Here are four major world trends affecting Indian BPOs and their productivity goals.

1.  The changing marketplace

“The world competition on cost is heating up,” Neil Bentley, joint managing director, Active Operations Management International (AOMi) in London, notes. “The Indian BPO market needs to wake up to this.”

The cost issue has many pieces. First, new entrants have appeared that do quality work are productive and have lower prices than the Indian BPOs. “This paves the way for new entrants,” the AOMi executive explains. The Philippines, Malaysia and Indonesia are offering significant advantages over Tier 1 and Tier 2 India sites, he points out.

At the same time, costs at home are rising, Brantley points out. India has recently experienced the fastest interest-rate increase since 1935. Indian wage inflation renders their pricing less competitive. Alsbridge CEO Ben Trowbridge adds Indian BPOs could be challenged on cost competitiveness “if exchange rates go the other way.”

Also, there is internal competition within India. To be competitive, BPOs are moving work from high-cost to lower-cost cities, according to Rahul Kanodia, CEO and vice chairman of Datamatics. “We explored opening an office in China. We believe Tier 3 Indian cities are equal to China. This is how Indian BPOs can mitigate the cost issue,” he continues. He adds that today Tier 3 Indian cities have the requisite infrastructure and educated populace to provide the needed labor.

V K Raman, head, domain services, BPO services, Tata Consultancy Services (TCS) says Indian BPOs “need to create global footprints,” not only because the buyers are entering new markets, but also because that allows access to a larger talent pool. While the governments in many countries have initiatives to create employable talent and provide the requisite infrastructure, he adds, “providers must create scalable and sustainable business models in new delivery locations.”

2. A new focus on productivity

“Service management remains a challenge for many providers,” says Trowbridge. Kanodia says part of this is a cultural difference. “Indians aren’t as focused on productivity as they are on technology,” he reports.

Bentley says more and more European and American companies are making their service provider selections on criteria other than cost. He notes labor productivity has “moved up the agenda”  because Western companies realized they still bear the risk under established headcount contracts. Today the Indian BPOs “just can’t throw more people at the problem,” says the AOMi Director.

He says this is a paradigm shift, just like the major changes Toyota did to its production lines 15 years ago. These forces are causing BPOs to look at how to optimize labor productivity across the supply chain.

There is opportunity here, Bentley believes. He points out planning and managing capacity “is the most overlooked process in the back office.” The basic question is: Do we have enough people to do the work or not?

Previously, the Indian BPOs didn’t have to really answer that question. They just kept extra resources on hand. “Managing capacity was not a primary concern before. Today they have to evidence their professionalism in these areas,” the AOMi executive says.

And it is possible. AOMi has been able to increase productivity 20-40 percent in India by managing resources better, Bentley reports. “That percentage is enough to regain their competitive advantage,” he adds.

3. A shift from simple head counts to transaction-based contracts

Clients are looking for BPO solutions based on outcomes rather than inputs. For the first time BPO operations have to manage the whole problem, not just provide a shared service center filled with people on a tariff. Bentley says this change forces BPOs to focus on managing output effectiveness. “Now they need the right people (i.e., as few as possible) doing the work,” he explains. The emergence of global standards for the operations management practice gives clients new tools to define and control BPO relationships.

4. Changing client demands

The AOMi executive says many BPOs now have onshore operations at their client sites. Here, the clients want to have the same planning control they have in their own operations. This is forcing BPOs to manage their human capital planning and productivity better. These include:

• Matching resources to the work
• Having the right skills at the right time
• Forecasting future demand

“Outsourcing buyers want to look under the bonnet. They want to know their service provider’s approach to operations management to see if their methods are similar,” Bentley continues.

Perception is part of the problem

Finally, Kanodia posits that part of the perceived productivity gap is “just perception.” The Datamatics CEO has found Indian BPOs frequently had higher labor productivity than the clients themselves. “When people work remotely, you wonder whether they are really working or just having tea. You question when you cannot wander around the shop floor,” he explains.

Kanodia says Indian BPOs are using tools, technology and platforms to close the true productivity gap. Process remodeling has helped Datamatics clients improve their accuracy by 80 percent and turnaround times by as much as 90 percent. “The only way to do that is by taking a blue sky approach,” he notes.

The bottom line: “BPOs have to able to respond to changes in the marketplace. As every boxer knows, you can’t win if you are flat footed,” says Bentley. If the Indian BPOs can learn to control more effectively, Bentley believes the resultant productivity will become “a competitive differentiator against the emerging competition.”

Human resources, call centers, customer service, finance and accounting. Companies have offshored these processes for years. But what about research and development? Is it a good idea? How much of the R gets outsourced relative to the D?

The burst of the economic bubble in 2008 led to corporate downsizing in R&D activities, as companies focused on their core competencies to keep their lights on. The subsequent recovery rekindled development and exploratory activities, but this time enterprises are enlisting the help of outsourcing providers.

Today, outsourcing customers “are increasingly looking at speed to market and are open to handing over the entire product lifecycle responsibility, including conceptualizing the product and its go-to market strategy, designing the technology architecture and delivering the integrated product,” reports Dr. Anurag, Wipro’s CTO.

To date, he says development-related outsourcing has proceeded much faster than research-related outsourcing. Currently, the IT industry, particularly software application development, has produced primary buyers for outsourcing.

Benefits of outsourcing R&D

Outsourcing R&D has “benefits beyond cost arbitration,” says Dr. Anurag. First, buyers want to tap into the databases available. He says external information agents have deep databases on specialized functions and industries, which makes the information retrieval cost-effective.

Outsourcing R&D also reduces turnaround time, because the company can focus on marketing and outreach while the outsourcer is collecting the specialized data. “These activities can run in parallel,” Dr. Anurag points out.

Indian providers like Wipro use PhD-trained subject matter experts. They have deep experience and honed R&D skills. “Indians have access to large talent pools of highly educated researchers,” Dr. Anurag notes.

Outsourcing R&D also “plays a vital role in global collaborative development skills of the provider’s and buyer’s employees he adds. They would learn how to communicate, engage and resolve to build relevant solutions in spite of distant geographies, varying cultures and thought processes. This also value adds individually in their global project management capabilities, he points out. They get exposed to a wide array of research tools, methodologies and best practices, which they can continue to use after the R&D project is complete.

What types of R&D projects are best suited for offshoring?

Dr. Anurag says research that has the following features is best suited for offshoring:

• Areas where the organization has a limited research history
• Areas where in-house research facilities are inadequate
• Areas where the outsourcer has wider access and expertise in third-party resources
• Topics that have information that only research brokers and information agents can access
• Topics where specialized resources are essential for best results
• Areas that have local innovation need and expertise
• Tasks that have a multi geography need as the outsourcer can optimally facilitate the distribution of tasks

Mitigating risks
The risk associated with outsourced R&D varies from solution to solution. In some it could be financial risk like part investment and recovery through market-linked payments. In others, it could be manufacturing risk like yield, etc.

Wipro has enablers such as CDMS (collaborative design, manufacturing and sustenance) and Silicon Prototyping services that provide a model to recover the risk the provider takes; the rewards can come from payments associated with the supply end of the service.

How a typical global delivery model works

Dr. Anurag says R&D outsourcing success occurs when the outsourcing provider “acts as an extendable R&D arm, getting involved right from product definition to actual product development.”

Typically, U.S.-based companies retain intellectual property rights when outsourcing R&D. Dr. Anurag says the organization holds all the technical information required for the research, giving the outsourcer access to confidential market data.

Together the partners design the goals of the research and its timeline. The outsourcing model they select should eliminate as much complexity as possible and encompass co-creation and innovation.

To simplify the model, both parties must analyze all characteristics that affect the research activity including the organization’s culture, customer demand requirements, competitor advantages and market characteristics.

For seamless collaboration, there must be appropriate knowledge transfer, experimentation, simulation situations, skill exchange, coaching and, most importantly communication. “These will ensure the bridging of any gaps,” explains the CTO.

A good incentive mechanism works to overcome any trust deficit between the two while giving both parties a sense of accountability to each other.

Selecting the proper partner

Wipro suggests enterprises use a global sourcing model (GSS) to evaluate the sourcing options available. The GSS identifies programs suitable for each specific R&D program and an appropriate outsourcing partner because its rigor asks the requisite questions regarding their capability, interest and intention.

Further, the outsourcing partner must have suitable enablers to foster collaborative research and development. For example, Dr. Anurag says companies “must have a strong technology partner network to gain insights into next generation technology and roadmaps.”

Why Wipro?

Wipro has successfully collaborated with numerous academic and industry research institutions and has its own Centers of Excellence that provide an apt research environment, Dr. Anurag adds. Wipro proactively invests in platforms to build expertise and enable customer innovation so customers can go to market with highly differentiated products. The goal is to provide outsourcing buyers with a first-mover competitive advantage or a preference in their customers’ mind, which also leads to higher top-line revenue growth. Some of the key investments include, setting up a product compliance and certification lab, called Tarang, building mobility research and development labs, being a member of multiple industry forums like OHA, Autosar and Continua etc. to enable co-innovations among others.

The bottom line

Outsourcing buyers who want to save money and have bright minds work on their project in centers of excellence or specialized labs should consider offering their R&D projects.

A weak rupee, for example, theoretically boosts the top line of Indian service providers while their clients see no benefit, and a stronger rupee should erode their margins. However, most providers each have their own complicated long-term currency hedging strategies in place, meaning some will fare better during currency fluctuations either way in the short term while others will take a hit. At the same time, Indian providers are spending an increasing amount in U.S. dollars to pay for growing operations stateside and must import software and hardware to run its operations on the subcontinent, both of which cost more when the rupee falls.

“The global recession created a volatile market for currencies,” says Ben Trowbridge, founder and CEO of outsourcing consultancy Alsbridge. “Understanding how to manage these risks is extremely challenging for companies as well as the providers.”

“Currency fluctuations may be less of an issue today because of the tendency to sign shorter deals,” says Helen Huntley, research vice president with Gartner. Neither outsourcing party is locked into inflexible contract pricing for seven to ten years the way they were in the past. “However,” continues Huntley, “we do know currency fluctuations can impact deal pricing.”

“Offshore outsourcing clients are beginning to incorporate currency risk clauses into their contracts,” Huntley says. There are several options for addressing the issue of foreign exchange rates in an outsourcing deal.

The least risky is a currency risk-sharing clause. Such a term ensures that neither the customer nor the supplier is advantaged or disadvantaged as a result of vacillating currency values during the course of the contract term, according to Huntley. The clause should provide a method for calculation—for example, the mid-point rates of the day before the invoicing date as published by Bloomberg. The provision further cites which party will be initially responsible for exchange rate variances—for example the service provider absorbs a plus or minus five percent shift in exchange rate variances, after which the client and service provider then share the variance equally. Such adjustments are usually made on a monthly basis, says Huntley.

Another option is to require the service provider to bear full currency risk. This option—the most common—is popular with smaller and less experienced outsourcing customers who lack the time or talent to hedge foreign exchange rate risk themselves. It’s also a good option for those who want to avoid the uncertainty of potential increases in prices due to exchange rate swings. Under such an arrangement, the provider signs the contract in fixed U.S. dollars regardless of currency value fluctuations. But such a provision comes at a price. “Typically, the provider will increase its price by some amount to cover future currency fluctuations or the costs of hedging the currency risk,” says Trowbridge. If the provider hasn’t built in a safety net, adverse swings in currency valuations could hit the customer in the form of decreased service levels.

At the other end of the spectrum, the client may assume foreign exchange risk. By accepting a contract priced in Indian rupees then converted to the U.S. dollar rate on the day of invoice, the client not only bears the downside risk of adverse exchange rate fluctuations in the form of increased service fees but also acquires potential upside benefits of any favorable changes in exchange rates in the form of lower prices. That’s a roll of the dice some sophisticated multinational clients are willing to make if they have in-house currency hedging and risk management expertise—and one that could be paying off this year.

The most extreme—and rare—exchange rate risk mitigation tactic is a contractual provision giving the customer the right to renegotiate or terminate the deal if the exchange rate shifts beyond a certain threshold. Service providers may be less likely to agree to such a clause because it exposes them to sudden, unavoidable revenue loss.

There is no one right way to address currency issues in an offshore services deal. But as with any aspect of an outsourcing relationship, the goal should be a workable outcome for both the customer and the provider. To figure out what mitigation strategy is best for a particular situation, Gartner advises analyzing historical currency fluctuations between your country and your providers’ countries to determine the potential impact of exchange rates during your contract term and involving internal finance or treasury departments in deciding what option will work best.

There’s little doubt that offshoring business process work can deliver cost savings for outsourcing customers and profits for business process outsourcing (BPO) providers. But can the BPO industry actually improve the lives of the poor and disadvantaged in developing economies?

That’s what a recent study, funded by the Rockefeller Foundation and conducted by business consultancy Monitor Group, sought to find out. And the answer is, in certain cases, yes.

The researchers examined what they called the field of “impact sourcing:” employing socioeconomically disadvantaged people in BPO centers around the globe. They found that such work not only gives the poor and vulnerable more access to opportunities but can also provide high-quality, reliable services at prices that are at least competitive with traditional BPO centers and, in some cases, nearly 40 percent lower than the average provider.

Mike Kubzansky, a partner in Monitor’s National Economic Development and Security practice, had been looking at a range of innovative market-based approaches to poverty—most specifically “impact investing,” in which enterprises not only deliver a commercial business case but also have a social impact—when it became clear that the global BPO industry could do just that.

The study focuses, to a large degree, on the nascent BPO industry in Africa, where the Rockefeller Foundation has a large presence and interest. But it also looked at the BPO industry in India and a host of other underserved communities in developed nations, said Kubzanksy, such as “U.K. operators doing this in economically depressed areas in London, or what Accenture does with Native American populations in South Dakota.”

To qualify as impact sourcing, the BPO work needs to provide a significant income increase to its employees over their alternatives. As a result, a significant amount of BPO activity in, say Bangalore, where providers hire college graduates with other opportunities available to them in those cities, did not factor into the impact sourcing picture.

Kubzansky found a wide variety of BPO providers having a potential impact on poverty and opportunity in the markets where they set up shop—from multinationals like IBM and Infosys to African and Asian start-ups, from rural locations in Kenya to urban centers in Haiti. According to Monitor’s working paper, Job Creation through Building the Field of Impact Sourcing, impact sourcing employees benefit not only from income increases between 40 and 200 percent, their BPO employment also increases family investment in health care and education.

The most mature market for impact sourcing is India, where such activity takes place in rural areas and second- and third-tier cities. “There’s a social impact but also a strong business case,” Kubsansky explains. “Wages are lower, skills are comparable, and churn rates are significantly lower. They have been able to hit that double bottom line.”

The two BPO work areas where impact sourcing is likely to occur today are lower-end data tasks (data processing and digitization) and lower-end voice work that requires local language skills.

The biggest issue for BPO providers working in the impact sourcing arena is training. “It’s a significant investment, and one of the things they worry about the most,” says Kubzanksy. “And the problem exists at two levels. First, there’s the employees themselves. Some will have innate smarts but may have never worked in a formal setting. The other issue is middle management. Can I get skilled people out in a rural area six hours outside of Calcutta? Can I get these people who started out with me as entry level analyst trained up for middle management?”

In some countries, such as South Africa, the government is helping to absorb the cost of training. Then the issue becomes generating demand. In most cases, these BPO providers start with smaller contracts for local work and must figure out how to scale. “We’re still very early in the game,” Kubzanky said, “and the issues are the same as for anyone new in the outsourcing space.”

They key to taking impact sourcing to the next level is to surmount those growth hurdles. The average outsourcing customer may not be willing to take a risk on a new location or provider, and their interest is on cost cutting and quality, not providing opportunity to workers in Luang Prabang, Laos or Lahore, Pakistan. Quite the contrary, most Western companies today avoid trumpeting the creation of jobs anywhere outside their home countries.

Kubzansky points to two potential solutions. One would be an increase in established BPO providers subcontracting to smaller impact sourcing players. “This needs to go on a lot more to help these guys access larger multinational clients,” said Kubzansky. “They will be more comfortable having a conversation with a Wipro who will give their Six Sigma guarantee on the work.” The other is a model embraced by Samasource, a San Francisco-based non-profit that acts as an intermediary to service providers in five countries, providing them a sophisticated marketing and sales front end. Samasource brands the BPO work and, once acquired, distributes it as “micro work” to its member companies. “They have someone who can be at the front end and speak to customers so the providers can focus on service delivery, training and employment,” Kubzansky said.

According to the study, impact sourcing accounts for $4.5 billion in business annually—just 3.8 percent of the global $119 billion BPO industry—and employs 144,000, but it has the potential to reach $20 billion and employ 780,000 by 2015.

For most existing BPO providers, including many of the upstart players in the impact sourcing field that the research examined, the social impact of offshore outsourcing is an afterthought, if it’s considered at all. But Kunzansky says that is fine. There has to be a business case beyond doing good for sustainable change in local communities or developing economies. And, for many players in the field, there is, from the value of a new lower cost location to access to new markets.

In part 1 he talked with Outsourcing Center’s Senior Editor about the challenges in what he called “outsourcing adulthood.” In this installment Idnani talks about pricing strategies, new trends, cloud computing and the continuing changes in globalization.

BER: Do you think the industry has matured enough so it can deliver on business outcomes rather than process metrics?
RI: Most buyers typically measure business outcomes. They rely on process metrics because that’s the only way they know how to measure effectiveness and it’s in their comfort zone. There is resistance to moving to business outcomes

We start by linking the process metrics to business outcomes. Then we ask them if they would like us to impact important business metrics. For instance, if we are running an order- to-cash process, we link our performance to a reduction in the days sales outstanding. Or find them more working capital. This is a start.

BER: Do you see buyers and service providers coming together to innovate and co-create value?
RI: I do see both buyers and service providers coming together to innovate and co-create value if they are in alignment from an expectation standpoint. Co-creation can arise through helping a client. For instance, we were working with a large client on the global data management side cutting across finished product, pricing and customer. Management of master data was in silos and there as lack of agreed roles and responsibilities. We were also missing data quality measures and procedures. Today, with a one touch master data environment, they are able to see performance indicators real time.

BER: Does the outsourcing partner’s wider expertise in a domain lead to a shift in the way clients look at problems and solutions?
RI: The service provider has to shift the discussion from core to context. Let me give you an example. Three years back buyers in the CPG industry thought processes like trade promotions were core to their business. Now they realize it is not providing a competitive advantage, so they are interested in outsourcing them. Another example is tail spend management with telco operators. We did a deal with one of the largest telco service providers in identifying saves in their tail spend. Then we talked to other telecom companies about this process. Having done it before with another telco operator shifted the discussion to what is possible with others in their peer group.

BER: Let’s talk about pricing. Is pricing an area that comes under relentless scrutiny year after year?
RI: What’s important here is the level of transparency in the relationship between the buyer and the service provider. Do they have an open dialogue about the relationship and is the relationship delivering continuous value? If not, pricing will become a discussion point.

BER: How has pricing changed in the industry?
RI: Buyers started off with head count-based pricing in the past. In the last few years, we have worked closely with our clients either providing them a transaction pricing model or linking our pricing to specific business outcomes. Bundled pricing for different components of the stack (application, process and infrastructure), gain share and higher skin in the game are some of the things that we have been working on closely with our clients.

BER: Is on-demand pricing sustainable and profitable for both parties in the long run?
RI: Yes, both sustainable and profitable. But that’s true only when a buyer offers a certain minimum threshold of volume. It works for the service provider if it can serve multiple clients on a platform.

BER: What are the important emerging trends that will impact the outsourcing industry?
RI: There are several:

• End-to-end processing. Service providers need to be able to take over a process from beginning to end which will require them to have multiple sites across the globe close to the client location in addition to offshore and near shore locations. This will also allow them to link their performance to specific business metrics
• Data privacy and security. These are crucial considerations particularly in sectors like financial services and healthcare
• Regulation.
• Emerging technologies like cloud

BER: Globalization is clearly here to stay. What are the new global trends?
RI: Five years back everything was predominantly in India. Today we have more service delivery locations outside India than in India. Our strategy is to always be on the edge of where are buyers are. Our goal is to deliver the same unified experience to our clients regardless of the location.

Five years back 95 percent of the offshored BPO work went to India. Today buyers distribute their work differently:

• 10 percent to a location on the edge of their domicile
• 20 percent to near shore locations
• 70 percent to low cost locations

BER: Cloud computing is all the rage. What is really happening and how do you advise your clients?
RI: Cloud will have an impact on what and how we deliver. Today, we are engaged in third party implementation of process solutions for clients on their clouds (e.g. enabling a business process solution on the clients’ clouds such as order-to-cash on the top of existing ERP). We are also providing cloud strategy and adoption and consulting and helping implement cloud migration services.

We are also leveraging the internal enterprise cloud for internal efficiencies and hardware rationalization. For example, we revamped 12 server rooms and released about 4,400 square feet of server room/lab space during the year. The instance utilization has increased to as high as 90 percent at any given time.

To sum up, cloud computing activity thus far covers three areas:

1. The use of cloud computing to open up new business models (BPO platforms)
2. The internal enterprise cloud to drive internal efficiencies and effect order-of-magnitude cost/capex reduction in-house
3. Third-party implementation of cloud-based applications for build-out of clients’
   clouds.

Debra Floyd, COO, Outsourcing Center; Colin T Blakey, Account Delivery Management – Carillion, Accenture Finance Solutions; Beth Ellyn Rosenthal, Senior Editor, Outsourcing Center

Outsourcing Excellence Award – Best Global Services: Carillion PLC and Accenture
Carillion PLC is a leading support services company. It operates in a highly competitive industry where achieving its margin targets demands a rigorous approach to controlling costs and delivering profitable growth. Carillion’s disparate processes and underlying systems were a potential obstacle to that growth.

Carillion, which last year had annual revenues totaling £5.1 billion, has been on a major business transformation journey with a number of significant acquisitions and major contract wins over the last five years. The company had an internal onshore shared services center that ran multiple legacy HR and finance systems. Craig Brebner, eXcel program director for Carillion, says that as part of our transformation program the initial thinking was to implement an ERP system to enable the business strategy and achieve three goals:

1. Reduce cost
2. Provide greater transparency
3. Enable rapid growth

But during the business case development, it became clear the best way of achieving those goals was through outsourcing, according to Brebner. “In addition to enabling us to streamline and standardize our processes, the outsourcing cost savings also allowed us to invest in the new ERP system. The business case was compelling,” he says.

On the BPO side, Carillion outsources both HR (from recruiting through learning) and F&A using Oracle as its preferred ERP platform. Also, under a separate agreement, Carillion outsources application and infrastructure management. Accenture provides these services globally from the UK, India and the Czech Republic.

After Carillion signed the contract in 2005, it more than tripled its size through organic growth and acquisitions, which Accenture helped Carillion rapidly integrate. The majority of the UK Carillion organization now operates on an integrated Oracle ERP solution.

Moving the work offshore

Accenture and Carillion worked together to optimize the process for offshoring roles. For example, the two companies adapted their model to incubate work in India until fully stabilized. Brebner says Carillion “managed the offshoring process closely and the two companies worked together on the change management aspects of the deal. We only committed to offshoring roles and releasing people when we were confident that we could maintain our service levels.”

Like any outsourcing contract, this has been a journey. “The Carillion and Accenture teams have worked well together. Over the course of the contract we have taken on higher-value activities such as financial accounting. This is a reflection of the work Accenture delivered and the confidence in the teams,” says Steve Marsh, Accenture’s outsourcing account deliver manager for the Carillion BPO contract.

Marsh, based in the UK, is the primary Accenture executive with whom Brebner interfaces. And then Marsh and his team of service leads handle all interactions with the offshore delivery centers. Each center has a specialty; for example, Mumbai is the center of excellence for HR, Chennai is the expert in F&A and Bangalore is the technology center. “Delivering from multiple sites allows us to provide a high level of expertise,” says Marsh.

Accenture uses the time zone difference to its advantage. For example, the Mumbai office receives the time sheets and starts the payroll. When they leave, the UK center is ready to finish the work.

The Mumbai contact center answers a large majority of the calls on the first contact, according to Marsh. But if the caller has a more complex situation, the call goes to the UK team. “There’s no language barrier and they have great knowledge of Carillion’s corporate terminology,” the Accenture executive continues.

Ease of integration as a result of the outsourcing arrangement has been fundamental to Carillion’s successful growth. When Carillion acquired Alfred McAlpine plc in 2008, it asked Accenture to integrate the business on a tight timeline. “Getting this completed on time was a key milestone in developing confidence in Accenture’s people and their approach to offshoring,” says Brebner.

Today, Brebner says “all our offshoring locations are invisible to users. Most people at Carillion really don’t care where the service is coming from as long as it is on time and right the first time.”

Accenture’s services

Currently Accenture:

• Generates more than 350,000 paychecks annually. The service provider runs five different pay frequencies that include 15 different payrolls
• Administers 45,000 HR transactions annually across recruitment, benefits and employee lifecycle services
• Processes more than 360,000 supplier invoices, fuel cards and employee expense claims annually
• Completed 26,000 balance sheet reconciliations across 60 legal entities last year

The outsourcing agreement also has financial incentives. The two companies have a 50-50 gain/pain sharing arrangement depending on whether the actual costs fall above or below the baseline targets.

Carillion found Accenture’s value proposition “compelling.” Leadership liked the fact that Accenture “was willing to put skin in the game.” Brebner says Carillion executives felt they “could work effectively with the people we met and that the two organizations could work well culturally.”

Business results

Business results include:

• Produced a standardized set of processes and underlying systems. “Standardization allows us to more rapidly integrate new acquisitions, mobilize new contracts, transform business processes and reduce back office costs,” says Brebner. “This is an imperative to support Carillion’s growth agenda.”
• Provided a cost-effective means to finance the business transformation.
• Reduced cost by an average of 30 percent thanks to offshoring.
• Helped executives make better business decisions because of better knowledge. “We now have the ability to see rapidly across the company,” says Brebner.

“Outsourcing our finance and HR together with the implementation of an Oracle ERP platform has been an enabler of our business strategy. This allowed us to concentrate on what we are good at while Accenture focuses on running and optimizing these processes. We now are much closer to one version of the HR truth. It is debatable whether we would have been able to grow and change as rapidly without making this outsourcing work,” concludes Brebner.

L to R: Debra Floyd, COO, Outsourcing Center; Brain Duffy, Director of Sales and Service, Barclaycard US; Jeff Brown, VP – BFSI Operations, Firstsource; Linda Tuck Chapman, President, ONTALA

Outsourcing Excellence Award — Most Collaborative: Barclaycard US and Firstsource
“We are getting results that exceed our plan. By the end of the first year, performance of our former employees who are now on the Firstsource team was at or above what it was when we initiated the transition.”
Brian Duffy, head of service and sales, Barclaycard US

Criteria: The parties build an environment for collaborating on solutions and opportunities to produce win-win outcomes for the customer. This collaborative environment must be constant and not just when there’s a problem to solve.

Barclaycard US, the payments business of Barclays in the United States, issues American Express, Visa and MasterCard products through marketing partnerships with companies such as US Airways, Apple and the NFL. To handle its exponential growth, Barclaycard opened its own call center in Colorado for sales, service, collections and marketing in 2006. Eighteen months later “we realized that for this particular set of responsibilities, we would benefit from leveraging a partner,” says Brian Duffy, head of sales and service, commercial management, Barclaycard US.

The business sought to reduce its expense so it could provide more value to customers. The bank looked at offshoring. “We thought it would be best to go to market, sell the assets, re-badge the employees and buy back the hours. We saw this as a win-win for both parties,” recalls the Barclaycard executive.

At that time India-based Firstsource was looking to expand its presence in the United States. The two companies began their collaboration in 2008.

Collaboration and trust

Firstsource wanted to expand its presence in the Philippines; Barclaycard agreed to be its first voice client there. Based on its experience, Barclaycard knew its provider would be able to deliver the kind of service that would please customers.

On the business side, Firstsource allowed Barclaycard to restructure the agreement so it could count hours used in the Philippines for hours contracted in Colorado. As a result, Barclaycard funded less for the service because Firstsource’s operating platform in the Philippines is cost-efficient. Shifting more business to this location benefited Firstsource as well. The partners call this a “creative win-win.”

Collaborating on offshoring labor issues

Barclaycard says that when it faces staffing issues and needs access to service personnel quickly, it is able to rely on Firstsource. “We find that Firstsource aggressively puts together action plans and pulls levers necessary to address our challenges,” the head of sales and service says.

For example, Firstsource originally had difficulty in the first 90 days training and retaining representatives for the Manila center. “It’s a very competitive marketplace for employees,” Jeff Brown, vice president, operations for Firstsource, reports. Barclaycard executives met with Firstsource’s global COO to discuss the problem and come up with a solution.

The partners worked together to understand why people were leaving and what they had to do to retain them. “We addressed all compensation, benefit programs and employee satisfaction issues,” says Brown.

Firstsource discovered its salaries were below market, so it adjusted salaries accordingly. “They took it upon themselves to adjust salaries because it was the right thing to do to get the end result that we needed. They ignored their original target margin and took the right steps to ensure the program would be successful with the end user – the customer – in mind,” says Duffy.

This collaborative approach helped when Barclaycard reevaluated its approach to outsourcing debt recovery work, of which Firstsource had provided a share since 2009. The partners mutually agreed to move the business. Firstsource worked with Barclaycard to create a plan to compensate for the lost business that worked for both partners.

Barclaycard was also helpful when Firstsource wasn’t using all its space in the Colorado call center. The service provider was able to sublet unused office space in the Colorado location without compromising the quality or reliability of its services for the client.

Why this relationship works

Brown says the relationship’s success is based on a disciplined approach to understanding customer needs, tracking performance, making adjustments and delivering.

This discipline includes formal structure such as a governance calendar, “which ensures the right people are talking about the right things at the right time,” Brown explains. The partners communicate frequently and transparently to ensure they understand the objectives and challenges of both businesses.

Brown adds Firstsource takes the time to deeply understand the credit card business. “I spend a lot of time studying what Barclaycard’s competitors are doing,” he says. At the same time, he knows the bank is learning about what’s happening in the outsourcing world, especially the technology segment. “This allows us to make a deeper impact together,” says Brown.

The Barclaycard executive says Firstsource’s flexibility and collaborative spirit are key reasons for success of the partnership. “We operate in a rapidly changing marketplace. Credit card regulations have changed as did economic conditions over the past few years. We’ve changed our business model appropriately over the last three years. Firstsource is willing to make those changes with us,” Anderson says.

Brown says Firstsource is willing to make those changes because “we base our business on long-term relationships.”

“From the beginning, you couldn’t separate what we did from what they were doing,” says Duffy, adding there has always been open and transparent dialogue between Firstsource and Barclaycard. “They return our calls within two hours.”

”We offer partnership cards with more than 40 different retailers, travel providers and financial institutions,” Duffy says. “So we understand what makes a good partnership between two different businesses.”

In order to meet these needs, Allegis Group Services provides three distinct service offerings that can be delivered individually or in combination to meet every human capital or workforce management need that your company may have. Each service is comprehensive and fully customizable to align with your goals for a world-class workforce that is built to lead your company into a successful future.

Allegis Group Services’ Workforce Management Solutions help companies manage the entire spectrum of processes and systems that requisition, procure, manage and pay a contingent workforce and staffing supplier community. Our solutions encompass more than just the automation of these processes through a technology system. They include the entire solution design, process optimization, active cost management, reporting analytics, performance management, overall program oversight and sharing of best practices from the other highly successful programs we design and manage.

Service Lines

RPO – Recruitment Solutions from Allegis Group Services. Allegis Group Services has succeeded with world-class organizations by providing flexible solutions that significantly impact their recruitment function with results. Our recruiting culture and passion to succeed on every assignment is unparalleled in the industry and always assures that our client’s goals are achieved.

Executive Search and Management Recruiting from InSearch Worldwide. InSearch Worldwide has built a Management Recruiting solution on 20+ years in the executive search industry. Our solution is designed to meet each customer’s need for either senior-level professionals or individuals with qualifications that are difficult to identify in the marketplace. When you choose InSearch Worldwide for your executive search needs, you’re working with a team with specialized expertise in the following:

• Attracting pivotal talent on a global basis
• Actively sourcing passive job seekers
• Providing a positive candidate experience
• Recruiting across major functions (HR, Technology, Marketing, Operations, Legal, Finance, etc.)

Distinctive Capabilities

Allegis Group Services^® Inc., an operating company of Allegis Group^® Inc., provides human capital and workforce management solutions to customers in a wide range of industries across the globe. Our offerings include Managed Services (MSP), Recruitment Process Outsourcing (RPO), Executive Search and Consulting Services.

Whether you’re looking to optimize the use of your contingent workforce program, outsource your organization’s recruitment needs or want to analyze key market trends to better serve your business needs, Allegis Group Services can help. Through distinct service offerings, we employ industry best practices and our experience to assist our customers in maximizing the efficiency and effectiveness of their workforce programs.

Allegis Group Services at a Glance

• Year founded: 2001
• Revenues: AG 2010 revenue- $6.4B
• Employees: 524
• Service lines: RPO, MSP, Executive Search, Consulting Services
• Headquarters location: Hanover, Maryland
• Locations of global delivery centers (active on six continents): London, Toronto, Frankfurt, Bangalore, Beijing

For More Information

Telephone: 877-247-4426
www.allegisgroupservices.com

Awards and Recognitions

• GM Supplier of the Year ‐ 2011 (GM Award Video)
• Microsoft Premier Vendor Status ‐ 2010
• Rockwell Collins Presidents Award ‐ 2009

Mountain View, Calif,-based Global Upside, Inc. provides services with a U.S. team in California and Florida serving as the customer service contacts while highly educated U.S. GAAP-trained professionals in India perform the assigned tasks overnight with measurable accuracy and a cost savings of 40 percent or more. The one-year contracts are flexible, with monthly fixed fees based on a per-hour rate.

Global Upside’s model is particularly beneficial and affordable for small companies and startups that have difficulty scaling their resources up and down to meet fluctuating needs as their business grows and for companies that are hesitant to outsource.

That was the situation online music subscription service Rhapsody International, Inc. faced when RealNetworks spun it out as an independent company in March 2010. Rhapsody is an online on-demand digital music service serving more than 750,000 subscribers in the United States. RealNetworks previously handled the accounting, and Rhapsody suddenly had a short time line – one month – for building an accounting organization from scratch.

But Michael McGinn, Rhapsody’s VP of Finance, decided it made more sense to outsource to an expert with the resources to quickly ramp up for implementation and then scale back later, if necessary.

McGinn recalls, “If we had built the accounting organization ourselves instead of outsourcing, we would have over-hired or under-hired. We were guessing how much staff we would need. In retrospect, we underestimated and would have found ourselves in a tough situation – either stretching the folks to an extent of their not being reliable or having to hire additional staff. So Global Upside’s ability to flex their workforce to meet our needs has been terrific.”

The cost picture was also a strong draw for outsourcing, McGinn says, “The savings from the outsourcing funded an additional full-time person with analytical capabilities for our business, which was a nice win for us.”

McGinn soon recognized two other benefits. “Because they are overseas, we interact largely through e-mail. It forces us to be much clearer and more disciplined in both our communications and our procedures. And it prevents a marketing person from walking down the hall with an invoice and asking somebody to put it in a drawer for a couple of weeks because they don’t want to pay it yet. There’s a much more systematic process that is very good for internal controls.”

The 12-hour difference in time zones is also a benefit. During a financial audit, the auditor can request information by mid-afternoon and Global Upside in India has the information ready in Seattle the next morning.

Rhapsody now has a controller and one accounting clerk on site; the resources doing all the transaction accounting are in India. Rhapsody retained responsibility for closing the books, financial reporting, and writing and mailing checks.

Customer service issues when outsourcing offshore

The RealNetworks controller recommended Global Upside, but McGinn was hesitant at first to outsource. “The idea of handing over the keys, so to speak, to a team of folks that are halfway around the world is something you have to think through to understand the operational implications,” he says. Bhargava and McGinn talked through the issues until McGinn was comfortable.

When issues arise, communication is not a problem even though the people doing the work are 12 hours away. Global Upside’s clients can call customer service – which is totally based in Florida and California – during the daytime, and they coordinate the issues with the resources in various geographies. This is a differentiation from many larger BPO providers that usually accommodate only a two-hour overlap for real-time communications.

Global Upside’s customer service approach is one-on-one relationships rather than a call center, and the customer service contact person knows a client’s business. “Honestly, I don’t know if I would have been comfortable with going down the outsourcing path if not for that. Having a local U.S. presence as a bridge between here and India has been great,” says McGinn.

Global Upside’s customer service reps also went to RealNetworks to help with the procedures-gathering activities in the transition. The transition included the challenge of moving from the prior Oracle-based accounting system at RealNetworks to Rhapsody’s new Microsoft Dynamics (Great Plains) system, which involved re-doing the account structures.

In addition to the approach to customer service, Bhargava points out another difference between Global Upside and larger BPO providers. He says his company is happy to accommodate the needs of smaller companies, startups and companies that are new to outsourcing and hesitant to outsource more than one function at first.

Industry complexities in F&A are a driver for outsourcing

The trend of shifting from in-house to outsourced F&A services is not entirely due to the need to reduce costs. F&A is becoming increasingly complex. Companies that decide to outsource their F&A work are looking for value – not just a company to do transactions but a service provider with a high level of expertise in all functions, regulatory compliance and across global operations.

Royalty complexities. In the music business, for instance, the process of managing the royalties due to rights holders is complex.

There are a number of different rights holders (to the sound recording, the musical composition, etc.), and Rhapsody has agreements with hundreds of rights holders. McGinn explains that at the end of each month Rhapsody must process the royalties to the rights holders for every piece of music Rhapsody played for its online customers. “We have a massive computer system that calculates the royalties we owe to the various rights holders and churns out reports that we need to provide to them and then make the appropriate payments,” he says.

Revenue-recognition complexities. Bhargava cites another example of F&A complexities, this one centering on clients in the high-tech industry. “Revenue recognition is a really complex issue for software companies. With sales occurring through indirect channels, a software firm may lack control over the accuracy and timeliness of information. Also, revenue-recognition rules and when to record revenue differ among US GAAP and international accounting standards.”

The Software-as-a-Service, on-demand, and cloud-computing models increase the complexities of revenue recognition. Stock compensation is another challenge that impacts software companies.

Investors, along with auditors and regulators, focus on revenue, as it’s often the source of errors that leads to a need for revenue restatements. For public companies, this information is also important to their customers. Fiscal-year revenue restatements are a time-consuming, labor-intensive activity; and most companies lack the resources to handle this in house. For example, Global Upside recently conducted a revenue restatement for a company that required reviewing 8,000 contracts.

Globalization complexities. It’s not unusual, even for small and midsize companies, to have operations in several geographies. For their payroll function alone, they need resources to convert compensation in U.S. dollars to local currencies – sometimes in more than 15 countries.

Bhargava says startups and smaller companies sometimes have only a nominal understanding of global business issues such as the differing requirements for licenses to operate in various geographies. Taxes and regulatory compliance are also complex in global operations.

Tips for F&A service provider selection criteria

Smaller U.S.-based F&A outsourcing providers such as Global Upside can bring the same level of resources and expertise as larger BPO providers. Beyond the expertise and global resources, buyers should include the following factors in their provider-selection criteria:

• Proven track record of protecting data confidentiality. The provider should also conduct regular, ongoing training of employees regarding confidentiality.
• Demonstration of responsiveness in customer service issues with the provider’s other clients. Services should happen like clockwork; but where issues arise, the provider’s customer service team must have a proven track record of quickly and effectively resolving issues.
• The provider should not be a signer on the client’s bank account; it should not be able to touch its clients’ cash.
• Although some smaller companies in various industries rely on their outsourcing partner to provide an individual who takes on the role of CFO, this practice could jeopardize the buyer’s business or the provider’s business. The best practice is for both parties to understand the level of trust necessary and to recruit someone external to the provider’s company.
• Measurable accuracy at a level of 99 percent or better.
• The provider’s staff should hire only degreed accountants, and they should also have several years of experience before joining the provider’s firm. Even so, people make errors. Select a provider that ensures all of its work is reviewed on a daily basis by chartered accountants.

As the second largest BPO company based out of India, WNS “extends the enterprise” of some of the world’s best brands. WNS provides industry-focused and cross-industry solutions in key industry verticals that include Travel, Insurance, Banking and Financial Services, Manufacturing, Retail and Consumer Packaged Goods, Shipping and Logistics, Healthcare and Utilities. WNS delivers an entire spectrum of business process outsourcing such as finance and accounting, customer care, technology solutions, research and analytics and industry-specific back-office and front-office processes. We offer decision-support services through our Research and Analytics capabilities. Our Business Transformation Outsourcing enables the client organization to outperform as a highly efficient, productive and dynamic organization.

We enable clients to outperform with our passion for service and innovation. Clients benefit from our global delivery network and a comprehensive outsourcing services offering. Deep industry knowledge and expertise, a partnership approach, comprehensive service offerings and a proven track record enable us to deliver business value to many of the world’s leading companies. We are passionate about building an organization that is valued by our clients, employees, business partners, investors and the community at large. Our management team comprises accomplished professionals from leading global organizations. Each member brings deep business acumen and outsourcing domain expertise, ensuring a strong growth curve.

Service Lines

Banking and Financial Services – WNS has end-to-end capabilities in the banking and financial processes. We support diverse segments, including banking, asset management and brokerage. To offer a glimpse of our services across the value chain in a year, we process over five million checks, manage over one million customer and broker calls, and process more than three million back-office transactions. Our resources are certified professionals in public accounts, underwriting and SAS programming. WNS offers a proprietary software for lending management called Digital LoanTM.

Insurance Services – WNS offers end-to-end solutions across the entire spectrum of life, property and casualty, and health insurance processes. The quantum of our operations across the value chain is significant. In a year, we process over 20 million claims transactions, handle over one million customer transactions and over two-and-half million calls, and perform over 250,000 life and pensions transactions. Our resources in insurance are trained professionals with AICPCU (IIA) /IF-1 of CII / CPA / CFP and AAPC certifications. WNS offers clients its proprietary auto-claims management software, ProClaimTM.

Travel and Leisure Services – With over 30 clients in airlines, travel agencies and GDS providers, WNS has a deep understanding of the Travel and Leisure industry. Our services across the value chain include over 140 processes, many of which are end to end. WNS manages in a year over eight million customer interactions, 20 million flight coupons, five million passenger requests and cargo operations for 1,900 flights. Our resources are IATA and UFTA certified.

Finance and Accounting – WNS has a comprehensive service offering that supports end-to-end functions in a Chief Finance Officer’s office. In a year, WNS manages over 62 million transactions with a value of over USD 70 billion, delivers transactional to high-end F&A and supports transactions in over 25 major global currencies and multiple ERP applications. We have been consistently delivering over 40 percent annual savings to our clients and taking our relationships further through continuous process improvements and service levels. Our resources are CA / CIMA / CPA qualified. WNS has a global partnership with CIMA.

Research and Analytics – WNS has a rich pool of domain consultants who offer knowledge-intensive services that support executive decision-making. Our 1,500+ analysts with advanced qualifications, such as MBA, Chartered Accountancy and PhD (statistics), and service more than 45 clients in the United States and Europe. Our KPO services are spread across industry verticals such as CPG and Retail, Financial Services, Media and Entertainment, Professional Services and Emerging Verticals. The high-business-impact WNS KPO solutions come with multilingual capabilities.

Contact Center – As part of WNS Customer Care Outsourcing, our contact centers handle 20 million calls, two million e-mails and one million white mail in a year. The calls range from query handling to rules-based response and judgment-based decision-making. The WNS contact center handles scripted and unscripted calls, with an average handling time of eight minutes for unscripted calls. We run 35 different voice processes with 95 percent inbound calls and five percent outbound calls.

Legal Services – WNS offers legal processing outsourcing to clients that include the UK’s leading conveyancing law firms, personal injury litigators and global insurers. We have a resource base of over 400 skilled lawyers, legal graduates, paralegals and case handlers. We manage robust data and inbound/ outbound voice processes. Our service offering includes property law, personal injury claims, law firm back-office operations and corporate legal support services.

Transformation Solutions – WNS Transformation Solutions are geared towards aiding organizations to achieve sustainable business transformation through operational excellence. The three-pronged strategy includes operational transformation by leveraging our global operations with lower-cost operating models, process reengineering, benchmarking and best practices, and domain and technology innovations; sustainable change where we architect a transformation vision and road map that incorporates organizational change and enables the realization of sustainable business results; and actionable insights that leverage the WNS strength in analytics to drive direct business impact. Our service offerings include consulting and program management services, process and quality services and technology services.

Emerging Businesses – WNS has over the years effectively tapped into the emerging business opportunities in sectors such as Shipping and Logistics, Healthcare, Retail and Consumer Packaged Goods, Manufacturing and Utilities. Across the value chain, we process over two million customer transactions and manage payrolls for over 200,000 retail employees annually. WNS clients include several Fortune 500 companies.

Distinctive Capabilities

The WNS key differentiators “extend the enterprise” of our clients and are geared to help businesses outperform. The following distinctive values power each client relationship that WNS builds:

• Business Transformation: WNS recognizes the need for outsourcing to drive strategic change in an organization and create business value year-on-year. WNS looks beyond delivering operational efficiency, service level agreements and lowering costs and transforms the client’s business.
• Partnership Approach: WNS works seamlessly with clients through complete alignment of interests. We structure financial models that best respond to the stage of the relationship – transition, stabilization, continuous improvement – and our clients’ goals for the relationship.
• Deep Domain Expertise: Outsourcing services impact business performance when they are combined with industry intimacy. Our strong capabilities in each industry vertical we operate in, coupled with our endeavor to constantly upgrade the skills of our employees, ensure we deliver service with a distinctive edge.
• Global Delivery Capability: We offer global delivery capabilities to support our clients’ global enterprises. The WNS Global Delivery Network gives clients access to a scalable and flexible infrastructure with the desired skills, services, cultural alignment and language capabilities at the right price at onshore, nearshore or offshore centers.

WNS at a Glance

• Year founded: 1996
• Revenues: USD 616 million (2011)
• Employees: 21,000+ (2011)
• Service lines: Banking and Financial Services, Travel and Leisure Services, Insurance Services, Finance and Accounting, Research and Analytics, Contact Center, Legal Services, Transformation Solutions, Emerging Businesses
• Headquarters location: Mumbai, India
• Locations of global delivery centers: 23 delivery centers across India, USA, UK, Australia, Costa Rica, the Philippines, Romania, Sri Lanka and UAE

For More Information

Corporate Offices Telephone Nos.:

• Mumbai: +91 22 4095 2100
• New York: +1 212 599 6960
• London: +44 207 440 0800

Fax Nos.:

• Mumbai: + 91 22 2518 8307
• New York: +1 212 599 6962
• London: +44 207 440 0808

E-mail: info@wns.com

www.wns.com

Certifications

• ISO 9001:2008 – Bureau Veritas Certification, Moody’s International
• ISO 14000 – Bureau Veritas Certification
• ISO 27001:2005- British Standards Institute
• PCI DSS – Control Case
• SAS70 – Type II Attestation by Ernst & Young

Awards and Recognitions

BPO Leadership:

• Dual Recognition at the BPO Excellence Awards 2010-11
• Best New Outsourced Services Delivery by Shared Services & Outsourcing Network (2010)
• Best New BPO Locator of The Year by Business Process Association of Philippines (2010)
• Industry-specific multi-year winner – IAOP Global Outsourcing 100 (2010)
• Special Award at the NASSCOM Corporate Awards for Excellence in Gender Inclusivity in the Best BPO

Company category (2010)

• Dian Masalanta Award of the Year for being a dynamic new partner of the National Voluntary Blood Services Program by Govt. of the Philippines (2010)
• Best New Outsourced Services Award by SSON (2009)
• Among the Top 3 BPO Companies in India for six consecutive years (NASSCOM)
• Among the Top Ten BPO Companies to Work for in India (Business Today)

Domain Leadership:

• In the Top Five FAO Market Star Performer for the second consecutive year by Everest Group (2010 / 2011)

Quality and Technology Leadership:

• Golden Peacock National Quality Award for Overall Business Excellence and Quality Standards (2011)
• IDG Media CIO 100 Special Category Award in recognition of WNS’s Infosec architecture and implementations (2010)
• NetApp Enterprise Innovation Award (2010)
• Maharashtra State IT Award (2010)
• Best Project Achievement in Green Six Sigma Award at WCBF, USA (2009)
• Golden Peacock Eco-Innovation Award for Green Lean Sigma Program by The World Environment Foundation in association with the Institute of Directors (2009)

Case Studies:

• How WNS increased conversion rate by 50 percent for Travelocity’s inbound offline sales:
  http://www.wns.com/Resources/Case-Studies/Case-Studies-Detail/entryid/3.aspx
• Finance and Accounting: End-to-end consolidation of the order-to-cash cycle for a global air delivery and freight services provider:
  http://www.wns.com/Resources/Case-Studies/Case-Studies-Detail/entryid/30.aspx