idea of utility-based
Management computing services, how do they gen-
erally respond? How does one prepare
Consulting to start with utility computing?
MS: The very first thing you need to
do is to understand how ready you
are. That gives you an indication how
far you need to travel. Also, that gives
you an indication of what kind of investment it’s going to
take and if you can also model what the future could look
like, then you can start to lay out proper business case for
change. So, you need to take a very well structured look at
how you deliver currently. Ask questions such as what’s in

13 GlobalServices www.globalservicesmedia.com January 2011

 Special Report Utility Computing: the Reality Check
the IT group, what are the activities and what are the costs,
what’s the value contribution to the business, and such.
The other thing you need to do is to take a model
of standard IT services, take a well functioning model of
IT services and you start to lay the groundwork of what
the future could look like so, you actually lay out a sce-
nario or two of what if we did the following standardiza-
tion or utility type activities to get us to a future state.
What could that future state look like? Interrogate that
model, analyze the assumptions and you make a very well
thought through future state assessment. Now, you
have a current and future and you make a roadmap to
getting there. You do all that in paper before you unplug
a server.
GS: How dependent is all this on your sourcing model-
in-house, offshore, outsourced…..?
MS: You need to look at not where it comes from, but
what’s delivered. As long as the organization can provide
as efficiently as a professional sourcing arm would. Then,
that’s no reason to look elsewhere. What matters is how its
delivered, where it comes from is secondary.
As standardized service delivery continues to grow, key
sourcing decisions will no longer be around outsourcing,
offshoring, or repatriation, but rather, around how best
to drive standardization and utility-based consumption of
IT as extensively as possible. In some cases, outsourcing
will be preferable. In others, where, for example, in-house
incident management capabilities are more mature than
the service provider’s, or if assets are already owned by the
client organization, a retained approach will prevail.
GS: Normally, in any kind of standardization you lose
some flexibility. What do you have to say in this case?
What would the organization end up losing? Flexibility
also has a bearing on agility.
MS: Agility is one thing, standardization is another. You
do not have to be bespoke in everything you do in order to
be agile. Look at any standardized service for example- dial
tone, I can make a call any time I want, I can disconnect
any time, I can do call forwarding and it is standard. I have
the same dial tone as you have. You may not need any of
those fancy services. That is the difference. But how you
deliver has to be standard. You will lose some control as the
client, but that is part of the bargain. You have to be par-
ticipatory with IT provider. This is not a one way stream.
That’s where, I go back to the point about modeling out
what the future would like and knowing what is going to
change not only on cost side but also on the behavioral
side. GS
15 GlobalServices www.globalservicesmedia.com January 2011
 Emerging Trends

The Next Stage in Managed

Print Services is Here
Managed print services and IT- BPO processes traditionally stood at
different ends of the services spectrum. Not anymore.

by Sruthi Ramakrishnan

M
anaged print services (MPS) have tradition-
ally been associated with document print-
ing, faxing, scanning— basically managing
the document- related functions and infra-
structure of an organization. Handled mostly by imaging
firms, these services were not something that could be, or
were outsourced to traditional IT/ BPO service providers.
But the past 2-3 years have seen developments which
promise to change this. HP’s acquisition of EDS (Electronic
Data Systems) in May 2008, Xerox’s strategic alliance with
HCL and its more recent acquisition of ACS, Canon’s
2010 collaboration with Accenture- all these clearly mark
the growing convergence of the hitherto completely
distinct MPS and IT/ BPO markets. “There is a huge
opportunity at the intersection of document management
and business process outsourcing, much of which centers
around paper intensive tasks. This creates a real demand
from enterprises and governments for the services we
can deliver, including MPS, on a global scale,” says Russ
Buchanan, vice president of Worldwide Alliances (a divi-
sion of Xerox’s Global Services unit).

Not Unexpected
“The (Xerox- ACS) deal gives
This convergence was not entirely unanticipated. Print/ Xerox the scale to attack the
document output has come to be viewed, as James Joyce,
senior vice president, Xerox Enterprise Print Services’ put $150B BPO market through a
it, “the last unmanaged frontier when it comes to opti- combination of services, tech-
mizing IT infrastructure” (‘Managed Print Services Drive
Value for Businesses’, Global Services Media, July 02, nology and innovation,”
2010). But the maturing of managed services as a whole
has been greatly responsible for this. “As we start getting
into Stage 3 and 4 (of the evolution of managed print serv- Russ Buchanan
ices), there is an awful lot of IT integration potential with
document management systems,” says Edward Crowley,
VP of Worldwide Alliances (a ­division
CEO, Photizo Group. “So it’s clearly becoming a focus of Xerox’s Global Services unit)
area for the IT organizations. And in fact we see that in

16 GlobalServices www.globalservicesmedia.com January 2011


nearly 70 percent of MPS engagements, it is driven by IT
organizations, they are the ones actually managing that”.
How has this integration come about? “Customers are
looking for companies that can help them do two things:
one,solve the big, complex problems they face in today’s fast
moving and highly competitive marketplace and two, focus
on core business areas where they can create differentiation
for their products and services. An outsourcing partner that
can help them do both is very attractive,” says Buchanan.
“Imaging or document technology and document man-
agement companies have great expertise in a particular area,
but the scope of their expertise isn’t always sufficient to solve
the customer’s real business problems.” This is where IT/
BPO companies come in. “By acquiring or partnering with
ITO/BPO companies, these companies can address a much
bigger set of customer problems in a more comprehensive
way, significantly expanding their addressable market oppor-
tunity.” The results are there to see from Xerox’s acquisition
of ACS. “The deal tripled Xerox’s services business to more
than $10B. And, it gives Xerox the scale to attack the $150B
BPO market through a combination of services, technology
and innovation,” he says.
The Next Big Opportunity
Robert T Sethre, senior consultant, Photizo Group sees
this growing integration as the next profit opportunity
for both groups. “Imaging OEMs (Original Equipment
Manufacturers) and vendors recognize the need to develop
and support services, at first “close to home” with a strong
document management component, then later promoting
IT services independent of the document space. IT serv-
ices and BPO consultants may have been disinterested in
document management, or possibly simply overlooked the
potential, as it has been traditionally “messy” both from the
technical support as well as from the financing and admin-
istration standpoint. But they will address the topic as well.
MPS provides a framework where both groups, emerging
from their core business base, will discover the profit oppor-
tunities— MPS is in this sense a true facilitator,” he says.
HP was the first to recognize this opportunity. The EDS
acquisition was done keeping in mind the company’s Phase
2 goal- ‘to develop a layer of leading software applications,
with a particular emphasis on management automation, to
optimize the performance of HP’s hardware and differentiate
it in the marketplace. Phase Three has addressed the services
side with a goal of bringing the business into the forefront
of global providers’. Xerox and Canon followed suit, each
collaborating with or acquiring IT and BPO heavyweights
to provide more fully integrated end-to-end services, thus
creating “a new class of solution provider,” according to
Ursula M. Burns, Xerox chief executive officer.
17 GlobalServices www.globalservicesmedia.com
Emerging Trends
Geographical expansion has also motivated some of
these partnerships, like in Canon’s case. Growth in Europe
was one of the key reasons for its collaboration with
Accenture last year, besides that of expanding its services
line. As Gary Horsfall, Head of Consultancy Services,
Canon Europe had commented at the time, “One of the
biggest challenges faced by European organisations today
is the management of their information, imaging and
media assets. Through our collaboration with Accenture,
we will create a series of propositions delivering custom-
ised solutions for large European organisations to manage
this challenge. The launch of Consultancy Services is fur-
ther evidence of Canon’s transition towards a service-led
organisation, which is a key strategy in supporting our
continued growth in Europe.”
The More,The Merrier
The prospects are not lost on smaller players. With MPS
burgeoning with opportunities ranging from software, IT
services and hardware manufacturing and management,
this space is set to be crowded by many more providers
than could be imagined less than a decade ago. “While the
traditional OEMs have recognized the opportunity and
necessity for developing services, this is not their strength.
New market entrants who excel in the software, IT and
process management and consulting space will discover
and start to leverage these opportunities. Interestingly,
these non-traditional players can also add hardware prod-
ucts and service offerings through partnerships without
being forced to develop a complete hardware portfolio on
their own,” says Sethre.
The USP factor here would be the range of services a
provider offers. This is what the big players are trying to
build on, in a bid to grab the biggest slice of the MPS mar-
ket pie. “One of the core premises of MPS is that nobody
has a lock on all of the necessary skills or product offerings.
As a result, we see new players entering the market as they
start to address that new opportunity. The usual group of
players may be surprized and even threatened by new ven-
dors. Some respond through partnerships and acquisitions
(Xerox/ACS, HP/EDS, Canon/Accenture). The newcom-
ers will bring a unique set of skills that the established
players cannot offer,” he says.
The net result will be a great benefit for the market and
respective users, but the process, he predicts, will be messy
as different vendors jostle for attention and position. The
winners, as Buchanan puts it, will be “the ones that go
beyond traditional MPS to address production print and
virtual/mobile print needs, and offer complementary capa-
bilities in BPO and ITO to deliver innovative solutions for
a broader range of client business needs.” GS
January 2011
 ADVISORY

xperts by Runa Mookerjee

Engineering Services -
An Outsourcing Evolution
An increasingly competitive market for "����
$�%��� engineering services
has made outsourcing indispensable
#���������to the !�industry, more so
following the downturn !�

E
"�����#��
ngineering services outsourc-
ing is likely to skyrocket fromfinancial recession, several engineer-
$15B in 2010 to around
$200b by 2020. In a recent
ValueNotes survey1 we found that
traditional design and manufacturing
�� �������
services make up the largest portion
�!�
of outsourced engineering services. An
increasingly competitive market for
engineering services has made out-
sourcing indispensable to the industry,
���������������
more so following the recent global
economic downturn.
������
An increase demand for engineer-
�����������
ing services is leading to a correspond-
ing increase for outsourced services.
�
Current spending on engineering serv-
ices of $750B is expected to increase
to $1.1T by 2020. Industry sources
���������������
expect India to play a large part in the
outsourced engineering services sector.
���
During the 2008-2009 global
�
ing manufacturing companies had to
cut back on their costs and downsize
in terms of operations, processes and
employees. This benefited the out-
sourcing industry as more was out-
sourced, and the trend is expected to
continue through 2020.
Certain regions which are also
among the favoured outsourcing desti-
nations are more popular for engineer-
ing service buyers. Besides, led by rapid
industrial growth some of these Asian
countries form the client base as well as
provide outsourcing services.
$�%��� "����
#��������� !�
!�
"�����#��
�
Going beyond traditional
outsourcing
�����
Our survey findings indicated that �
outsourced engineering services are
popular in aerospace manufacturing,
industrial and automotive domains. A
decade ago, the nature of engineering
work being outsourced involved lower
end services like creating digital models
and drawings and sending these back
to the buyer who then incorporated ��
these in his designs. However, engi-
neering work currently undertaken
involves a substantial portion of the
actual design activity. This has come as
a result of buyers realising that to have
����
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��

Growth drivers include �� �������

�!�
Changing demographics among
western countries - as a ‘dominant ��������������� ����������������
engineering service employed’ baby ������ ���������� ��
boomer generation reaches retirement, �����������
the availability of skilled engineering � �������������
workforce is on the decline in the �������
west.
���������������
��� �� � �
Outsourcing helps clients concen-
trate on core services – the avail-
����������
ability of specialised talent that can �������������
deliver regular processes helps the firm ��
to focus on its core competencies or
development of newer technologies. &�����'�(����)����������*
&�����'�(����)����������*
18 GlobalServices www.globalservicesmedia.com January 2011

a competitive edge, they need to realise
the full value of outsourcing rather than
just cost savings. Subsequently, service
providers have evolved into providers
of specialised services with a better
understanding of their customer prod-
uct lines. They have also had to build
new competencies, such as knowledge
based engineering, life cycle manage-
ment, technical publication - to adapt
to changing customer needs that allow
them to support complete product
development.
Some companies are successfully
turning to technology to further their
engineering services needs, effectively
using Web 2.0 technologies to an out-
sourcing advantage. These companies
take the help of means such as ‘open
innovation’ and crowd sourcing - i.e.
outsourcing of tasks which are tradi-
tionally performed by an employee
or contractor to a large (undefined)
group, community (a crowd), through
19 GlobalServices www.globalservicesmedia.com
an ‘open and usually interactive plat-
form’. The tasks outsourced could be
as simple as generating competitive
or cost cutting ideas or as complex
as the designing of an entire product
range or a completely new product. In
a multi polar global space the knowl-
edge process outsourcing industry has
grown beyond conventional outsourc-
ing. Apart from using third party serv-
ices for regular engineering services,
increasingly, engineering service pro-
viders are turning to outsourced inno-
vation to contribute to the ‘product
design’ itself.
Let us take a look at some examples
that showcase just this –
Toyota: Outsourced
innovation
The Japanese auto maker’s ‘value inno-
vation’ strategy involves its suppliers
beyond cost cuts and lower prices
for supplies – engaging them in the
ADVISORY
design process for its high selling
Prius model. Toyota’s is a case where
open innovation and crowd sourc-
ing merge- adopting a best practice
method that invites all the best minds
(albeit at large!) to participate in its
collective effort to cut back costs and
come up with a better design for its
product.
Boeing: Testing the model
Boeing also made optimal use of open
innovation technologies to stress test
the hydraulics of the 787 Dreamliner,
combining the inputs of companies
in the US, UK, Japan, China. Boeing
allowed over a 1,00,000 entries in its
World Design Team, an Internet based
global forum encouraging participa-
tion and feedback from various stake-
holder groups during final states of
development. Their ideas and inputs
were then collected through online
surveys, in turn providing updates as
the design of the plane’s exterior and
interior evolved. This novel innova-
tion method allowed Boeing to build
a prototype using inputs from several
thousand engineers and run tests as
the design emerged.
Though the use of open source tech-
nologies is a debatable issue, its use in
generating ideas for products is more of
a win-win situation for engineering
firms. Even if the design comes out
eventually flawed, the firm then has a
prototype which is a test of ‘what can
go wrong’. On broader level, it is clear
that outsourcing engineering services is
here to stay and go even further in the
coming years. GS
(ValueNotes conducted a survey
across the engineering services indus-
try to gauge sentiment for outsourcing
among buyers and service providers.
A subsequent report gives in depth
insights to these trends.)
Runa Mookerjee is Analyst, ValueNotes
Sourcing Practice
January 2011
 ADVISORY

xperts by Max Staines

A New Role for Benchmarks

Traditionally a bargaining tool for clients to set pricing targets for
service providers, outsourcing benchmarks are increasingly being used to
collaboratively drive transformational initiatives. The result: an enhanced
partnership and significant performance improvement.

B
enchmark analyses of
outsourcing contracts are
a longstanding and com-
monly applied manage-
ment tool to gauge the competitive-
ness of service delivery in the context
of competitive market standards.
Traditional benchmarks are often
used to set a target price for service
providers. In justifying an aggressive
number, clients will argue that top
performance should be the goal and
standard that service providers aim for.
Service providers, meanwhile, typically
counter that top-performance targets
defined by the benchmark are arbitrary,
inaccurate, or based on cherry-picked
numbers from myriad environments,
not necessarily reflective of the unique,
customized, and often constraining
reality of the individual client.
In this context, the process often
becomes contentious, and the bench-
mark’s role is limited to that of a club
to wield during the negotiation proc-
ess. The task of finding efficiencies
and savings rests, moreover, largely
with the service provider. As a result,
the lower the price target, the lower
the vendor’s profit margin.
These traditional rules of the
game are fundamentally changing.
Increasingly, benchmarks are being
used to define and implement broad-
er transformational change programs
characterized by demand manage-
ment, standard service delivery, and
usage-based “pay by the drink” utility
computing models. In this context,
benchmarking is the first step in a
mutually agreed program of client/
provider transformative change.
The Optimization
Opportunity
While the utility concept of a model
has been around for years, implemen-
tation capabilities have been lacking.
Now, thanks to a combination of
better measurement tools and more
mature pricing mechanisms, busi-
nesses are increasingly looking to reap
the benefits of usage-based standard
service delivery.
Compass data shows that tradi-
tional improvement initiatives drive
incremental efficiency gains within
the existing operational environment,
and typically produce annual savings
of 10 percent to 20 percent. A trans-
formational approach to improve-
ment, characterized by an optimized
Total Monthly Cost
Current Cost Optimized Cost Constrained
Environment
AMS Desktop
SIAM Retained
IT delivery model and utility com-
puting, often produces overall cost
savings of 40 percent or more.
In other words, rather than tighten-
ing the screws on the way things have
always been done, IT leaders are estab-
lishing a new and significantly better
way of doing things – a clean slate that
fully leverages the benefits of stand-
ardization and utility computing.
The improvement reflects both
increased delivery efficiency from
the supply side, as well as improved
commercial management from the
demand side.
Growing interest in optimized
service delivery is raising the bar for
the comparative benchmark standard.
The question is no longer, “How does
performance compare to the what is
of existing performance (either aver-
age or top quartile)?”, but rather,
“How does performance compare to
an optimal what could be state?” In
Cost delta due to
imposed constraints
Cost in Unconstrained
Environment
Network Hosting
Constraints

20 GlobalServices www.globalservicesmedia.com January 2011

 ADVISORY

the could be state, client organizations

effectively manage demand and serv-
ice providers to drive efficiency and
leverage economies of scale. Here,
the target is no longer the best that
can be achieved in the existing envi-
ronment; rather, it becomes the best
that can be achieved in a transformed
environment.

Squeezing Out Constraints

Following a benchmark analysis defin-
ing the “size of the prize” of standard
service delivery, usage-based pricing
models can be applied to gain trans-
parency into the business drivers of IT
spend as well as the cost implications
of business decisions regarding how
IT is used.
A business can then apply this
transparency to create “tensions”
between the demand for and supply
of IT services. Ideally, the tensions
produce incentives for the business to
cost-efficiently manage consumption
and for the service provider to cost-
efficiently manage delivery.
Pricing tensions can also be applied
to assess the operational constraints
identified by the benchmark analy-
sis and to determine whether their
cost is justified in terms of value to
the business. These constraints typi-
cally come in two forms, either “con-
tracted” – whereby the client dictates
a particular custom requirement, or
“non-contracted,” whereby lack of
clarity surrounding processes, roles,
and responsibilities drives duplication
of effort and inefficiency.
Realistically, not all of these con-
straints and premiums can or should
be eliminated. But a benchmark anal-
ysis, coupled with tensioned pric-
ing, identifies and quantifies the con-
straints, allowing the business to more
effectively apply value-based decisions
to its IT investment.
Embracing the Concept
A focus on transformational opti-
mization rather than incremental
improvement redefines the roles and
responsibilities of client and service
provider. Rather than place the onus
solely on the service provider, the
process is becoming collaborative; spe-
cifically, clients are assuming increas-
ing responsibility for looking inward
to identify the historical behaviors and
operational constraints that lead to
inefficiency and high costs. By allowing
the service provider to leverage econo-
mies of scale and, potentially increase
profit margins, this approach makes
the aggressive cost reduction target
more palatable to the outsourcer.
Indeed, many vendors are embrac-
ing the concept of usage-based pricing
and standard service delivery, because
it provides them with greater control
to leverage economies of scale and
their expertise at efficiently deliver-
ing IT services. Coupled with the
increased incentive to drive efficiency,
this creates a significant opportunity
to grow profit margins.
In addition, the savings generated
through a utility exercise are likely to be
re-invested by the client organization
into new initiatives, which can be new
opportunities for the service provider
to generate revenue and strengthen
the relationship.
That said, it’s certainly true that
approaches to sourcing negotiations
and contracts will have to adjust, as
account managers are typically com-
pensated by revenue or size of the deal.
Moreover, while the concepts of
utility computing and usage-based
pricing mechanisms are gaining
increasing credibility, much work
remains to be done in terms of refin-
ing these mechanisms and establish-
ing effective metrics to measure and
manage IT delivery and consumption
in a utility-based environment. That
work is underway among service pro-
viders and advisors who have proac-
tively recognized the opportunity, as
well as by others who are being pushed
by competitive pressure to meet the
reality of changing business require-
ments. GS
Max Staines is President of North America for
Compass Management Consulting.

21 GlobalServices www.globalservicesmedia.com January 2011

 Platinum Sponsors

22 GlobalServices www.globalservicesmedia.com January 2011

 CONSUMER PACKAGED GOODS COCA-COLA ENTERPRISES

Finance and Accounting

Solutions
Capgemini enabled Coca-Cola Enterprises to achieve
major cost savings through a finance optimization project
The Client:
Coca-Cola Enterprises is the world’s
largest marketer, producer and dis-
tributor of Coca-Cola products.
Operating in 46 U.S. states and
Canada, CCE is the exclusive Coca-
Cola bottler for all of Belgium, con-
tinental France, Great Britain,
Luxembourg, Monaco and the
Netherlands. Sales represent 16% of
The Coca-Cola Company’s world-
wide volume.
Situational Analysis:
In early 2007, Coca-Cola Enterprises
(CCE) conducted a benchmarking
exercise to see how the organization’s
effectiveness and efficiency stacked
up against the competition. With
this study they identified that to
become more efficient, CCE would
need to conduct as much of its trans-
action processing as possible in a low
cost country, either with a third party
outsourcer or a captive shared ser-
vices center. The economic goals
million per annum in CCE’s transac-
tion work, through a finance opti-
mization project.
Solution:
CCE chose Capgemini to implement
comprehensive finance and account-
ing (F&A) solutions throughout
CCE’s global business to create an effi-
cient process in a cost-effective envi-
ronment for order-to-cash services,
purchase-to-pay accounting, and
record-to-report activities, as well as a
comprehensive document manage-
ment solution. The transformation
project focuses primarily on a joint
CCE-Capgemini unique order-to-cash
approach, utilizing a best-of-breed
credit toolset designed to increase the
effectiveness and efficiency of credit
and collection departments. In addi-
tion, the automated credit module
enables CCE to apply a single set of
approved rules and procedures to every
credit decision, improving the efficien-
cy and consistency of the decisionmak-
At A Glance
CLIENT
Coca-Cola Enterprises
SERVICE PROVIDER
Capgemini
INDUSTRY
Consumer Packaged Goods
SERVICE PROVIDED
Finance and accounting solutions
SOLUTION
A unique order-to-cash approach
to the transformation project
SUCCESS METRICS
The contract with CCE will run for
seven years from July 2008, and the
total contract value amounts to approx-
imately $137 million. The partnership
will realize the following benefits for
their business:
� Accelerate the transformation and
help achieve near world-class perfor-
mance through standardizing and
streamlining operations.
� Deploy a global unified solution
across all CCE business units to sup-
port the business that includes stan-

“
were to achieve cost savings of $20 ing process. dardization and process improve-
ment while maintaining high stan-
We are on track to achieve the targeted dards of control and compliance.
� Achieve a minimum savings target
savings at the tail end of the transition with of 25%
Capgemini. Our internal benchmarks have gotten � Mitigate risks while transitioning

better, and through good people management, the work and implementing new
tools, systems and technologies.
we have reduced severance costs. The concept of
Capgemini’s Rightshore solution is a definite plus
®

on their side of the ledger.” For more information on Capgemini, write to

Claude Hartridge, Vice President, Executive Sales
JOE HEINRICH, VICE PRESIDENT, FINANCE GLOBAL INITIATIVES, CCE at Claude.hartridge@capgemini.com

19 GlobalServices www.globalservicesmedia.com December 2010

23 GlobalServices www.globalservicesmedia.com January 2011
 OWENS & MINOR HEALTHCARE

‘Lift & Shift’ Migration

Dell Services used a “lift and shift” migration to modernize
a heavily customized ERP platform
The Client:
Owens & Minor, Inc., a Fortune 500
company, is a leading national distrib-
utor of name-brand medical and surgi-
cal supplies and a healthcare supply-
chain management company.
Situational Analysis:
The company needed to modernize its
systems to provide for future enhance-
ments and growth, while improving
performance.
The decision to migrate all mainframe
processing of its mission-critical enter-
prise resource planning (ERP) system
to a framework based on Microsoft®
Windows® was also governed by the
need to preserve the company’s 20
years of IP-based data, systems, and
unique business logic.
Specific project goals included:
� Achieving timely or early project
completion to allowing termina-
tion of mainframe services
� Preventing disruption to ongoing
business operations
� Delivering defect-free software in
the Windows environment
� Implementing change control
changes to current systems during
the migration period
� Sustaining adequate performance
of applications in the Windows
environment
� Ensuring that the project stayed
within the approved budget
Solution:
Dell Services used a “lift and shift”
migration to Windows to modernize
Owens & Minor’s heavily customized
ERP platform. The first aim of the lift
and shift migration was to achieve a
“like-for-like” system by running
extensive testing. The implementa-
tion of a relational database manage-
ment system reduced risk by introduc-
ing minimal change to applications,
while providing for data tier modern-
ization.
The key steps followed by Dell
Services in the migration exercise were:
� “Lift and shift” Cobol from
Mainframe to Wintel
� Configure Database I/O routines
in Wintel Environment
� Retrofit
� Test and Fix
At A Glance
CLIENT
Owens & Minor
SERVICE PROVIDER
Dell Services
INDUSTRY
Healthcare
SERVICE PROVIDED
Mainframe Migration
SOLUTION
Used a “lift and shift” migration to
Windows
SUCCESS METRICS
� Cost savings. The project is expect-
ed to yield substantial annual sav-
ings while improving efficiencies
for supply chain management.
� Planning for the Future. The
migration ensured that the compa-
ny’s core IP remained intact and
achieved greater optimization.
� Higher performance. The new IT
infrastructure delivers greater per-
formance capabilities.
� Enhanced customer service. The
user interface modernization will
deliver better online tools for

“
processes to allow business-critical � Implementation Owens & Minor customer service
representatives.
This was a complex and mission-critical � Increased staff productivity and
project, and we are proud of the benefits efficiency. Simplified business
this successful collaboration brings to Owens & processes.

Minor. The migration establishes a powerful and

flexible computing platform to drive future
growth and innovation.” For more information on how Dell can help
your organization, please contact
Sujata_Rakhra@Dell.com or
CHUCK LYLES, PRESIDENT OF DELL SERVICES PUBLIC SERVICES Savitha_Lakshman@Dell.com. Please also visit
SECTOR dell.com/services for more information on their
capabilities.

26
24 GlobalServices www.globalservicesmedia.com
www.globalservicesmedia.com December
January 2010
2011
DIVERSIFIED A FORTUNE 100 COMPANY
Message Migration
and Management
Microland ensures Six Sigma class email
availability and zero error migrations for
the world’s largest Microsoft Exchange
installation
The Client:
The client is a Fortune 100 diversified
company with a strong set of global
businesses in infrastructure, finance
and media. The client operates across
multiple segments including aircraft
engines, power generation, medical
imaging, television programming and
consumer goods.The client is listed in
the NYSE and is a constituent of the
Dow Jones Industrial Average (DJIA).
Situational Analysis:
The client houses the largest enter-
prise Microsoft Exchange setup in
the world today, with over 400,000
mailboxes. The messaging infrastruc-
ture is spread across 19 data centers
with over 500 servers around the
world. In addition to this, the infra-
structure also caters to about 50,000
mobility users. The client needed a
partner who could:
� Manage the messaging infrastruc-
ture and the user accounts from a
centralized offshore location while
ensuring continuous availability to
the business
� Lower the operational costs &
implement a shared services model
across the organization
� Migrate mailboxes to newer
Microsoft Exchange platforms
when needed
25 GlobalServices
23
Solution:
Microland started this engagement in
1999 and continues to manage the
messaging infrastructure for the client.
At that time, the infrastructure consist-
ed primarily of Exchange 5.5 servers.
Over the years, in addition to manag-
ing the messaging ecosystem,
Microland also undertook platform
migration from Exchange 5.5 to
Exchange 2000 and later to Exchange
2003.
The salient points of the Microland
solution are
� A total ecosystem based approach
for managing the messaging and
the associated infrastructure viz.
instant messaging, security, mobil-
ity, storage, backup etc
� Consolidation of the exchange
environment and a single SLA
driven ITIL based messaging
management model across the
organization
� Extensive leverage of Six Sigma
and FMEA (Failure Mode Effect
Analysis) methodologies to ensure
continuous process efficiencies
� Proactive monitoring and man-
agement of incidents using
automation frameworks
� High visibility and control of
operations to the client through a
customized CIO Dashboard
www.globalservicesmedia.com
www.globalservicesmedia.com
At A Glance
CLIENT
A Fortune 100 company
SERVICE PROVIDER
Microland Limited
INDUSTRY
Diversified
SERVICE PROVIDED
Messaging Management &
Migration
SOLUTION
Leveraged Six Sigma and FMEA
methodologies
SUCCESS METRICS
� TCO Reduction: Vendor management
costs reduced by 30%; Data center con-
solidation and virtualization reduced
server footprint by 30%; Delivered year-
on-year reduction in cost per mailbox
� High Performance: Maintained email
service availability at 99.9X%; Ensured
defect free-migration and deployment,
and zero end user impact on migration
� IT – Business Alignment: End to end
service delivered to client’s shared ser-
vices group offering them ease of man-
agement and chargeback; New
site/cluster deployment time reduced
from 32 to 9 days, thus increasing the
IT’s teams’ responsiveness to business
needs; Enabled automatic retrieval
and download of warranty and contract
details and triggered automatic alerts
30/60/90 days before warranty expira-
tion, thus streamlining and internal
business process for the client’s IT team
For more information on Microland Limited,
write to TransformIT@microland.com or visit
www.microland.com
January 2010
December 2011
 METLIFE BANKING, FINANCIAL SERVICES & INSURANCE

Streamlining
Operational Workflow
Situational Analysis:
MetLife was looking for a solution to
streamline its operational flow,
reducing the amount of manual
processes and consolidating proposal
information into a single database
while continuing to meet the compa-
ny’s high quality standards. In order
to do this, MetLife needed a reliable
partner to provide:
� A new, automated operational
flow for life insurance issuing
process
� High-quality IT applications,
process controls and business
rules.
� Project deliverables in a timely
and well-scoped manner.
Solution:
MetLife chose one of the top applica-
tion development companies in the
world, Ci&T. Ci&T delivers con-
sulting, application outsourcing and
digital marketing services to its cus- At A Glance
CLIENT
tomers – with its innovation, exper-
MetLife
tise and skill set. Through the part-
SERVICE PROVIDER
nership, MetLife was able to work Ci&T
with Ci&T’s experts to streamline INDUSTRY
life insurance issuing process, creat- BFSI
ing a state-of-the-art automated sys- SERVICE PROVIDED
tem named Morpheus. This allowed Mainframe Migration
MetLife to achieve higher workforce SOLUTION
productivity and better databank Created a New Automated
control management, vital in accom- System
plish its goal of increasing clients to
100 million worldwide by 2010.
Ci&T was able to meet every pre-
established milestone and the project
was completed within five months.
� MetLife has achieved a reduction SUCCESS METRICS
in the time required for issuing Ci&T was able to meet every pre-estab-
life insurance policies from 10 lished milestone and the project was com-
days to less than 24 hours. pleted within five months.
� MetLife’s Brazilian unit reduced � MetLife has achieved a reduction in the
time required for issuing life insurance
the insurance proposals approval policies from 10 days to less than 24
time by 90 percent. hours
� MetLife’s Brazilian unit reduced the

“
insurance proposals approval time by
90 percent
“When we invested in the implementation
of a new application by Ci&T, MetLife sought
an innovative tool that would allow the issuance
of policies with significantly greater efficiency.
Once successfully in use for our individual and
SMB customers, we decided that our corporate
clients would benefit from the tool as well. What
For more information on this service from Ci&T,
began as an isolated support tool is now critical write to leonardo@ciandt.com or visit their office
to the daily operation of our business.” at Ci&T, 640 Freedom Business Center, Suite
210, King of Prussia, PA 19406.
Phone: +1 610 482 4810 Fax: +1 267 775 3347
BRENO GOMES, CHIEF INFORMATION OFFICER, METLIFE BRAZIL

8 GlobalServices
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