Graham and Doddsville - Issue 1 - Winter 2006 (1).pdf
Future Of Outsourcing
1. The Future of Outsourcing
- What to Expect in 2010 -
Sales Leader Series – TeleBriefing #7
November 19, 2009
2. Sales Leader Series – Fall 2009
Escaping Pipeline Purgatory - view Sept, 17 2009
Creating Qualified Opportunities (Not Just Leads) - view September 24, 2009
Sales Readiness for 2010 –view October 1, 2009
2.0 Sales Tools for the Real World - view October 19, 2009
Outsourcing Buyers Panel: “Why We (Really) Buy” - view October 27, 2009
Sales Leaders Dream Team - view November 5, 2009
Future of Outsourcing – What to Expect in 2010 - view November 19, 2009
The Outsourcing Institute / 3forward
All Rights Reserved 1
3. Sales Leader Series: Hosts and Sponsors
Dan Hudson Frank Casale Matt Smith
President, Co-Founder CEO and Founder, EVP, Co-Founder
3forward The Outsourcing Institute 3forward
The Outsourcing Institute / 3forward
All Rights Reserved 2
4. Guest Panelist
John Willmott
CEO, NelsonHall
john.willmott@nelson-hall.com
The Outsourcing Institute / 3forward
All Rights Reserved 3
5. State of the Outsourcing Marketplace
John Willmott
NelsonHall
Copyright 2009 NelsonHall
4
6. Contents
• Role of BPO in a Recessionary Climate
• The Good, the Bad, and the Ugly
• Conclusions
Copyright 2009 NelsonHall
5
7. Role of BPO in a
Recessionary Climate
Copyright 2009 NelsonHall
6
8. Seasonally Adjusted BPO TCV Up 25% in Q3,
recovering from dramatic fall in Q1 – shows
emergence of recession-driven contracts Key
Business Process
Outsourcing
Global Outsourcing Contract Value
Average 2002-2008
6
-15%
($Bn)
-40%
4 +25%
5.1 5.1
4.6
2 4.3
3.7
3.1
Q3 2009 Q2 2009 Q1 2009
Copyright 2009 NelsonHall
John.willmott@nelson-hall.com 7
9. Impact of Recession on
Sourcing in 2009 and 2010
Action in response to recession Taken in 12- Planned for
months to Q3 Q4 2009 and
2009 (%) 2010 (%)
Significant review of business strategy 54 21
Revision of operational budgets 71 15
Organizational restructuring and lay-offs 44 21
Revision of sourcing strategy 34 16
Review and renegotiation of existing BPO 43 20
contracts
Identification of new BPO opportunities 25 25
Preparation of RFPs for new BPO opportunities 15 48
Award of new BPO contracts 8 37
Copyright 2009 NelsonHall
8
10. Organizational Priorities in a
Recession
• First priority is to cut cost-to-serve in core
operations
• Second priority is to retain and maximize
value of existing clients
• Third priority is to enter emerging markets
more quickly
• Compliance, risk management, and certainty
of outcome are critical
• Investment is severely constrained
Copyright 2009 NelsonHall 9
11. Required Outsourcing
Contract Characteristics
• Greater certainty of business case
• Rapid pay-back achieving year-one cost
savings
• Focus on removing cost from high-volume
transaction-oriented processes
• Shift in risk in timing and certainty of cost
reduction in favor of client
• Shift in pricing mechanisms to move volume
risk to suppliers
• Potential increase in contract scope
Copyright 2009 NelsonHall 10
12. The Good, the Bad, and the
Ugly
Copyright 2009 NelsonHall
11
13. Realizing Business Value
Risk Factors What works
• Cost reduction based on • Labor arbitrage
major IT platform • Continuous
change improvement/six-sigma
• IT-centricity • Improved agent
• Extensive subcontracting management
• Taking on scope beyond • Interfacing with client
supplier cost levers systems
• Using the wrong • Channel shift
location/channel • Technology fixes
• Client abdicating • Limited scope platform
responsibility BPO
• Leaving service • Operational focus
unchanged • Strong client management
Copyright 2009 NelsonHall 12
14. Philips Case Study
• Strategy
– Salary arbitrage (1)
– Process improvement savings (2)
• Issues
– Need for increased automation
– Improving organizational agility
– Sustainability/what’s the value proposition to staff?
• Actions
– Development of transformation roadmap
– Tool for measuring error rates and timecycles
– Moving global hubs to India and China
– Leverage technology: PTP platform, general ledger cockpit,
OCR, electronic invoicing…..
Copyright 2009 NelsonHall
13
15. Key Lessons: BPO Service
Management
• Day-to-day operational management is the
key requirement
• Be process-led and aim to standardize but
continuous improvement is arguably more
important than major change
• Start with the possible not the impossible
• It takes time to stabilize operations & to
change operations
• Offshore services take time to introduce within
complex multi-service contracts
Copyright 2009 NelsonHall
14
16. Drivers of Reduced Total Cost
per Policy
Ratio of supervisors
to personnel
Ratio of managers to
Cost impact
personnel
Proportion of
customer files in
image format
Copyright 2009 NelsonHall
15
17. Impact of Staff Turnover
50
45
40
35
• Low staff turnover often
regarded as an end in itself
30
Cost
25
• But needs to be:
20
– The right staff
15
– Creative tension
10
5
0
<12% 15% to 20% >25%
Staff turnover
Copyright 2009 NelsonHall
16
18. Key Lessons: Use of Technology
• Be pragmatic. A single platform is not always
necessary or appropriate
• Do not under-estimate the complexity
embedded in legacy platforms and processes
• Systems integration projects are still late and
over-budget, even within BPO contracts
• Channel change means changing customer
behavior as well as technology
• Technology is only part of the answer. People
management is ultimately more important
Copyright 2009 NelsonHall
17
19. Use of Tools/Technology
• Digitization & Workflow
– Scanning, automatic queuing, work distribution &
agent management
• Specialist applications
– Auto cash application
– Invoice duplication avoidance tool
– Online payments
– Collections tools
– Collaborative dispute resolution
• Self-service
Copyright 2009 NelsonHall
18
20. Planned IT & BPO Initiatives
Initiative High Extent (%)
Greater use of standard software 50
packages without further customization
Simplification of business processes 47
Use of cloud computing/standard supplier 40
managed IT infrastructure
Use of BPO services based on supplier 27
hosted software
SaaS (hosted software using supplier 23
best practice)
Copyright 2009 NelsonHall
19
21. Future of BPO lies in Combination of
Inward-Out and Surround-the-Core
Non-core
functions
Core
Process
functions
improvement
- Client systems
- Labor arbitrage
- Channel optimization
- Technology “gap fillers”
- Platform BPO
- Labor arbitrage
Copyright 2009 NelsonHall
20
22. Increasing Optimization of
Channels and Delivery Locations
Channel Role
IVR Routing (customer and company controlled) and presenting
options; simple transactions
Web Self-Service Obtaining information; changing static info; simple purchases
Email and chat Technical support and problem-solving
SMS Outbound notification
Agents
- India Low cost; technical support; back-office; analytical
- Philippines Low cost customer service with increased cultural acceptance
- Onshore Ability to retain, cross-sell & up-sell
- Onshore WAHA Graduate-level; domain-specific capability to retain, cross-sell
& up-sell
Copyright 2009 NelsonHall 21
23. Key Lessons: Partnership
• Work towards common goals, not hidden client or
vendor goals
• Improve strategy alignment
• Challenge one another to achieve best solution e.g.
imaging paper vs. moving to Internet
• Vendor should disclose cost & profitability forecasts as
well as current costs & margins
• Introduce lean sigma to improve service quality and
staff motivation
• New services will emphasize partnership aspects more
than cost reduction
• Formalize innovation and consider use of “innovation
budgets”
Copyright 2009 NelsonHall
22
24. Impact of Outsourcing on Application
of Business-Oriented Metrics
How does outsourcing help
Role of Business- High- High in business-oriented
Oriented Metrics effectiveness
in-house (%)
effectiveness
outsourced
metric application?
(%) • More reliable/consistent
metrics
Improving • Easier access to
metrics/improved techniques
service 47 84 for data gathering
delivery • Increased standardization of
Improving processes
business • Improved knowledge of how to
24 54 use information to drive
value change
achievement • Separation of management
from implementation
Copyright 2009 NelsonHall
23
25. Timing of Introduction of
Business-Oriented Pricing
Proportion Why establish initially?
Stage
(%) • To establish good
knowledge of operations
Initially 13 at this stage
• To reduce the time
Once costs & involved in setting
service levels 81 metrics and SLAs
established
• To increase speed of
process transformation
Never 6
Copyright 2009 NelsonHall
24
26. Conclusions
• Business value realization has three
components:
– Cost reduction and SLA compliance
– Ongoing contribution to process improvement
– Support for wider business objectives
• Core functions remain dependent on labor
arbitrage, process improvement, channel
optimization and technology tools
• Non-core functions increasingly susceptible to
platform BPO
• Client needs to participate proactively
Copyright 2009 NelsonHall 25
27. TAKING OI ON THE ROAD… Outsourcing 2.0: From Theory to Reality
Are you still doing it the old fashioned way?
London, Dallas, San Francisco, Miami, Washington DC, New York, Chicago
Outsourcing 2.0 - the new outsourcing and what it means to you - your
strategy, your process and your career. More Cities coming soon…
Check out www.outsourcing.com/roadshow
With the largest outsourcing network in the world and the
most trafficked outsourcing portal on the internet at
Outsourcing.com, OI is the go-to-source for those seeking
targeted sales and marketing traction and ROI in the
outsourcing space.
If you need:
- Qualified Outsourcing Leads,
- Exposure to outsourcing decision-makers
- Thought Leadership opportunities
Contact Jared Gleason at 516-279-6850 x712 or
e-mail jgleason@outsourcing.com to request an
2009 The Outsourcing Institute overview summary on promotional vehicles.
28. 3forward’s Sales Transformation ModelTM
Sales 2.0 Design and Deployment
Social Media
& Networks
Lead Generation and Management
Outbound
Events &
Broadcasts
Messages Sales Readiness Essentials
Executive
Appointment
Setting
Markets Targets Messages
Research & Intelligent
Surveillance Nurturing
To Discuss: Dan.Hudson@3forward.net
3forward, LLC; All Rights Reserved 27
29. Resources
The Outsourcing Institute Group
3forward – Sales Readiness
OI
3forward
The OI Roadshow
3forward Sales Leaders Blog
3forward’s New Tools Directory
Other OI’s Recruiting Home Page
Outsourcing 2.0
The Outsourcing Institute / 3forward
All Rights Reserved 28
30. Sales Leader Series – Fall 2009
Escaping Pipeline Purgatory - view Sept, 17 2009
Creating Qualified Opportunities (Not Just Leads) - view September 24, 2009
Sales Readiness for 2010 –view October 1, 2009
2.0 Sales Tools for the Real World - view October 19, 2009
Outsourcing Buyers Panel: “Why We (Really) Buy” - view October 27, 2009
Sales Leaders Dream Team - view November 5, 2009
Future of Outsourcing – What to Expect in 2010 - view November 19, 2009
The Outsourcing Institute / 3forward
All Rights Reserved 29
31. Thank You For Joining
The Future of Outsourcing
Sales Leader Series – TeleBriefing #7
November 19, 2009