Industry news

Successful Case Studies in Business Process Outsourcing

14th March 2012

In the early days, Business Process Outsourcing (BPO) usually consisted of particular outsourcing processes such as payroll. It has now grown to encompass a number of functions that are considered ‘non-core’ to the primary business strategy.

The NOA seminar for Successful Case Studies in Business Process Outsourcing took place on 14th March at Eversheds, Manchester. The aim of the seminar was to highlight recent NOA successes and share best practice

From Transaction to Transformation: KPMG and EquaTerra

KPMG EquaTerra is the largest independent third-party Sourcing advisor in the UK with over 150 dedicated sourcing professionals in the UK and Europe.

Jonathan Howgate, Principal Consultant, KPMG Sourcing Ltd, outlined the organisation’s value assurance policy, highlighting the importance of holistically reviewing all outsourcing arrangements.

Recommendations from the review help move contracts to an optimal state.

• The review policy looked at the methods, benefits and negatives of analysing performance, process, potential and other aspects of outsourcing contracts

• As an outsourcing contract reaches maturity, the continuous review process can help deliver further value to service providers and clients

Successful outsourcing case study: Rail Settlement Plan

Stephen Green, Head of Operations, Rail Settlement Plan Ltd, introduced the successful outsourcing case study of the Rail Settlement Plan. British Rail goal was to enable passengers to use the national railway network seamlessly, and found that outsourcing may be the most efficient way of doing so.

• Business operations division British Rail Business Systems was sold to a major outsourcer

• The services provided needed managing on behalf of Train Operating Companies so the Rail Settlement Plan was created

• It has proven to be the right model – RSP concentrates on understanding business needs and translating them into programmes and managing resulting services

• Green also made observations on the links between risk transfer and influence on technology and influence.

Successful BPOs

Tom Bridgford, Partner and Head of Commercial and Outsourcing, Evershed, gave a general insight into BPO as well as defining successful BPO and the problems and pitfalls that may arise in any process.

• Business Process Outsourcing includes services such as procurement, finance and accounting, HR and facilities management. The benefits can include lower costs, budget control and a better quality of service

• However, defining ‘good’ BPO can be problematic. Lack of clarity in the ITT or difficulties in measuring current success can lead to outsourcers finding it difficult to define whether BPO has been successful. This highlights the need for a robust negotiation process between supplier and client and clearly defined work-streams for each schedule

• Problems will often occur in BPO, but relevant steps should be taken to minimise damage. These include reporting to the client in advance, discussing how to prevent future occurrences and identify future damages

BPO in India

Bhupendra Mistry, Alliance Manager and Statistical Programming & Analysis at Hoffman la Roche took us through the successful case of Roche Holdings who outsourced their business processes to India.

At the 2006 Global Capacity Building Initiative, Roche identified their long term strategic goals, and it was decided that in order to achieve them, BPO was a suitable solution.

Firstly a rigorous selection process ensued that the most appropriate outsourcer was selected.

• Several country and model choices. India proved most suitable

• All relevant vendors in India were considered. Researched vendors to evaluate overall capabilities, presence in India, experience in pharmaceutical development

• Presentations, proposals and vendor visits helped to determine final vendor

Once the vendor was selected, Roche’s Indian BPO began to operate, and over a period of time, built a professional relationship and increased operations, all whilst ensuring excellent quality.

Breakout Sessions

The breakout sessions were focused on BPO hot topics such as the mapping of business functions and the security of outsourced data. Questions posed included:

• Is mapping always fundamental and needs board approval?

• What can go wrong during mapping?

• Should you always have a backup?

• How can you guarantee continuity if you terminate the contract?

• What are the impacts on other parts of an organisation?

• Do your existing providers offer the complete service offering?

• Who deals with your process mapping internal, consultant (external) or CSP/intern?

Two particular questions that were raised were:

• What three things have gone wrong in your deal?

• How would you have done it differently?

When addressing these questions, three main areas were covered:

1. Scope & relationships

a. Scoping - Failures by customers to properly scope their requirements and include these in the formal contract inevitably leads to problems. The parties do not have matched expectations at the outset and customer expectations do not necessarily materialise into the service they ultimately receive.

b. Due diligence - Difficulties with due diligence exercises from a supplier perspective, often caused by scoping issues (as in (a) above) and difficulties in obtaining the required information (from either the client or an incumbent provider), resulting in a lack of understanding by the supplier of the required services and difficulties with pricing an uncertain scope.

c. Delivery – Failure by supplier operational teams (the ‘B Team’) to deliver on promises made by supplier sales teams (the ‘A Team’).

d. Third parties – Problems with third party providers (for example, sub-contractors of the customer on which some of a supplier’s activities are dependent, or a supplier’s own sub-contractors) can create tension between customers and a lead supplier. Ensuring that there is a process for identifying responsibilities, defining roles and ensuing appropriate controls are in place help to lessen any impact.

e. Trust – A key element of any successful outsourcing. A poorly scoped outsourcing (particularly on a first generation outsourcing) may lead to disagreements very early on in the most fragile stages of the relationship.

2. Pricing flexibility and changing business needs of customers

a. Evolving customer businesses requires a flexible and accommodating contractual relationship, including flexible pricing mechanisms (for example, indexed charges). Provider innovation (in 3 below) is also required to tackle these changes.

b. Gain-share mechanisms – These mechanisms can be difficult to draft, but problematic if not properly agreed at the outset. An unsuspecting customer may receive an unexpected invoice from a supplier demonstrating savings achieved, with little or no clarity around the required process. It was generally agreed that other mechanisms are, however, well received by both customers and suppliers to recognise efficiencies / performance, including service credits and bonuses (i.e. risk / reward).

3. Continuous improvement & innovation

a. Customers will expect continuous improvement of service delivery and quality throughout. Incentivisation (e.g. gain share, risk/reward etc) is often key to successfully implementing any such contractual obligations, and (as mentioned in 2 above) innovative suppliers will develop successful relationships with customers where they can identify innovative solutions as the customer’s business develops/changes.

In summary, when mapping - objectives need to be clear and consistent throughout the whole process. It is crucial that your supplier is validated and services are well defined in terms of supplier fit and flexibility.

The seminar concluded with networking drinks. To view the full set of slides please visit the members’ area of www.noa.co.uk

Ashok Soota began his career in 1965 with the Shriram Group of Industries in India. In 1978, he became CEO of Shriram Refrigeration, a company which was unprofitable for four consecutive years. He went on to become the President of Wipro Infotech from 1984 to 1999. Under his leadership, Wipro's IT business grew from US$2 million in 1984 to US$500 million run-rate in 1999.

In 1999 Ashok co-founded MindTree which in a span of 11 years became a global entity with revenue run rate of US$350 million, with over 9000 people and offices in multiple cities in the U.S., Europe and Asia. Happiest Minds (a next gen IT solutions & Services Company) was launched in August, 2011 by Ashok Soota and a team of industry experts, with the mission to create Happiest People and Happiest Customers.

Ashok is an industry leader. He was President of Confederation of Indian Industry (CII), India's largest Industry association and also President of Manufacturers' Association of Information Technology. He has served on the Prime Minister's Task Force for IT and on the Advisory Council for the World Intellectual Property Organization, Geneva. He was recognised as 'IT Man of the Year' twice and as 'Electronics Man of the Year'.

Why did you start Happiest Minds?

We believe that new technologies and transformational technologies really represent an opportunity for a new entrant to come in. It provides your entry strategy, it provides a basis for transformation and it gives you an opportunity to come in and say “look, none of the incumbents have really got any solid experience which puts them at an advantage; we’re all experimenting with some case studies here and there”. On top of that, we have no legacy to protect. Therefore we are straight away going to provide you with the richest, most logical solution which favours and helps you build the newest technologies. So I think it is a basic entry strategy that we saw, we see that the message has resonated well enough – 12 customers across the world in the space of just 6 months after starting is quite something given the lead times in this business. Interestingly enough, none of those customers are customers from our previous business, they were all new recruits. They met us as well as meeting with larger players, and then decided “hey look these guys know what they’re talking about, they’re a seasoned and experienced team, and they’re working at the leading end of where they’ve got expertise.” The second reason is linked back to the name, where we are saying we do want to create a company, where I would say it is truly a unique culture which enables, and focusses on happiness.

So, you said that your mission is encapsulated in the word smile. How does that work?

Research shows that the happiest moments in anybody’s life are the ones that they were giving, not the ones that they were taking. It resonates when you say straight away “how do we inculcate that?” We do this in little ways, for example, we will celebrate every milestone with an act of giving. So when we launched the company we gave away a finite number of meals for the government’s food for schools programme, so we were helping those kids access their one big meal a day. We will do some act of giving at each and every stage, every milestone. If I were to talk about some of the other aspects, I think the word ‘mindful’ is a very unusual word. You won’t find it anywhere else. It is a very rich word, it carries a lot of meaning in it, apart from being thoughtful, attentive, caring, seeing what’s likely to come ahead, literally you are thinking of the other person. I think that in itself is very closely linked to our approach. I should mention that it is not just the values alone which encapsulate our theme of happiness, its actually reflected in everything right from the name obviously, the mission statement is ‘happiest people, happiest customers’, the values as I’ve just described lend themselves to the acronym ‘SMILES’. We have developed a happiness framework for people as well as for customers, in our 5 year vision statement it says that we want to be the happiness evangelists for our people, and our customers. We want to be part of a global happiness movement, so we work in the IT environment but we also work in a global environment with people saying “what can we do to maximise happiness?”

You touched on your Corporate Social Responsibility programme, something that we’ve noticed has taken a back seat for some organisations in recent years, but you’re clearly making a big feature of it. Can you tell us about your activities in that area?

As part of our 5 year vision statement we actually articulated it and defined a set of measurements with criteria behind it so that it doesn’t remain pie in the sky. If you see our 5 year vision statement it says to be a leader in CSR initiatives with our core business operations, is an interesting approach to social responsibility. We are saying we are bringing a certain core confidence, if we can integrate some of that capability with our core business operations then we can deliver more value. So how do we take our own expertise to help make a difference in the lives of other people? For each of the divisions we have defined measurement criteria. The first we have decided is that we want to establish volunteering and community involvement as a core part of our Global People practice, and we encourage our people to get involved in that. I’ve already mentioned our celebration of milestones with an act of giving; we want to be able to establish processes to leverage our own capabilities for socially relevant causes. We want also to be able to say ‘how do we engage with our own clients and partners?’ to make a difference to society and to the environment. Finally, as we become profitable we will launch the Happiness Minds Foundation with its own focus mission. But that doesn’t mean we are going to wait until that time, we are going to do all of the activities I mentioned to you earlier.

(Puneet Jetli, Co-CEO of Happiest Minds Technologies) The holiday season was 3 months into our existence and there is normally the practice of a Secret friend or a Secret Santa, and the motivation was not only to find a secret friend but to establish contact, communicate and collaborate, and it would accrue a certain act of giving. The more people who go out and find a secret friend, the more people are sponsoring meals for underprivileged children. The idea is that every little act can become a force for giving.

The first few months of 2012 have seen an increase in the demand for outsourcing, with Morrison & Foerster’s outsourcing practice reporting a 20% increase in outsourcing activity.

Alistair Maughan, partner at Morrison & Foerster (MoFo) attributes this rise in activity to a drive for growth by Financial Services Companies. Companies are tending to use multiple suppliers as opposed to singular suppliers to allow room to negotiate more competitive deals. Maughan also noted an increased interest in outsourcing from property and pharmaceutical companies.

Maughan estimates that this increased interest will hold outsourcing in the buyer’s market for six to twelve months; however, Government plans to hive public sector IT into mutual companies could absorb capacity in the market and result in higher prices.

The pharmaceuticals giant selects the Indian outsourcer's platform for marketing content, developed in partnership with a division of marketing giant WPP.

The ‘Digital Marketing Platform’ developed by Infosys in partnership with Fabric Worldwide (a division of advertising and marketing services group WPP) is designed to enable users to manage their online marketing process from beginning to end and monitor and analyse their success.

Phil Benton, GSK' vice president for the new division says “we recognise that our customers, consumers and other external stakeholders increasingly want to engage with us on-line […] Global Digital Services will enable us to provide globally standard processes, scalable assets and advanced analytics to support better and more efficient engagement with these external audiences."

London’s second largest airport plans a £73m IT operations overhaul which will include hosting, telephony and management of end-user computing.

There will be 11 lots available for suppliers to bid on which are outlined on an online tender, with each lasting for a period of 4 years. The most expensive of these being valued at £12m covers hosting, management, support and maintenance. This section of the airport’s current framework has more than 900 servers, based on a virtualised Unix and Wintel estate, as well as over 200 storage devices.

Gatwick is also considering cloud-based services to handle its web services, including their website, intranet and extranet.

The £20 billion guarantee scheme to increase the flow of credit to SMEs is to be approved this week by EU regulators.

The proposal for the National Loan Guarantee Scheme unveiled by Chancellor George Osborne in November aims to provide government guarantees for bank’s funding in an effort to cut the cost of borrowing for companies.

The European Commission has been assessing the plan to ensure that in falls in line with EU state aid rules. According to a source approval from the European Commission is imminent and will come in the next few days.

Capita has unveiled details of their £440m deal with the armed forces under which it will work with the Royal Navy, Army and Royal Air Force on its Recruiting Partnering Project (RPP).

The forces stand to save and estimated £300m with the 10 year deal, and hope to release 1,000 military recruiters back to the front line. Ownership of the recruitment policy, entry criteria and assessment standards will remain with the Forces, but the RPP will handle the process of attracting and recruitment of new soldiers and officers.

As part of this plan an ICT platform will be provided by Capita, although they will continue to work in an assisting role with the existing model until March 2013 when the new delivery model will be executed.

SAP, the market leader in creating business management applications, has confirmed that over the next 4 years it will invest an additional $450 million to increase its leading position in the Middle East and North Africa.

SAP intends to increase its workforce in the region from 300 employees to 800 as well as setting up a training institute to certify 2,000 software consultants. SAP said that these measures are designed to lead to a significant increase in sales in the region.

Werner Brandt, Chief Financial Officer, said the region is: “is remarkable in its growth potential, scope and readiness to innovate - additional investment will enable us to deliver leading-edge innovation, better localization and more talent.”

Thameslink has awarded a £120 million contract to upgrade infrastructure to Carillion. Carillion will service lines and deports as part of the Thameslink Programme in preparation for the delivery of new 12 car trains.

The longer trains are set to serve increased demand and improve the timetable of the service to the north and south of the capital.

Richard Hoswon, Chief executive of Carillion, said: "We will continue to work closely with Network Rail and the train operators to maximise value for money in delivering this important new phase of the Thameslink project."

BT has been chosen by Australia's Financial and Energy Exchange Group (FEX) to provide its Radianz Cloud software for financial services, giving global market participants greater flexibility in accessing the FEX exchange.

The BT Radianz cloud services have been created to suit the global financial community in providing stability and speed of service.

Thomas Price, FEX CEO, said: "BT leads the way in providing financial services cloud connectivity. They help us extend our global reach and gain greater access to the community that we need to attract new clients and grow our business."