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BUSINESSPROCESS OUTSOURCING29 JUNE 2007

YOUR GUIDE TO BPO AND SHARED SERVICES

Outsourcing payroll & HR

– can you afford not to? Tel 0800 1804994 www.uk.adp.com

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CONTENTS

Should I be a captive or a client? p. 4

BPO booming in Latin America and East Europe p. 5

UK marketplace relies on value p. 5

Standardisation encouraging shared services p. 7

Briefs from Bangalore p. 8

Always leave space for renegotiation p. 8

10 top tips for success p. 8

Around the world, or in your own office p. 9

COLT go it alone to India p.11

New approaches to outsourcing as BPOcomes of age p.11

Can BPO boost UK jobs? p.11

BPO AND SHARED SERVICESA TITLE FROM MEDIAPLANET

Project Manager: Aleksandra Mamczak, 020 7563 5888Production Editor: Ulrika FalleniusEditor: Sean HargraveDesign: Sophie WesterbergPrepress: Jez MacBeanPrint: News International

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For more information about supplements in the dailypress, please contact Henrik Kanekrans, 020 7563 8873henrik.kanekrans@mediaplanet.com

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Need expert insight into Business Process Outsourcing?From simple transaction processing services to a value-added solution with business insight. If you’re looking for sources, experts, andexpertise to help you give your audience deep insight into the latest BPOtrends – Look to Capgemini.

To talk to one of the BPO team please call: +44 870 904 3776 or visit www.capgemini.com/bpo

Welcome to BPO and shared servicesBusiness Process Outsourcing is the leveraging of technology or specialist processvendors to provide and manage an organisation’s enterprise processes and appli-cations. The most common examples of BPO are call centres, human resource ad-ministration, accounting and payroll outsourcing, although as this supplementwill show there are a number of different types of BPO that businesses can explore. BY: MARTYN HART, CHAIRMAN, NOA

So why would companies consider BPO? There are several key factorsthat would lead a company to choose BPO; the need for externalexpertise, the need to improve an in-house service, the need forspeed to market, the lower costs and the superior flexibility and scal-ability. Every company considering BPO for the first time (and thereare many companies that have not entered the market yet, althoughnumbers are increasing) must carefully weigh up in-house processesbefore considering outsourcing.

BPO has been the subject of much debate. Stories of poor servicefrom offshore vendors, for example, are hugely popular with theBritish press. If ever a data security breech occurs in an offshorevendor, this will make national headlines in the UK. So the pressureon vendors to provide a high quality, low cost service is immense.Recent BPO research commissioned by the National Outsourcing Association (NOA) and conducted by NelsonHall surveyed 100sourcing managers from end user companies in the financial servicesand manufacturing sectors. The perceived failings of vendors werea major area of concern for many sourcing managers when rejectingBPO. Lack of vendor service maturity and lack of client companyknowledge within the vendor were both seen as highly significantfactors for rejecting BPO. In fact, 67 per cent of sourcing managersinterviewed cited a lack of process operations knowledge within thevendor as a key factor when rejecting BPO.

The survey also delved into the issues of geographical location.Quality of BPO was perceived to be highest in Asia. When sourcingmanagers rated countries’ BPO delivery quality, the highest ratingcountries were Malaysia, India, China and the Philippines. Asia as awhole scored a 3.6 rating (out of 5) for quality of BPO delivery,

whilst Eastern Europe scored 3.3, as did Latin America and SouthAfrica.

Where offshore BPO was concerned respondents were less concerned about domain expertise and relevant experience and moreconcerned about legal issues and the technological infrastructure ofthe company. 89 per cent saw legal protection and 88 per cent sawthe quality of power and telecoms infrastructure as issues which figured highly in their prioritised concerns.

And offshore need not be an element of BPO delivery. Just look atthe UK government. 2005’s Gershon Report and last year’s followup - The Varney Report - both outlined plans to overhaul services inthe public sector. The improvement of business processes throughshared service delivery has been earmarked as the principle strategyto achieve cost savings and transform services. The Government’svision is that by 2016, the majority of the transactional elements ofCorporate Services in the public sector will be delivered through ahandful of professional shared services organisations. They are initiallyfocusing on HR, finance and accountancy – they are estimating asaving of £1.4 billion per year of the annual £7 billion spend on HRand finance.

Another aspect of BPO that has shot to prominence this year is legalprocess outsourcing. Late last year it was announced that CliffordChance, the world’s largest law firm, is creating a captive in India tocarry out a great deal of administrative work. The proposal is expected to yield more than £9.5 million in annual savings. Previ-ously legal firms had been hesitant to utilise offshored services. Subsequent to this announcement, other legal firms have started totake notice of offshoring. Firms have started to consider the benefitsthat can be gained by offshoring low value secretarial work such asaudio and copy typing; the work can be competently carried out offshore, costs can be vastly reduced by employing offshore secre-taries, onshore secretaries will be more satisfied as they will be employed to carry out more interesting work and the onshore secretaries will become fee-generating.

BPO comes in many different shapes and sizes and as our researchhas predicted the market will continue to boom. BPO has caught upwith ITO in the past few years, and although it is still some way behindin terms of contract value, the difference is steadily diminishing.Whereas call centres are the area of BPO that have stolen the head-lines, there are plenty of other business processes within organisationsthat are ripe for improvement, whether through pure outsourcing, orthrough a shared services delivery model. If companies approach BPOin a careful and considered way and ensure that they get the right advice and are protected by the right contracts, they have a lot to gain.

We hope that this supplement offers an insight into the BPO market.If you need any more information on the subject, please see our website(www.noa.co.uk) or come along to one of the NOA monthly seminars.

POTENTIAL FACTORS FOR BPO REJECTION

Rejection Factor Proportion High Significance (%)

Perception of greater contract & legal risk 74Lack of process operations knowledge within vendor67Unproven service delivery quality 51Lack of client company knowledge within vendor 50Compliance concerns 46Lack of vendor service maturity 45Lack of suitable offshore service delivery capability 43Inappropriate service locations or location mix 41Lack of demonstrable success stories 39Unproven cost reduction capability 35

Every angle covered.

Audit.Tax.Consulting.Corporate Finance. www.deloitte.co.uk© Deloitte & Touche LLP 2007. All rights reserved.

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Should I be a captive or a client?All companies considering offshore outsourcing have to answer the same question –should they set their own division abroad or should they outsource?

It is a question which Peter Moller, Headof Deloitte & Touche’s OutsourcingAdvisory team, faces daily on behalfof clients and, as with many businessquestions, the answer depends on thecompany in question and what it ishoping to achieve.

“There isn’t really a definitive ruleof thumb,” he suggests.

“It really depends on each companyand their management philosophyand whether they would prefer not tolose control over a process or if theythink it is better done by someoneelse who offers a particular process astheir core competency.”

The most basic question a companyhas to ask itself is whether they believe that outsourcing to an off-shore provider will bring savings ofaround 20 per cent or more because athird party is likely to be making a 15per cent margin on whatever you arepaying them and so, it stands to reason,if they are not offering you savings inexcess of that ballpark figure, youmay be better carrying out the workin-house.

Well trodden pathFor those that decide they wouldrather keep control of their businessprocesses and so would rather set up

their base offshore in, say, India thereis a long proven track record of suc-cess. Many of the large outsourcingcompanies in India actually have theirroots in a global corporation decidingto offshore to the country but wantingto retain control of their processes.These then have a habit of attractingwork from other clients and growingin to large offshore outsourcers whichare then, typically, spun out of or soldby the global corporation which setthem up.

This is what happened with WorldNetworks Services, which was origi-nally set up by BA, and Genpack,which was founded by General Electric.

“Those considering setting up theirown bases offshore can gain a lot ofconfidence from the fact that they arenot pioneers taking a huge risk andthat other companies have alreadybeen successful,” Moller points out.

“The key question for a lot of com-panies is do they have, or can they getenough critical mass on the ground tolaunch an offshore base for them-selves. If someone has a head countapproaching a couple of hundred thenthey may well decide they have thepeople in place to offshore adminis-tration tasks to their own team ratherthan go for a third party.”

Big name gameHead count is another crucial issue,Moller warns, because a company’sability to attract and, crucially, retainstaff it needs to have a respectedbrand. Although it may not seem anissue to an outsider, those within Indian outsourcing are only too familiar with local culture favouringthe big names in business.

“If you aren’t a big brand name inIndia you will have to pay peoplemore to work for you and you willsuffer more staff churn that the bigbrands,” Moller reveals.

“Indians are incredibly proud towork for international brands. I wasat a parents’ day recently whereworkers were allowed to show theirparents where they worked and I gotchatting to one lady who explainedshe could never leave Infosys becauseher parents wouldn’t allow it.”

Indian marketAnother obvious question a com-pany has to consider is whether itsee India as a market it wants to op-erate in. If it feels there would be abenefit to having an office in thecountry, then it makes sense tocarry out business processing tasksfrom that office.

“India is going through a very ex-citing boom and so there is growingwealth and a lot of companies are realising that they want to be inIndia,” says Moller.

“For such companies it is a hugeadvantage to have a decent-sizedpresence on the ground and so it obviously makes sense that if youare setting up there anyway youmight as well considering outsourc-

ing some business process tasks tothat office.”

Ultimately, the question of whetherto launch an office or employ a thirdparty is generally down to the busi-ness culture at a particular companyand whether it is more motivated bykeeping control of processes orwhether they are attracted by thegeneric ‘your mess for less’ pitchoffered by third parties.

Outsourcing the mailYou may have noticed that outsourcing is going in to manynew areas but you may still be surprised to hear that PitneyBowes Management Services is offering an outsourced, secure mail room service.

However, when you consider the threat of terrorist and political extremists sending suspicious packages to compa-nies and government departments it makes sense to use athird party which can scan and then open post in a safe environment, Managing Director, Richard Thompson maintains.

“The ease with which a terrorist, a disgruntled customer, anactivist group or a criminal can introduce threats to a com-pany or government organisation in the guise of an envelopeor package, means that the post room is a critical point ofvulnerability,” he maintains.

The company carried out a study of the sectors most atrisk and found in top spot was the government, then camebanking and finance and in third place was high tech man-ufacturing. Telecommunications companies were at the bottom of the ‘at risk’ list.

What is the point of these roles comingback to the country

if we do not addvalue?”

”

40,000 new BPO jobs were created in East Europe last

year alone””

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BPO booming in Latin Americaand East EuropeIt is often said that India is ‘overheating’ and there are many locations around theworld that will take on its mantle or, at least, happily take a share of its BPO success.

Whilst there are as many answers towhich country or regions are bestplaced to be the proverbial ‘next India’as there are BPO providers, a commontheme emerging in the last couple ofyears has been South America.

For a BPO provider such as PVKannan, CEO of 24/7 Customer, SouthAmerica makes perfect sense becausethe continent, to varying degreesacross it many countries, has a wealthof young talent with the languageskills needed in the United States andEurope. In fact, he has set up a facilityin Guatemala because graduates arenative Spanish speakers but have topass an English exam before they aregiven their degree.

“It’s estimated that something likeone in five people in the USA speakSpanish as a first language,” he pointsout.

“So that means they share a lan-guage with most South Americansand many South Americans alsospeak English very well and so when

someone from the United States getsthem on the phone they just thinkthey are speaking to someone in theUnited States with a Spanish accent.”

According to Kannan South Americais set to prove a viable alternative forNorth American executives who wantto outsource operations but do not wantthe hassle of flying to India. In a sensethe region is to become America’snearshoring centre, he maintains,with the added benefit of providingout of office hours voice and dataservices to Spain. Hence it will comeas no surprise that Mexico is believed

to hit 190,000 BPO jobs by the end ofthe year, up nearly four times in justfive years.

Matthew Vallence Managing Directorat Firstsource believes Buenos Aeriesin Argentina is set to be an importanthub, not just for Spanish services butalso because it has a huge Italian pop-ulation and a sizeable Japanese ex-pat community.

“It has sizeable communities fromaround the world to provide globalservices and also has the potential fortaking Spanish evening calls,” saysVallence. “You generally find that callcentres have evening spikes in callswhen people get home from work orschool and these could obviously bepassed on to Argentina when a Spanishcentre is shut or has calls waiting.”

East EuropeWhilst South America is attracting alot of attention for its proximity toNorth America, the same is happeningin Europe, with East European coun-

tries providing a huge, cost-effectivetalent pool for West European brands.It is certainly a region that MichaelBarrett, a senior lecturer at the JudgeBusiness School, University of Cam-bridge believes is going to provehugely popular for nearshoring con-tracts.

“The latest figures from researchersat McKinsey show 40,000 new BPOjobs were created in East Europe lastyear alone,” he enthuses.

“The region produces so many topengineers and telecoms experts thatwe’re finding that whilst some com-panies start out with a little outsourc-ing in the area, they’re now startingto move in to co-development.

“A huge motivator is that a lot ofclients are being put off the extensivetravel and time commitments of out-sourcing in India and prefer to have alocation that may not be as cost-effective up front but is on a similartime zone and is far more accessible.”

Commonwealth strongNonetheless, despite there being con-stant questioning of whether India is‘overheating’ Bill Payne, Vice Presi-dent of Strategy and Development ofIBM’s Managed Business ProcessServices division believes there is stillmuch scope for expansion in India.

“Business processes are being out-sourced all around the world and it’s

UK marketplace relies on valueWhen BPO works at its best it should not just be aboutcost, although that is an obvious consideration. To MarcoBusi, Centre Manager of the Centre for Business ProcessOutsourcing (CBPO) the key is for both parties to lookbeyond initial efficiencies and concentrate on creatingvalue for the client.

Rather than find a business processwhich a client thinks could be donemore efficiently by a specialist, Busibelieves clients should be looking totheir chosen vendor to enable them tooffer higher value services and, fortheir part, vendors should look at thework they are doing and find outways to move themselves up thevalue chain.

A good case in point, he believes, isUPS, which has moved from deliveriesto making itself integral in the supplychain of many of its customers.

“It’s a great case of how a companycan start out taking care of deliveriesbut being so good at it that they startto tell the client how they could makeefficiencies throughout the supplychain and then get more and more responsibility,” Busi enthuses.

“It gets to the point where clients,such as at least one major supermarket,turn to UPS to get their advice onpackaging so they can work out moreefficient load patters for deliveries. It’s

a great example of a vendor workingclosely with a client to drive valueand the BPO industry could do learnan awful lot from it.”

Learn from callsTo underline his point, Busi draws attention to the typical call centrescenario where a company has askedan outsourcer to look after its customerservices operation, almost, as he termsit, “as a necessary evil” rather than asan opportunity.

“If you think about it, there is nobody better placed within the organisation to work on future highervalue offerings than the call centrestaff,” he reasons.

“There is nobody in a business thatwill be listening to customers on acontinual basis than the customercontact centre, so who else is betterplaced to understand the client’s busi-ness and consider new products andservices that they could help theclient provide and so move them-selves up the value chain?”

Jobs returningClients should also be listening to thelessons learned in their contact centreso they begin to realise that it is notjust a way of getting someone else,held at arm’s length, to handle alltheir incoming customer calls but apoint of contact with the public thatcould teach them valuable lessons.

Busi makes the point at a time whencall centre jobs are coming back to the

UK this point is incredibly importantfor the well-being of the domesticBPO marketplace.

“People in the call centre industryused to see India as a huge threat butit’s more of a threat with back officeservice now,” he says.

“At first the UK was huge for callcentres, then everyone went to India,and it was seen as a huge threat butnow companies are tending to bring therole back in to the UK. In fact, you actually find that brands are advertisingthe fact that they have UK call centresas a positive attribute so it is clear thatjobs are coming back to the country.

“The point I would ask people toconsider is what is the point of theseroles coming back to the country ifwe do not add value? If we just havejobs coming back that could be auto-mated in the future, then they will be.The one thing you can do to protectagainst this is to work hard at drivingvalue for the client because an auto-mated process can’t do that for them.”

very exciting but you only have to goto India to realise it has the capacityto expand further,” he says.

“Sure, there may be some overheat-ing in some of the big cities but youonly have to look to the huge numberof second and third tier cities that thiscan spread out in to and you can seehow wage inflation and rising costsin one city can be countered by a newup and coming city nearby.”

Payne reveals he often tells clientsand interested parties at conferences hebelieves there is an argument that theUK is best off looking to do business inand through its former empire, ratherthan the EU, and is often given “somevery strange looks”. However hemaintains that the country’s formercolonies obviously have very goodEnglish skills and highly educatedpopulations which make them attrac-tive to business. This is not just trueof India and Canada, he suggests, butalso the “million dollar question” ofwhether African countries can “do anIndia”.

“The work will go where the skillsare,” he suggests. “So it’s a reallyintriguing question to look at variousAfrican countries and see wherethey’ll be in 20 years. If they can bestable and provide the necessaryskilled work force then they could besignificant players. South Africa iswell poised now, it just needs to pro-duce more top calibre people from itsuniversities, it needs to scale up. If itcan, it will definitely be one to watchin a few years time.”

USA looking toEuropeThe latest Quarterly Index fromsourcing advisers TPI shows a dra-matic shift in the focus of the globaloutsourcing market away from its tra-ditional US heartland and deeper intoboth Europe and Asia-Pacific. Whilstmarket activity in the US has de-clined, Europe is experiencing contin-uing growth. $5.2 billion (€4.2billion) of outsourcing deals werestruck in the Americas in the firstthree months of this year, a decreaseof some 70% on the first quarter of2006. Indeed, the 27 contractsawarded there during the first threemonths of this year represent thefewest quarterly contract awardssince 2001. By way of contrast, thetotal value of contracts awarded inEurope, $9.7 billion (€7.7 billion) wasup 67%, while Asia-Pacific experi-enced a 30% increase in the value offirst quarter deals from $2.1 billion(€1.7 billion) in 2006 to $2.7 billion(€2.2 billion) in 2007.

Duncan Aitchison, Managing Di-rector of TPI, commented:

“This shift in market activity fromthe Americas to Europe can princi-pally be explained by the US’s fargreater maturity as an outsourcingmarket. Europe and Asia-Pacific arenewer to outsourcing and their mar-kets therefore currently have morepotential to grow. That said, the sig-nificance of these developments fromthe perspective of outsourcingproviders should not be underesti-mated. Europe will become increas-ingly important to the serviceprovider community.”

Your Global Network Partner to Drive Successful BPOBPO has impacted business in every industry sector across the globe. As outsourcing enters a new phase,telecom/IT capabilities are at the forefront of BPO gains.This article explores how leading, best practice net-works and IT capabilities are critically enabling the latest wave of global business optimization.

The Global Model EraWith the rise of ‘multi-shoring’, companies today are lookingto out-task specific processes and functions to various partsof the world. India is still at the heart of this outsourcing,however, newly emerging BPO markets include countriessuch as Hungary, the Philippines, Canada and South Africa.Overall, the trend toward a multi-site global BPO model isintensifying the need for truly global network services.

Why the Network is Mission-CriticalTelecom/IT infrastructure, managed applications, and networkservices drive the performance of the systems, software, andfunctions of BPO. These capabilities support more effectivebusiness processes to deliver agility, performance, andprofitability. Efficiencies gained on the network propel higherproductivity and the ability for in-house staff to focus on corecompetencies and business priorities.

Additionally, telecom/IT services help meet thedemands of security and governance requirements byprotecting extremely sensitive corporate data. FromHIPAA and Sarbanes-Oxley in the US to PIPEDA in

Canada or the Data Directive in the EU, network security,archiving and storage facilities must meet corporatecompliance standards. Globally, these initiatives createspecific controls around what can and can’t be done withdata, including storage and processing. For the bankingand financial industry, for example, high-securitynetworking has become mission-critical to BPO.

Scale, Efficiency, and a True GlobalityVSNL is one of the world’s largest global communicationsproviders. We provide a comprehensive portfolio ofnetwork solutions, managed hosting and storage, andmanaged network and application services on our whollyowned global network in order to support BPO initiatives.From outsourcing to leveraging next-generationtechnologies to enhancing profitability, VSNL’s core focusis on enabling our customers to drive value creation. Wepartner with leading Systems Integrators (SIs) to developoutsourced solutions building on synergies betweenglobal IT and network capabilities. VSNL is a leadingenabler of outsourced solutions driven by our:

Network Future-Proofing To best optimise outsourcing investments, VSNL hasinvested in key next-generation network technologies.

EthernetVSNL has led the industry in deploying a comprehensivesolution suite extending the efficiencies of Ethernettechnology to global wide area networks (WANs). VSNLoffered the first truly global Dedicated Ethernet networksolution and the first to be recognised by the MetroEthernet Forum-9 standard. Recently, our Dedicated GlobalEthernet service received a second recognition with theMEF-14 classification. Together, these standards ensurethat our Ethernet service is fully measurable, manageable,and robust, meeting criteria jointly defined by the world’sleading Ethernet service providers and infrastructuresuppliers. Groundbreaking application of this ubiquitousand easy-to-use technology is providing our UK enterprisecustomers with one of the most cost-effective services toimprove their networks, scalability, and financialperformance. VSNL‘s network investments to deliver newEthernet technology are enabling next-generation BPO tothrive in a scalable, future-proof environment.

MPLS Our Global VPN services offer an ideal solution fororganisations that need a flexible, manageable and cost-effective Wide Area Network, but cannot compromise onperformance, reliability or security. VSNL‘s networkencompasses a highly redundant MPLS global core of 15super PoPs and over 350 PoPs at the edge of this core;reaching into the business centers of five continents.VSNL‘s expert and experienced resources support theentire enterprise network lifecycle for MPLS VPN WANsolution.

Managed Hosting and StorageVSNL’s managed hosting and storage solution allowsenterprises to remain focused on their core competenciesrather than managing complex storage optimization,disaster recovery planning, and the ongoing maintenanceand security challenges associated with hosting andstorage management. VSNL leverages and passes on theoperational advantages of its offshore Indian operationsto help customers reduce costs, while improving servicequality and mitigating risk through the use of the VSNLglobal network, data centers, specialised resources andsophisticated management tools. Our global customerscan use VSNL‘s best-in-class Managed Hosting & Storagesolution to safely out-task services and to reduce ITmanagement complexity.

� Truly global footprint � Wholly owned infrastructure for the highest levels of security and control � Best-in-class managed network, application, and infrastructure solutions � High-performance standards maintained between the UK and across the world � Core market strengths in emerging BPO countries

For more information on how VSNL can help support your BPO initiative, please contact Nicola Hathaway at + 44.20.7519.4621 or via email at Nicola.Hathaway@vsnlinternational.com.

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Standardisation encouraging shared services uptakeCommon tasks and similar computerplatforms are combining to makeshared services a popular way ofgaining efficiencies, particularly forthose companies that are keen onkeeping their back office roles closeat hand.

After decades of global firms allow-ing individual arms to have increas-ing autonomy the current thinkingamong those looking to drive share-holder value is to centralise opera-tions in to a shared centre because itis pointless having, for example, mul-tiple offices processing invoices whenthey could be done from one location.

According to Robert Chapman, Headof BPO at EDS, this has been made allthe more sensible by global companiesinvesting in large computer systems

which allow staff dotted around theworld the same access to businesstools. ,“Typically a client will have,say, a SAP platform and its staffeverywhere will have access to it andthey’ll generally also have the sametools in various offices,” he says.

“So they realise that with their peopleusing the same computer system andtools around the world, their processesare well aligned and there’s nothingreally stopping them from doing cer-tain roles from the same centre. This isobviously far more efficient than ifyou have people doing the same tasksin different offices.

“It’s also a very handy way ofspreading the balance of work byhaving a large team that can adaptwhen their work loads change.”

Whilst many companies will chooseto set up their own shared servicescentre, many will go down the routeof asking a shared services specialistto either set up a centre on their behalf or, as is often the case, set it upand then run it for them as well.

“In a way it can become a form ofoutsourcing,” says Chapman.

“We have clients coming to us thatwant a shared service centre but theseback office tasks aren’t central to theirbusiness and they don’t necessarilywant to put in the investment to setup a new shared services office. So,they bring an operator, such as EDS,on board to share in the cost of set-ting up the centre in return for a con-tract to run it on their behalf.”

Whilst there is an element of costsaving, there is also a strategic ele-ment in combining back office rolesin one place, regardless of whetherthe shared service centre is run by the

company or a third party. “If you’vegot everyone together, you can be re-ally focussed and keep training con-stant and really motivate a team toimprove customer service,” saysChapman. “Companies realise thatwhen they’re spread thinly it can beharder to ensure customer service iskept at the level they require.”

Shared services are proving par-ticularly attractive for the publicsector which has been under consid-erable pressure, since the publicationof the Gershon report in 2004, tosave costs by pooling resources andsaving on, what the report estimatedas, 84,000 duplicated civil servantjobs. This has ensured staffing effi-ciencies are very high on the agendain all public service departments, ac-cording to Hilary Robertson, BPODirector at Xansa.

“Government, both central andlocal, has seen there are huge savings

to be made through shared services,”she says. “There’s the obvious savingof sharing a building and the same ITsystem because you don’t need peoplein neighbouring councils or depart-ment all doing the same role frommultiple offices. We’ve set up the NHSSBS which we estimate a quarter ofall NHS organisations are now a partof. We share any profits with theDepartment of Health and we reckonin a few years, if we got half of allNHS organisations, the profits equateto something like 12,000 nurses’salaries.”

Robertson predicts the public sectorwill move increasingly towards sharedservices because there are not onlysavings to be made but it fits in withthe current drive for the governmentto provide services that are ‘joined up’and give the consumer a simplified, ifnot single, interface with variousdepartments.

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Briefs from BangaloreWhilst global companies and the public sector have led BPO, professional serviceshave started to catch up in recent years and now one of the latest fields to startswitching to BPO are lawyers.

Although accountants, like many inthe finance sector, have led the City’smarch towards BPO, their legal coun-terparts have been slower to pick upon the benefits of outsourcing back office tasks but this is changing, assignalled by legal giant CliffordChance setting up a captive BPO inIndia last Autumn in a bid to save anestimated £9.5m on administrationcosts.

Boom timesKesh Sharma, Director of Magellan,has helped several legal firms offshoretheir back office work and reveals, asever, there is not a single driver, butmany.

“A huge issue is that all the lawfirms we talk to say they are grow-ing,” he says.

“That’s great for them, but it meansthere is a lot of competition for legaladvisors and secretaries who, althoughthey are not actually lawyers, are verywell trained and knowledgeable.

“The law firms realise that theyhave a huge administration and sec-

retarial burden that, if taken awayfrom their clerks and support teamscan help motivate these people to staybecause it gives them more time tospend giving advice and help outclients on the parts of work that don’talways need a layer.”

Sharma is quick to point out thatdespite “media hype” this is actuallyanother case of outsourcing actuallyenriching jobs in the UK through relieving well paid city secretaries ofjobs they are, arguably, over qualifiedto do, such as copying documents andtranscribing tapes. This leaves themtime to focus on more fulfilling workthat justifies their salaries which, due tothe skilled nature of their role, are farhigher than a conventional secretary.

“In all the work we’ve done, I thinkthere’s only been one secretary whowas made redundant,” he says.

“Everyone else has really enjoyedseeing all the paper work and adminbeing done somewhere else so theycan get more involved in the clientfacing side of the business.”

India leadingThe offshore location could be any-where but the first handful of firmsare opting for India, Sharma pointsout, because security has now beentightened and staff are highly trained.

“The project leaders in our Indiancentres are qualified lawyers andeveryone handling documents is agraduate who we’ve trained in legalprocesses and jargon,” he claims.

“Plus we don’t allow any mobilephones or pens in the office sonobody can ever take a note of any-thing. Conversely we had a client inLondon who hired a temp who, on herfirst day, discovered she’d been askedto work on papers relating to caseagainst one of her relatives. I pointthis out to customers to show how ac-tually it’s safer to use offshore staffbecause they’re working in a secureenvironment and the chances of thembeing involved indirectly in a case byaccident are far smaller than a tempyou hire in London.

“I wouldn’t advise that really sensi-tive work on a top secret mergershould be outsourced but for everyday work it’s a very good way to savemoney and better motivate staff inthe UK.”

The other huge plus point India hasgoing for it, according to Sharma, isthe four and half hour time differencewhich means that by the time law firmsopen their offices in the morning, theirIndian outsourcers have had a four orfive hours head start on the workingday. Hence, data sent at the end of theworking day in the UK can beprocessed by the time the office opensagain in the morning.

Always leave space for renegotiationWith the maturing of the BPO market two facets havebecome clear. Contracts are increasingly more short termthan the previous five to ten years deals that were oncecommon and, as often as not, these shorter term dealsare renegotiated before they expire.

In fact, BPO lawyer David Isaac at Pin-sent Masons estimates that around70% of all outsourcing contracts areredrawn within two years but hemaintains that, particularly in IT, thisis not a bad thing but more a sign thatclients and vendors realise that IT proj-

ects change in scope, reflecting clients’growth and strategic realignments.

“It is usually imagined that con-tracts should only be renegotiated ifdire problems demand it. In practicehowever, most sophisticated IT con-tracts need regular reviews and some

form of re-alignment,” he suggests.“Increasingly in both the public and

private sectors, contract change is required to take account of develop-ments in an organisation’s business ormovement in the IT market.

We’re often involved in contract discussions which demand a moveaway from a single-source arrange-ment to multiple-source outsourcingsor to a mix of in-house and outsourcedarrangements. In each of these situa-tions, we’ve witnessed variation to reflect changing business requirements,maturing relationships and new man-agement styles.”

Break clauses keyOne way of avoiding potential renego-tiation difficulties and costly discus-sions, Pinsent advises, is to includeunilateral break clauses at predeter-mined dates when setting up a contract.These will usually be the anniversaryof an agreement starting and maybealso a time half way or two thirds ofthe way through the contract.

This gives both vendor and clientan opportunity to reflect on the con-tract, monitor the performance of aproject, weigh up possible changesthat are required and renegotiate.

This need for reflection means it is

a good idea, Pinsent suggest, to allowa contract to continue without toomuch alteration through usingphrases in the original contract thatstate after the break clause, if agreed,services should be provided at “pre-agreed rates” but only using “best-of-breed” solutions (which may haveimproved since the signing of theoriginal document). This process ofbuilding in a period of reflection toallow for renegotiation is now verycommon, Pinsent reveals, and wouldsuggest anybody considering off-shoring work, particularly in the fastchanging world of IT, should build inan automatic renegotiation periodand should certainly never commit tomore than two or three years of unin-terrupted service from any provider.

10 Top Tips for successNick Billington, UK Head of Outsourcing at Accenture passes onhis top tips for BPO best practice

Allow lots of time - An outsourcingprogram needs time and effort fromthe executives driving the change

Win over the bosses - The CFO hasresponsibility for running thearrangement with the provider

Build a consensus - Everyoneneeds to be involved – find businessline ‘champions’ who embrace theidea

Do your homework - The key is thework done up front, including indepth analysis of existing costs andperformance

Craft the contract carefully- Formulate a contract that incen-tivises the right behaviors for bothparties…one sided arrangements neverwork in the longer term. The successof an outsourcing arrangement can-not depend entirely on a single doc-ument – so once it’s complete and

signed, the key aspects need to bebroadly embedded in the servicemanagement process

Change Management / Communi-cation – Leverage all channels andmethods to ensure clear understandingof changes, issues and actions

Stick to specifics - Affected staffneed to receive concrete informationas soon as possible

Measure performance - Applyingmetrics both measures the success ofan arrangement and provides data toprotect the programme from backlash

Operational discipline – It is chal-lenging to focus on operations sta-bilisation in the early stages oftransition… but it is critical for bothparties

Build a partnership - Be openabout business objectives and goals.Set up a suitably sensitive and flexi-ble governance structure…this is keyfor the good times and to navigatethrough challenges

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IT Outsourcing to Eastern EuropeSergei Levteev, President of IBA Group, a Prague-based IT service provider withclients in more than 30 countries explains the appeal of East Europe.

Eastern Europe is one of thefastest-growing regions inthe world. Eastern Europeancountries have become centresfor IT outsourcing because oftheir geographical and culturalproximity to Western Europe,and skilled and low-costlabour force. Using softwareoutsourcing to Eastern Europe, Western companiescreate high quality products

in a cost-effective and timely manner.IT departments have tight budgets, limited resources,

and time constrains. Outsourcing to Eastern Europe canserve as a key strategy in addressing these challenges.

Different outsourcing models are currently in place. AtIBA Group, we use a combination of onshore, near-shoreand offshore operations to provide premium quality solutions to our customers. We also lay special emphasison long-term relations with our clients, which providesfor a higher degree of trust and better understanding ofclient business needs.

The most commonly used offshore suppliers are Indian. However, Eastern Europe offers good opportunitiesfor those who want to diversify their outcourcing portfo-lios. Eastern Europe has a highly educated workforce, primarily in the high-tech sector, it has the required ITand communication infrastructure and enjoys politicaland economic stability. IT providers in Eastern Europe havelow employee turnover and are reliable partners. Prices thereare very competitive, even compared with India and China.

Sergei Levteev - IBAGroup President

Although this region is a new destination, some EasternEuropean companies have been in the outsourcing businessfor years. For instance, the first IBA Group’s developmentcentre was founded in 1993 in Belarus. In the past years,IBA Group has evolved into an international alliance withoffices in the Czech Republic, Belarus, the United States,Germany, Russia, Cyprus, and Bulgaria. To date, IBAemploys more than 2,000 professionals. IBA attributes itsdramatic growth to the increase in demand for IT outsourcingservices on the global market.

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Recruitmentoutsourcertop honourRosaleen Blair, the chief executiveof Alexander Mann Solutions, hasrecently been named as the VeuveClicquot Businesswoman of theYear.

Rosaleen started out running ananny business in her nativeDublin before moving to London toset up her recruitment outsourcerin the hope she could revamp howbusinesses hire staff. The companyis now a £300 million global oper-ation with 800 staff.

The award was set up in 1972 bythe champagne brand to celebrateits bicentenary by promoting andrecognising female businessachievements.Around the world,

or in your own office?Ask a managing director or CEOs if they, or anyone elsein their senior management can programme their laptopand the resounding ‘none’ will give a good idea why somany companies choose to outsource IT projects.

In fact, it is IT outsourcing whichJohn Tilley, managing director ofPerot Systems, points out, can makedifferent offshore locations very attractive at different times.

“We work on a truly global basis,so we have staff in many locationsbecause our advice to any potentialcustomer is that you if you want towork long term with someone, youneed to spread staff in various loca-tions,” he says.

“The problem can be that if a lot ofwork comes to one country, it can pushup inflation as there’s competition forthe people with the right skills. We’re

in Romania, for example, but if youasked me if that’s going to be as attrac-tive in five or six years as it is now, Icouldn’t guarantee it because they mayrun in to problems of not having theuniversity places available to increasetheir supply of qualified people.

“Hence we build our IT strategy sowe can switch resources if one locationbecomes less attractive. The challengefor us then becomes to standardise ourprocesses so different parts of theworld work together seamlessly.”

Tilley believes that this global,standardised approach is vital in IToutsourcing because if an outsourcer

puts too many of their proverbial eggsin one basket, the service levels andpricing structure they agreed a coupleof years ago can be hard to maintainif the country they have chosen to lo-cate their IT teams suddenly overheatsand wages spiral and top quality staffbecome harder to locate and employ.

Cosourcing routeA rather different strategy of placingprojects in between outsourcing andinsourcing, so called ‘cosourcing’, isproving popular in IT, particularlywith help desks, according to JerryCave, Plan-Net co-founder.

“A lot of companies are deciding toget a provider like us to go in and either get the staff to run their IThelpdesk or take over the functioncompletely,” he says.

“If they come to us to provide staffit takes the strain off them to spendtime interviewing people but if they

want to take it to the next stage andask us to take on the contract to runtheir IT helpdesk or take over a partof it, and so cosource it, we find thatwe generally will employ, train andmange the IT support staff but the clientmay well have a manager keepingoverall control of the function.”

Cave believes the attraction to aclient is that they know an IThelpdesk is vital but as their businessgrows it can be difficult for them togrow their helpdesk in line with increased demands.

Opportunities countThe main driver, though, for IThelpdesks to be cosourced is whatCave sums up as the ‘opportunitycost’ rather than a saving on the costof running an IT helpdesk.

“Companies know that it takes a lotof management time to run a help-desk,” he says.

“So the question they are increas-ingly asking themselves is what is thecost of having managers running thefunction compared to allowing themto get on with something else a littlemore strategic? What is the cost, interms of missed opportunity, to havethose managers interviewing staffand managing those staff when theycould be doing something more beneficial.

“It’s the Holy Grail of IT outsourcing.If you can make people see that theyonly have an IT department becausethey can’t be making money when thecomputers are down and they missout on billing opportunities, so it goesthat if they then have managers devoted to looking after that sectionof the business, they can’t be doingsomething else more strategic thatwill help the company grow.”

There is also the cost considerationwhereby a company can pay an out-sourcer or cosourcer to provide a serv-ice, such as an IT helpdesk but if theybuild it themselves and their needschange, they may have to invest in awhole new infrastructure – a cost thatcould either be avoided if they used aservice provider, or at least shared.

Tutors on tapOne of the latest ideas in Indianoutsourcing is young bright grad-uates not manning the phone in acall centre but rather using theirstudies to help British youngsterswith their home work.

TutorVista gives UK studentsone-to-one, unlimited personaltutoring for a flat monthly fee of£49.99. The new service has beenlaunched by K Ganesh who, in thepast, set up one of India’s bestknown IT outsourcers, IT&T beforeforming business analytics com-pany Marketics which he recentlysold to WNS Global Service for$65m.

IT Section

Corporate-support processes, often duplicated in separate parts of the same business, usually account for up to 40% of total costs. The shared serv-

ices business model (SSBM) enables organisations to exploit the potential cost savings hidden in support services and to re-channel the released

resources into higher-value activities.

The Executive’s Guide to Shared Services

Far from being a “throw-backto the old days of bureaucraticcentralisation” (The Economist,2003), emerging SSBMs con-solidate and deliver repetitivecommon processes through asingle delivery organisation,after having optimised them toeach customer’s set of specificrequirements.

The move to shared serviceshas gained momentum in boththe public and private sector. Inthe UK, governmental initiativeshave been focusing lately ontransforming the public sectorthrough reducing waste andduplication in the back-officefor reinvestment in front-lineservices (Gershon Review, July

2004). Similarly, according to IBM, more than 30% of US Fortune500 companies have now adopted the SSBM.

Nevertheless, executives are sceptical about the potential benefits of the SSBM. Whilst some companies that have adoptedthe model have been disappointed with the results, others haveachieved benefits far beyond their expectations. An in-depthanalysis of best and worst practice clearly indicates that most ofthese initiatives fail due to a lack of clear understanding of theSSBM and how to manage the change it involves.

The Executive’s Guide presented here offers a conceptual frame-work to better understand the shared services concept, identify thechallenges arising during the transition to the SSBM and be awareof the critical success factors.

This guide answers the fundamental questions one need to answer when planning to adopt the SSBM:

� What is the SSBM and what variations of the model exist today?

� Why should you consider adopting the SSBM? � How should you plan and manage the change

involved in the transition to SSBM?

What? Public and private organisations have developed several differentvariations of the following three basic models for the delivery ofservices based on the shared services concept:Shared Services Business Unit (SSBU): A business unit created internally within an organisation, dedicated to deliver to internalclients optimised services that were previously carried out repet-itively across different business units.Commercial Shared Services Business Unit (CSSBU): An evolutionof the SSBU model, where the SSBU achieves sufficienteconomies of skills and scale to profit from delivering services toexternal clients also.Commercial Shared Services Centre (SSC): A commercial com-pany whose core business is to provide shared services to a rangeof different external clients.

Why?Organisations throughout the world constantly face operationaland strategic challenges to better serve customers at lower cost.Lean theories from manufacturing teach us that most improve-ment opportunities come from eliminating non-value-added ac-tivities. The SSBM enables organisations to gain economies ofscale and skills. Dramatic cost cutting can be achieved fromeconomies of scale, especially for transaction-intensive, volume-oriented tasks.

Recent research concluded that the SSBM gen-erally leads to 20% direct cost savings; 20% in-direct cost savings as a result of processimprovement and optimisation; and another15% as a result of systems improvement

Economies of skills enable organisations to streamline and optimisethe shared processes and to develop a strong customer service orientation, providing higher-quality services. The SSBM also allows for greater connectivity across businesses, enabling amore efficient information flow throughout the supply chain.

How?A full transition to the SSBM takes anywhere between 18 to 24months, although selected functions can be up and runningmuch sooner. The table below is the core of the Executive’s Guidewe’re presenting here as it identifies the most common shortfalls,the potential impact on the project, and the critical success fac-tors (CSF) characteristic of best practice.

Project and Change Management

Business process re-engineering

Bad transition planning Longer and more costly projects than expected Develop the business case/strategy/plan

Lack of management buy-in Poor monitoring of achievements and loose adherence to plans Gain executives sponsorship and leadership Set targets and goals

Wrong selection of processes Outsourcing of core competencies Select processes starting from those with a low strategicimpact and significant economies of scale

Processes are standardised but not optimised Poor performance and service quality Reengineer the processes, don’t just transfer inefficiencies

People Management Lack of clear communication to staff High resistance to change Communicate throughout the project.Build attractive career plans.

Service Level Agreements (SLA)

Definition of Rigid SLAs Early contract termination with significant delays and financial losses

Define SLAs to reflect the dynamic nature of these projectsUse the knowledge generated at every step to inform the SLA

IT systems integration Lack of proper system integration Poor service delivery Plan the integration in advance

Deploy enabling technologies

Category Common shortfall Impact on the Project CSF based on best practice

The benefits promised by the adoption of SSBM can refillthe competitive engine of most organisations, both publicand private. The transition can be lengthy and complex.The Executive’s Guide to Shared Services that we havebriefly presented here summarises the know-how availableto support decision makers to successfully plan and under-take such a transition.

The Centre For Business Process Outsourcing (CBPO) is the first research centre of its kind in the UK. Bringing world-leadingresearch to the area of BPO, our mission is to support practitioners to use outsourcing to shape their future, innovate and im-prove their global competitive position. We offer executive education, knowledge transfer, consulting and contract research.

For more information, or to take part to our on-going survey of outsourcing practices and trends visit www.cbpo.org.uk

Dr. Marco Busi, Centre Manager,Centre for Business Process Outsourcing, University of Strathclyde, Inverness & Glasgow,marco.busi@strath.ac.uk

If researchers, BPO practitioners and industry had a common forumthrough which they could share latest research findings and swapreal life experiences of what has worked and what has not, MarcoBusi is convinced the overall BPO marketplace would benefit.

Hence he is behind a project to launch Strategic Outsourc-ing, An International Journal to be published by Emerald Pub-lishing from the end of the year or, at the latest, the start ofnext year. Busi believes that the BPO marketplace needs ajournal because, without one, people only have access to in-formation directly relating to their area of expertise and somiss out on the opportunity to learn from BPO projects relat-ing to different parts of the marketplace from a wide varietyof industries.

“We all have so much we can learn from one another,” hesuggests. “So the journal will allow practitioners and re-searchers to share experiences from a number of different in-dustries where outsourcing is practised, so that the chances ofsuccess of these initiatives are optimised. We’re working hard

to make it interesting and industry relevant so that boardmembers up to CEO will embrace it as well. So the journal willnot be the traditional academic journal but will feature bothtraditional scientific research together with industry view-points, hence maximising its value to the different type ofreaders and leading the international debate on strategic out-sourcing.”

The editorial team behind the project is currently being builtup to make sure articles are provide by, and peer reviewed, bythe best in the business – already the likes of the Harvard Busi-ness School, MIT and London Business School, among manyothers, are on board.

Once it begins publication Busi is convinced the journal willhelp the BPO marketplace mature, replicating the positive ex-perience of more mature industries such as manufacturingwhich, he feels, made great leaps forwards once companieslooked to researchers and one another to test methodologiesand share real life experiences.

Creating a unique BPO forum

This project has become a benchmark””

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PROMOTIONAL FEATURE

COLT go it alone to IndiaWhile headlines of companies outsourcing to Asia are nowa daily occurrence, few people realise that many companiesare going it alone. COLT Telecom has recently done justthat by building a captive finance shared services centre(SSC) in India to support its European operations.

While the primary objective was toreduce costs, the SSC offshoring pro-gramme aimed to solve a number ofother challenges faced by many organisations today: an overly com-plex and expensive to maintain tech-nology configuration, non standardbusiness processes and resistance tochange in the European businesseswhich historically had been run on alargely autonomous basis.

In response to these challenges andrecognising that internal resources todeliver an initiative of this scale wereinsufficient, COLT approached Deloitteto take overall responsibility for thedefinition and delivery of the trans-formation programme. The decisionto build a captive SSC rather thanoutsource to a third party was takento achieve additional savings (by notpaying for an outsourcer’s profit mar-gin) and was made easier by the fact

that COLT’s majority shareholder, Fidelity Inc, already had a facility inDelhi that could be used.

Describing the challenges, MikeDobby, a Finance TransformationPartner from Deloitte, commented:“To succeed, this project required ahigh level of senior managementcommitment and an increased focuson ‘business as usual’ during the tran-sition. The successful implementationcombined processes, people and tech-nology into a totally new operatingmodel for finance, fundamentallychanging the way key services aresourced within the organisation.”

Building capacityCOLT phased its approach by creatingits shared service centre in India andinitially shipping the existingprocesses. This allowed significant costsavings to be realised quickly through

wage reduction whilst reducing risk bybuilding knowledge within India. Itthen undertook an initiative to glob-ally standardise routine transactionprocessing, such as matching andpaying supplier invoices and receivingand allocating cash from customers.This was complemented by the imple-mentation of a global Oracle financialsystem that considerably increasedthe visibility and consistency of fi-nancial information.

Tony Bates, Chief Administrativeand Financial Officer at COLT said:“By conducting a successful pilot, weconfirmed that the offshore modeland Indian resources had the skills required to deliver on key accountingprocesses. We have also ensured lowattrition in India by building strongcareer paths and hiring generally mature workers.”

Can BPO boost UK jobs? Top 10 Tips forsuccessfulShared ServicesJohn Stevenson, UK COO, at AtosOrigin passes on his top ten tipsfor making shared services work:

● Align Shared Services with thecompany strategy and organisa-tional model, IT and processes● Build a compelling case forchange and communicate it toemployees at all levels to assistbuy-in● Secure strong sponsorship thatis cascaded down through the organisation● Discuss a shared vision for thefuture state of Shared Services● Involve stakeholders in buildingand realising the business case todeliver significant benefits● Put in place strong programmeand change management from theoutset● Simplify with no compromisesand maximise automation● Allocate adequate resource(both quantity and quality) –staff, money, etc.● Select the right location for theservice / business● Create a high performance serv-ice culture in the Business Sup-port Centre and select leadershipbased on competencies required

When offshoring first started to gather momentum throughout the latter half of the1990s, one could not escape alarmist headlines lamenting UK jobs lost abroad.

Now, however, offshore and nearshoreBPO providers are growing in confi-dence and believe they can say, withsome assurance, that their work canactually benefit the UK economy.

Although the public may not be totally surprised that companies thathave taken jobs, or at least roles,abroad would have a counter argu-ment, Neil Robinson, Director ofClient Management at Convergysclaims that offshoring is good forBritish business, so it follows it mustbe good for the country as a whole. “Alot of the technology and projectmanaging teams remain back in theUK,” he claims.

“The work may be done in East Europe or India but it’s being run fromthe company in the UK and it’s allow-ing them to get projects delivered veryefficiently. I think people have to realise that the business world haschanged and it’s far more dynamic,offering companies a vast choice ofsuppliers from all over the world. Itmay take time for people to adapt butthe projects are nearly always runfrom the UK and they can actuallycreate jobs in the UK once they’re delivered.”

New marketsFurthermore, there is the rather obvi-ous point that if developing countriesare helped to develop further, they become huge markets for UK goodsand services. It is only too self-evi-dent for someone such as Bill Payne,

Vice President of Strategy and Devel-opment of Manager Business ProcessServices at IBM.

“You only have to go over to some-where like India or China to realisethere’s now more than a billion ormore than two billion people who

don’t want to live in poverty, theywant what you and I have got,” hesays.

“So they clamour for BPO jobs sothey can afford the goods and serv-ices we have in West Europe or theUnited States. Certainly in India it’salready creating a huge middle classand so a lot of companies are nowsetting up there not just to run BPOoffices but to have a launch pad tosell to India. You only have to drivearound India to see all the big westernbrands are already there doing verywell.”

Transition aheadOf course there is a major proviso tothe UK gaining from offshoring. AsMichael Barrett, Senior Lecturer atThe Judge Business School, Univer-sity of Cambridge point out, thecountry cannot simply expect thebenefits of BPO to flood in withoutlaying the ground work.

“It’s probably too early to say forsure that offshoring BPO can be ben-eficial for the UK but it definitely hasthe potential to be,” he says.

“The crucial thing here, though, isthat in the case of offshoring admin-istration work there is always the ar-gument put forward that it allows UKstaff to do more proactive, client facing roles. That’s obviously true butbusinesses obviously have to put inthe time and resources to train peoplefor these roles, they can’t just expectit to happen automatically. So, there’sdefinitely the potential but it willneed some investment in UK staff tomake it happen.”

Highlighting the success, ShirishPatel, a Telecommunications Partnerfrom Deloitte, noted: “This project hasbecome a benchmark for building acaptive offshore SSC. To implementsuch a complex transformation pro-gramme across so many countries in18 months is incredible. The total costbenefit associated with implementingworldwide standard businessprocesses whilst moving to an SSCmodel in India has given COLT a significant competitive advantage.”

New approaches to outsourc-ing as BPO comes of ageMIKE ETTLING, VP, GLOBAL BPO STRATEGY, UNISYS.

The world of Business Process Outsourcing is in a period of flux. Unisys hasbeen a provider of BPO services for many years and we are now seeing adefinite trend for companies rethinking how they approach BPO, what theyare outsourcing and how that outsourcing is being managed to ensure asuccessful partnership.

Buyers are a lot more sophisticated and the best outsourcers are developinga closer, healthier interaction between them and their clients – the focus ison people, productivity and process requirements rather than just supplyingtechnology.

As the industry evolves BPO firms must offer value for money alongsidedeliverability, supplying significant savings to business in processing theirback-office functions. Unisys compares itself to Toyota’s lean manufacturingmodel in this respect - maximum efficiency and minimum waste with aflexible approach which is highly responsive to customer requirements.Specialisation and economies of scale with technology offer significantsavings to clients. BPO providers are becoming far more savvy about howto offer best-fit services. As an industry, BPO is where ITO was five or sixyears ago, yet it is far more fragmented. Market valuations of some playersin BPO indicate how hot the market is right now.

Looking ForwardSo how will the BPO industry develop? In the immediate future it is safe tosay that by the end of 2008 BPO will look significantly different. We alreadysee emphasis on vertical industries where BPO specialisation is beingdeployed in mission-critical applications, not just on robotic back officefunctions. The closer working relationships that have developed betweenBPO providers and their clients has led to a greater trust of the BP outsourcerand, consequently, more sophisticated functions being entrusted to them.For clients, BPO partners must increasingly demonstrate secure businessoperations to prove trustworthiness.

The type of industries seeking business process outsourcing will alsochange. Sectors such as healthcare and fund management, for example, arelooking at BPO as an attractive proposition to help these industries operatechanges. For fund management, through the growth of hedge funds andregulatory changes in financial services, we are witnessing a need for BPOas the financial world expands and requires ever larger volumes of back office services.

These fundamental economic developments are typical of what is drivingBPO. As it gains trust as a viable, secure business option, we will definitelysee BPO flourishing across most, if not all, areas of industry.