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Table of Contents

1. BusinessProcessOutsourcing(BPO) Introduction o HistoryandDefinition o CorporateLeadershipModels o InternationalModels o ValueChain,CoreandSupport Processes 2. BPO TheEconomicPerspective o GlobalAllocationofWork o MarketSizeandGrowth o TrendsandPerspectives 3. LocationSelection o Offshoring/Nearshoring/Onshoring o LocationTrends o LocationSelectionCriteria o LocationModeling
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4. OptimizingthroughBPO/DueDiligence o Volume&KPIAnalysis o Benchmarking/SpanofControl o GovernanceModels o BusinessCase 5. BPOVendorAnalysisandSelection o UnderstandingtheBPOVendor market o AnalyzingselectedVendors o BPOVendorSelectionModeling 6. ManagingTransitionandHR o Contracting o ServiceLevelAgreements o Pricing o People&KnowledgeTransition

BPO Vendor Analysis and Selection


Offshore business models & company examples (revisit)

OffshoreBusinessModels

CaptiveModels

StrategicAlliance/JointVenture Models
BuildOperateTransfer(BOT)/Joint Venture(JV) Provider owned/jointoperations, transferabletothecustomerata pre determinedtime BritishTelecom Steria

OutsourceModel

PureCaptiveModel Aninternalcostcenterora 100%subsidiarycompanyset uptoexecuteoffshore businessprocessesand/orIT services GE,Amex,Dell,HSBC,Ford, Sun,Citibank CaptivePartnershipModel StrategicalliancewithIndian providerforimplementation supportservicessuchas infrastructureset up, recruitmentandtraining EDS TCS

PureOutsource UseofaIndia basedproviderto offshorebusinessprocessesor ITservices NYLife Infosys ,Amazon Daksh ,

InvertedBOT WheretheIndianProvider providesonlyimplementation supporttostartwithandis allowedtobuyintotheentityonly uponthecenterreachingcertain milestones AIG Polaris,BA WNS

ManagedOutsource Full /parttimeresourcesonthe groundinIndiatofacilitate transition,relationshipmgmtand transferoforganizationand domainknowledgetothirdparty providers Greenpoint Progeon

Companieswithcaptiveoperations,inadditiontoperformingfu nctions in house, alsooutsourceselect functionstothirdpartyproviders

German BPO providers

BPOProvider Bosch NewSource TDS(subsidiary of Fujitsu) TSystems

Country Germany Germany Germany Germany

Locations Magdeburg,Germany Timisoara, Romania Hannover,Germany Frankfurt,Germany Various inGermany and Austria Weingarten,Germany Bratislava,Slovakia Berlin,Tunis

KeyFocus CallCenterServices Small F&ABPOpractice F&ABPO Formercaptive SSCBahlsen ITO,HRBPO ITO,BPO

MajorClients BoschGroup (F&A) Lorenz Group Mainly N/A Telekom TCom TMobile Mainly SMEs

Accon RVS

Germany

F&A, HRBPO

US-based BPO Providers with European Delivery Networks


BPOProvider Accenture ACS(Xerox) CSC HP(incl. EDS) IBM Country USA USA USA USA USA Locations Europe Aberdeen, Bratislava, Prague,Piasenczo Barcelona,Toulouse, Krakow World SourcingDelivery Model Barcelona,Wroclaw, Bucharest Brno, Budapest,Vilnius, Krakov,Bratislava Frankfurt,Amsterdam, London KeyFocus BPOcore business ITOutsourcing Some F&ABPO ITOutsourcing BPOside business Major F&ABPOfocus Biggest provider inGermany BPOcore business of Global ServicesBU F&A BPO,specialist Banking,insurances Stronginvestment management background (manages close to $30trillion) F&A BPOfocus Expertfor middle market MajorClients Many GM OfficeDepot SwissRe P&G Fraport TBD

BNYMellon

USA

Mainly N/A

OPI
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USA

Sofia

Mirant Corporation

European BPO Providers with European Delivery Networks


BPOProvider Capgemini Country France Locations Europe Warsaw,Krakow, Wroclaw,Barcelona, Madrid,Murcia, LangreoAsturias, Bedford, Birmingham, Edinburgh,Leeds, London,Manchester, Northampton,Reeding Chatham,Frankfurt, France Wormer (NL),Krakow, Brno, KeyFocus ITOutsourcing Strong inF&ABPO MajorClients Syngenta Prudential

Steria (incl. FormerXansa)

France/ UK

BPO,strongITcapabilities, strongF&Apractice

BritishTelecom, BBC,Whitbread

Xchanging Accounting Plaza

UK Nether lands

Specialist BPO,procurement, strongtechnology capabilities,

Mainly N/A

Indian BPO Providers with European Delivery Networks


BPOProvider Genpact HCLTechnology Infosys WNS Country India India India India Locations Europe Budapest,Bucharest, Wroclaw MultipleUK (Belfast, Croydon),Krakow Brno,Lodz Bucharest F&A BPO BPO ITO,F&ABPO ITOfocus, F&ABPO KeyFocus MajorClients Linde GE BritishTelecom Philips Mainly N/A

Indian BPO Providers without European Delivery Networks


BPOProvider Caliber Point/ Hexaware iGate Satyam Tata Consulting Services Wipro Country India India India India India Locations Europe No delivery yet No delivery yet No delivery yet No delivery yet No delivery yet Some clients operations KeyFocus F&A BPOLeader ITO, strongF&ABPO technology ITO Some emerging F&ABPO MajorITOplayer Strong inglobalBPO, ITO WiproBPOBU MajorClients Mainly N/A Mainly N/A Mainly N/A Mainly N/A Mainly N/A

BPO Vendor Analysis and Selection


Selection process criteria weight
Example

Criteria ExperienceandReputation CapabilitiesandKnowledge SubCriteria CostandContract CooperationandTrust Sum

CriteriaWeight 25% 10% 35% 30% 100%

BPO Vendor Analysis and Selection


Sub-Criteria: Experience & Reputation
Example

SubCriteria Experience&Reputation BPOKnowledgeandExperience OutsourcingandBPOReputation References(comparable)

SubCriteria Weight

SubCriteriaValue 1=verybad;3=average;5=verygood BPO1 BPO2 4,5 4,5 4,5 4,5 4 4 4,5 4 34,5 BPO3 4,5 4,5 3 4 3,5 4 4 3,5 31 BPO4 4 3,5 3,5 3,5 4 4 4 4 30,5 5 5 3,5 4 4,5 4 4,5 4 34,5

20% 20% 10%

QualityandContinuousImprovement 20% Programs ServicePortfolio(IT,BPO) Backupand contingency capabilities FinancialStability 24/7ServiceCapabilities Sum 10% 10% 10% 0% 100%

BPO Vendor Analysis and Selection


Sub-Criteria: Capability and Knowledge
Example

SubCriteria Capability and Knowledge ITandSAPCapabilities ConsultingCapabilities IndustryExpertise ProcessExpertise LanguageCapabilities Sum

SubCriteriaWeight

SubCriteriaValue 1=verybad;3=average;5=verygood BPO1 BPO2 4 3,5 4 4,5 5 21 BPO3 4 4,5 2,5 4 4 19 BPO4 4 3,5 3,5 4 3,5 18,5 4 5 3,5 4,5 4,5 21,5

30% 10% 10% 30% 20% 100%

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BPO Vendor Analysis and Selection


Sub-Criteria: Cost and Contract
Example

SubCriteria Costand Contract Pricevs.Service FlexiblePricing(e.g.Transactional basedPricing) Contract and SLACapabilities InternationalFootprint and LowCost Delivery Capabilities Sum

SubCriteriaWeight

SubCriteriaValue 1=verybad;3=average;5=verygood BPO1 BPO2 3,5 3 3,5 4,5 14,5 BPO3 4,5 3 3,5 4 15 BPO4 2,5 3 3,5 4,5 13,5 3 3 4 5 15

60% 0% 0 % 40% 100%

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BPO Vendor Analysis and Selection


Sub-Criteria: Cooperation and Trust
Example

SubCriteria Cooperation and Trust ExistingRelationships(e.g.IT) KeyPersonnel CulturalFit OrganizationofCooperation ReliabilityandTrust Sum

SubCriteriaWeight

SubCriteriaValue 1=verybad;3=average;5=verygood BPO1 BPO2 2 2,5 4 3,5 4 16 BPO3 2 2,5 3,5 3 3,5 14,5 BPO4 1 2 2,5 3 3,5 12 3 3,5 3,5 3,5 4 17,5

15% 15% 20% 10% 40% 100%

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BPO Vendor Analysis and Selection


Results
Example

CooperationandTrust(all)

4,00 3,50 3,00 2,50 2,00 1,50 1,00 0,50 0,00


BPO 1 BPO 2 BPO 3 BPO 4

CostsandContract(all) CapabilitiesandKnowledge(all) ExperienceandReputation(all)

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BPO Vendor Analysis and Selection


Case Study BPO Selection
TheSituation Streamliningandcostreduction ThecompanyisaGermanAutomotiveSupplierwith3+billionEURinrevenues TheCaseCompanyoperatesgloballywithsales,manufacturinganddistributioninmorethan 20countries Around75%ofthesalesaregeneratedoutsideofGermany Overall,thegroupemploysapproximately18,500peopleinitsfourproductdivisions Almost250employeesarepartoftheFinance&Accountingorganization SomefinanceprofessionalsreportdirectlyintotheCorporateCFOwhereasthebulkofthe financepeoplereportsdirectlyintotherespectivelocalorganizations TheCaseCompanyisseekingstreamliningandcostreductionforitsaccountingactivities

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BPO Vendor Analysis and Selection


Case Study BPO Selection
KeyChallenge Captive SSCversusBPO KeychallengefortheCaseCompanyisongoingcostpressurethatresultsinstreamliningthe frontandbackoffice Withinthebackofficefunctionsinparticulartheaccountingorganizationstandsout AccountingattheCaseCompanytakesplaceonalegalentityandcountrylevelwhichmeans thatatalmost40differentlocationsaccountingactivitiesareperformed AlthoughSAPisinprocessofbeingimplementedstandardizationlevelsarequitelow Processesaremoreorlessdesignedbythelocalaccountingorganizationandmostlynotvery efficientlyorganized Ascanningsolutionwasimplementedinordertoreducecosts Mostoftheaccountingactivities,however,areperformedinhighcostcountriessuchas Germany,France,SpainandtheUSA DuetotheurgentneedforprocessstandardizationandcostreductiontheCaseCompany initiallyplannedtoestablishanearshore captiveSharedServicesolution However,withlimitedexperienceinbuildingandrunninganaccountingSSCatanearshore locationthesearchforasuitableBusinessProcessOutsourcingproviderwaslaunched

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BPO Vendor Analysis and Selection


Case Study BPO Selection
TheScope Accountingprocessesoffourdifferentcountries Accountingprocessesinscope
o o o o o AccountsPayable AccountsReceivable FixedAssetAccounting GeneralLedgerAccountingincludingTravelandExpenseAccounting Countries Germany(threelocations) France(twolocations) Spain(onelocation) CzechRepublic(onelocation) 80FTEinscope AveragetenurewiththeCaseCompany 14years Averagesalariesrangeby33,000EUR(duetolowersalariesintheCzechRepublic) fullyfringed averageisabout42,000EUR

Countries/Locations
o o o o

EmployeesandCosts
o o o

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BPO Vendor Analysis and Selection


Case Study BPO Selection
Theapproach:Implementationthroughconsultantassistance
TheOffshoringInstitutewascommissionedtosupportandfacilitatetheBPOselectionprocess DuetotheOImarketknowledgeandrelationshipmanagementtotheBPOproviders15 potentialBPOcandidatescouldbeidentified Overall,aftercriticalreviewandassessment12BPOproviderswereinvitedtosubmitaproposal TheOffshoringInstitutesupportedtheselectionprocessusingastructuredmethodology Also,theclientsfinanceleaderswereguidedtowardunderstandingandsupportingtheBPO solution

ThisRFPwasoneofthebestwehaveseeninyears.Itnotonlyhighlightedtheseriousnessof theCaseCompanytooutsourceitsaccountingoperations italsosimplifiedtheprocessof draftingatothepointresponseverymuch.Excellentwork.(HeadofBusinessDevelopmentof alargescaleglobalBPOprovider)

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BPO Vendor Analysis and Selection


Case Study BPO Selection
Phase Agreement onRFP &Longlist Send RFP SelectShortlistand sendnotifications Biddersconference/ OneonOne Meetings Submissionlastand finaloffer Negotiations/Due Dilligence/SiteVisit FinalDecision/ ContractClosing
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Aug

Sep
Confirmation with CFO

Oct

Nov

Due date RFP response

Send notifications to the final 4

BPO Vendor Analysis and Selection


Case Study BPO Selection
TheResults Impressivecostsavingsofupto50% TheCaseCompanyhasselectedaglobalBPOplayerwhowillsupportthecompanys accountingprocessesoutofitsPolandbasedaccountingcenter Currently,theselectedprocesseshavesuccessfullystabilizedandarebeingoptimized Thecasecompanyhasreducedheadcountbyca.60FTEsinlowvalueaddedprocessing Approximately15FTEremainasretainedorganizationandwillcoordinateBPOactivitiesand handlecriticalexceptionmanagementandlocalstatutoryreportingrequirements Cumulativerunningcostsavingsofmorethan9millionEURoveracontractperiodof5years includingtransitioncosts Breakevenoflessthan24months(keyissuearerelativelyhighseverancepackagesinthe respectivecountries) Transitionwascompletedinlessthan4months Thesequentialboardingofbusinessunitsatdifferentcountrieswascompletedinca.oneyear intothecontract

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BPO Vendor Analysis and Selection


Ifresultsareveryclosetoeachother,reasonshavetobebalanced
BPOProvider1 CooperationwithBPOProvider1 shouldworkbecauseoftheirprevious experiencesinthisarea NecessarytobuildupaWorkflow Systemtherebylaterimplementation (riskfactor) BPOProvider1isprobablecostsaving alternative BPOProvider2 BPOProvider2offersprofessional automationsolutionwithimmediateuse forthecompany Realizationofsavingsdependsonneeded automationcondition(riskfactor)
Example

Bothsuppliersprovidedcompetitiveoffers InconsiderationonexistinggeneralconditionsandrelativelowautomationleveltheBPOprovider1 offerseemedtobelightlyfavorably Aquestionofnegotiations:cooperationwithBPOProvider2couldbeconsideredifthesupplier takespartoftheriskofunrealizedautomation


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BPO Vendor Analysis and Selection


Theimportanceofhumaninteractionisdecreasinginmany serviceprocesses butcannotbereplacedcompletely
Example:AccountsPayableProcess before(untiltheendof1990s)
Invoice

Manualtransactionandaccountinginthesystem

Payment

SAP

Example:AccountsPayable today(sinceca.2000) EDI


Invoice

EWorkflow
Scanning

OCR

Manual Exceptions Mngt

Payment

SAP
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BPO Vendor Analysis and Selection


ThewaySSCwilloperateisconstantlychanging: Theroleoftechnologyisgrowing Humanvs.technology DevelopmentoftransactionalSSCstoCentersof Competence/Expertise
Manual Exception Mgmt.

Transactionalprocessesarerulesbasedand thereforetobecapturedwithnewtechnologies Newrequirementstowardscapabilitiesand qualificationofpeople Increasedimportanceinqualityofthelaborpoolin locationselection Totallyautomatedserviceprocesses Sincebeginningofthe1990sforeseenbutnot neararealitytoday Arealisticoptionatselectedcompanieswithin thenext10years?

EWorkflow

SAP

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BPO Vendor Market Analysis


Case Assignment / Homework for Dec 17 (Chen)
NOTE!Twodifferenthomeworkassignments: VendorMarketAnalysisandBPOVendorAnalysis Either,bothornonecanbecompleted

BPOVendorMarket Analysis HRBPOVendors

TheVolkswagenGroupisassessingopportunitiestooutsourceitsHuman Resourcefunction PleaseanalyzehowmanyFTEareworkingforVolkswageninsideand outsideGermany PleaseoutlinethescopeofthepotentialBPOengagementanduse followingassumptions


o o o FullyfringedcostsperFTEinhighwagecountries46,550EUR FullyfringedcostsperFTEinlowcostscountries29.000EUR HRcostsforVWare2.9%ofrevenue


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BasedupontheinformationpleaseanalyzetheBPOvendormarketforHR services Pleaseidentifyallplayerswithinternationaldeliverycapabilitiesand highlightdeliverylocations(atleast34players) Addatleastoneproviderfromyourhomecountry/region Pleaseprovidekeyfinancialdatasuchasrevenue,EBITmargin,numberof employees Also,pleaseidentifykeyclients

BPO Vendor Market Analysis


Case Assignment / Homework for Dec 17 (Alejandro)

BPOVendorMarket Analysis CallCenterBPOVendors

TheSAPGroupisassessingopportunitiestooutsourceitsoutboundcall centeroperations PleaseanalyzehowmanyFTEsareworkingforSAPinsideandoutsideof Germany Pleaseoutlinethescopeandcharacteristicsofthepotentialoutboundcall centerengagement ForcalculatingtheFTEcount,pleaseusethefollowingassumptions:


o o o FullyfringedcostsperFTEinhighwagecountries36,740EUR FullyfringedcostsperFTEinlowcostscountries16,920EUR OutboundcallcentercostsforSAPare1.65%ofrevenue(ineveryregion)

Basedupontheinformationpleaseanalyzetheoutboundcallcenterprovider market Pleaseidentifyalloutboundcallcenterplayerswithsuitableinternational deliverycapabilitiesandhighlightdeliverylocations Addoneproviderfromyourhomecountry/region Pleaseprovidekeyfinancialdatasuchasrevenue,EBITmargin,numberof employees Also,pleaseidentifykeyclients

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BPO Vendor Analysis


Case Assignment / Homework for Dec 17 (Saman)

BPOVendorAnalysis Finance&Accounting (F&A)VendorSelection Process

CaseSituation: GlobalchemicalcompanybasedinBelgiumwith3.6billionEURrevenuesand 18productionlocations(4inBelgium,1inNetherlands,2inGermany,1in Poland,2inFrance,1inSpain,3intheUSA,1inMexico,2inChina,1inBrazil) Additionallydistributionandsaleslocationsin59othercountries 151F&AprofessionalsarelocatedattheheadquartersnearAntwerpofwhich roughly68%arededicatedtotheaccountingfunction Ateachproductionsiteonaverage15F&Aprofessionalsaretakingcareabout processessuchAccountsPayable,AccountsReceivable,GeneralLedger,Fixed AssetAccounting Ateachothercountryorganizationonaverage2.5F&AFTEaretakingcare aboutAccountsReceivable,GeneralLedgerandInventoryAccounting TheF&Aprocessesarenotstandardizedonagloballevel,veryinefficientand cumbersome Therefore,thecompanyisinvestigatingtheoptionofoutsourcingtheF&A function

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BPO Vendor Analysis


Case Assignment / Homework for Dec 17 (Saman)

BPOVendorAnalysis Finance&Accounting (F&A)VendorSelection Process

Assignment: PleaseanalyzethefollowingthreeF&ABPOvendorsanddevelopa comparisonmodel


o o o Genpact Capgemini ABPOproviderofyourchoice Deliverylocationsandtheirestimatedcost Languagecapabilities F&Aexpertise BPOreputation Financialstability

Pleaseincludeatleastfollowingcriteriainyourmodel
o o o o o

Analyzetheabovementionedcompaniesandtrytoassessatleastthese criteria

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