Bpo for Mortgage Origination and Servicing 159114

8/12/2019 Bpo for Mortgage Origination and Servicing 159114

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Industry ResearchPublication Date: 18 July 2008 ID Number: G00159114

2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any formwithout prior written permission is forbidden. The information contained herein has been obtained from sources believed tobe reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. AlthoughGartner's research may discuss legal issues related to the information technology business, Gartner does not provide legaladvice or services and its research should not be construed or used as such. Gartner shall have no l iability for errors,omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed hereinare subject to change without notice.

BPO for Mortgage Origination and Servicing

Peter Redshaw

This report provides information for end users about some of the key providers ofmortgage process outsourcing (MPO) services: who the providers are; what servicesthey offer; how much of the mortgage process life cycle they cover; which regions theyserve; where they have offshore capability; and who their major clients are. Itcomplements the report, "User Survey Analysis: Mortgage Process Outsourcing ClientsReport High Levels of Savings," which examines the same market but is based onresponses from users (demand side) rather than providers (supply side).

Key Findings

There is considerable variety in this market in terms of the MPO services offered byeach vendor; the size of deals; the number of staff; the locations that the services aredelivered from; the track record of the providers; and their heritage in IT andoutsourcing.

MPO is especially popular in North America much more so than Europe, the MiddleEast and Africa (EMEA) and Asia/Pacific.

Different strategic approaches, such as offshoring and out-tasking, are increasingly partof MPO deals.

Recommendations

End users of MPO should:

Evaluate the full benefits (such as total value of operations) and cultural fit of a potentialdeal. MPO is a prime example of an area that may be driven by the need for costsavings, but to succeed, it must include factors such as the provider's location, solutionscalability and the required extent of automation.

Define the software platform that is needed by your firm. Is it important that the MPOprovider adopts your current systems, or is it vital for you to move off home-built orvendor proprietary systems and migrate to new, industry-standard platforms?

Plan ahead for the likely consolidation and expansion of MPO providers. Ensure thatyou have the flexibility to add new services, or to exit current providers and move to newsuppliers.


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Publication Date: 18 July 2008/ID Number: G00159114 Page 2 of 22

2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

TABLE OF CONTENTS

Analysis ............................................................................................................................................. 31.0 Introduction to the Survey............................................................................................... 32.0 Survey Results ............................................................................................................... 4

2.1 Support for Mortgage Origination...................................................................... 42.2 Support for Mortgage Servicing......................................................................... 62.3 The Number of Live Clients for MPO by Region............................................... 82.4 Top Three MPO Clients by Vendor ................................................................... 92.5 Software Used by Vendors.............................................................................. 132.6 Key Metrics for MPO ....................................................................................... 162.7 Vendor Facility Locations ................................................................................ 182.8 Staff Numbers for MPO................................................................................... 19

3.0 Summary ...................................................................................................................... 20Recommended Reading.................................................................................................................. 21

LIST OF TABLES

Table 1. Number of Live Clients for Mortgage BPO by Region......................................................... 8Table 2. Top Three Mortgage BPO Clients by Vendor...................................................................... 9Table 3. Software Used by Vendors................................................................................................ 14Table 4. Key Metrics for Mortgage BPO.......................................................................................... 16Table 5. Contact Centers and Data Centers ................................................................................... 18Table 6. Staff Numbers for Mortgage BPO ..................................................................................... 19

LIST OF FIGURES

Figure 1. Support for Mortgage Origination....................................................................................... 5Figure 2. Support for Mortgage Servicing ......................................................................................... 7


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ANALYSIS

1.0 Introduction to the Survey

Mortgage origination and mortgage servicing are two core business lines for many retail banks,

credit unions, building societies and other financial services institutions (FSIs), and they havebeen under intense scrutiny since the subprime mortgage crisis and the credit crunch thatfollowed in mid-2007. The logical and primary approaches for FSIs that are addressing anyissues with these crises should be to look at the whole business strategy for the mortgage marketand then to tackle specific items, such as risk management and reporting.

Of course, not all FSIs act in ways that are entirely rational, and there may be more-tacticalresponses, such rushing to make cuts, securing emergency funding or simply quittingtroublesome businesses. Nonetheless, business process outsourcing (BPO) is in theory, atleast only a secondary approach, because it does not solve any of the core problems that ledto or arose from these financial crises.

But it can help to deal with the aftermath, for example, by releasing a bank's key personnel towork on the primary issues, while the BPO provider gets on with the mundane, day-to-day

operations. It also helps to deliver cost savings (perhaps through offshoring or economies ofscale) that may be needed to run profitable mortgage operations at a time of tougher marketconditions. Then there are the benefits beyond cost savings, such as improved process disciplineand compliance for MPO (through service-level agreements), variable pricing and resources(ramp up and down), more-modern platforms (without bearing all the capital cost), superiortechnical expertise, and so on.

Gartner has seen an increase in the number of inquiries from clients asking about BPO formortgages during the past 12 months. Questions include: Who are the providers; what servicesdo they offer; how much of the mortgage process life cycle do they cover; which regions can theyserve; where are they located and do they have offshore capability; what software do they use;how many staffers do they have; and who are their major clients? Gartner conducted a shortsurvey of MPO service providers to answer these questions, and the results are presented here.

There is no comparative analysis here, and this is not one of Gartner's more-formal MagicQuadrants or a MarketScopes. However, it highlights some of the main players on the supplyside, along with their experience and their capabilities. In this way, this research complements"User Survey Analysis: Mortgage Process Outsourcing Clients Report High Levels of Savings,"which examines the same market but is based on users' responses (that is, it reviews thedemand side).

At the start of the survey, Gartner contacted 81 of the key IT providers around the world in thefinancial services and BPO markets to check if they were actively marketing or running BPO formortgage origination or mortgage servicing. The guidance that Gartner gave was that, in thisinstance, we were only interested in companies that offer BPO as a back-office service formortgages and that get the majority of their MPO revenue from services rather than software.

We did notinclude companies that predominantly provide software tools that facilitate the

automation of mortgage origination or mortgage servicing (for more information on these, see "ASurvey of Mortgage Servicing Solutions"). In other words, our criterion excluded many IT firmsthat have a major involvement in mortgage services through software but not through BPO.

Out of the 81 firms contacted, we received detailed responses from a core set of 24 firms. Thesefirms provided comprehensive answers to our questions, while respecting client confidentiality.


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Twenty-three respondents were active providers of MPO services, and one (Satyam) wasnegotiating to start new MPO deals.

2.0 Survey Results

2.1 Support for Mortgage Origination

As Figure 1 shows, the picture for the support of the different processes in mortgage origination isvaried. Some vendors (such as Genpact, IBM, ISGN, Lydian, Oracle Financial Services, QuatrroBPO Solutions and Zenta) support all, or nearly all, the elements of mortgage origination. Othervendors (such as TietoEnator and Wolters Kluwer Financial Services) support only a few. Thereis also variation between the processes themselves. Mortgage acquisition and funding aresupported by only about half of the vendors here, while application processing and documentmanagement are supported by nearly all the vendors.


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Publication Date: 18 July 2008/ID Number: G00159114


Figure 1. Support for Mortgage Origination

YesYesYesYesYesYesYesYesYesYesNoYesNoYesYesYesNoYesLoan Process Indexing

YesYesYesNoYesYesYesYesYesYesNoYesYesYesNoYesYesNoCredit Review

YesYesYesNoNoYesYesYesNoYesNoYesYesNoYesNoYesNoRate Lock Management

YesYesYesNoNoYesYesYesYesYesYesYesYesNoYesYesYesYesPost-closing

YesNoYesNoNoYesYesNoYesYesYesYesYesYesNoYesNoNoFundingYesYesYesYesNoYesYesYesYesYesYesYesYesNoYesYesYesYesClosing/Preclosing

YesYesYesYesYesYesYesYesYesYesNoYesYesNoYesYesYesYesDocument Management

(Procurement, Verification)

YesYesYesNoYesYesYesNoYesYesYesYesYesNoNoYesNoYesDocument Imaging

YesYesYesNoNoYesYesYesYesYesNoYesYesYesYesYesNoYesUnderwriting/Preunderwriting

YesYesYesYesYesYesYesYesYesYesNoYesNoYesYesYesYesYesApplication Processing

YesNoYesYesYesYesNoNoYesYesNoYesYesYesNoNoYesYesMortgage Acquisition

QuatrroBPOS

olutions

Ordina

OracleFinancial

Services(i-flex)

Optimus(Pola

ris)

NessTechnologies

LydianDataServices

ISGN

InfosysBPO

iGATEGlobal

Solutions

IBM

HeadstrongSvcs

Genpact

FiservLending

Solutions

Firstsource

EXL

EDS

e4e

Accenture

YesYesYesYesYesYesYesYesYesYesNoYesNoYesYesYesNoYesLoan Process Indexing

YesYesYesNoYesYesYesYesYesYesNoYesYesYesNoYesYesNoCredit Review

YesYesYesNoNoYesYesYesNoYesNoYesYesNoYesNoYesNoRate Lock Management

YesYesYesNoNoYesYesYesYesYesYesYesYesNoYesYesYesYesPost-closing

YesNoYesNoNoYesYesNoYesYesYesYesYesYesNoYesNoNoFundingYesYesYesYesNoYesYesYesYesYesYesYesYesNoYesYesYesYesClosing/Preclosing

YesYesYesYesYesYesYesYesYesYesNoYesYesNoYesYesYesYesDocument Management

(Procurement, Verification)

YesYesYesNoYesYesYesNoYesYesYesYesYesNoNoYesNoYesDocument Imaging

YesYesYesNoNoYesYesYesYesYesNoYesYesYesYesYesNoYesUnderwriting/Preunderwriting

YesYesYesYesYesYesYesYesYesYesNoYesNoYesYesYesYesYesApplication Processing

YesNoYesYesYesYesNoNoYesYesNoYesYesYesNoNoYesYesMortgage Acquisition

QuatrroBPOS

olutions

Ordina

OracleFinancial

Services(i-flex)

Optimus(Pola

ris)

NessTechnologies

LydianDataServices

ISGN

InfosysBPO

iGATEGlobal

Solutions

IBM

HeadstrongSvcs

Genpact

FiservLending

Solutions

Firstsource

EXL

EDS

e4e

Accenture

QuatrroBPOS

olutions

Ordina

OracleFinancial

Services(i-flex)

Optimus(Pola

ris)

NessTechnologies

LydianDataServices

ISGN

InfosysBPO

iGATEGlobal

Solutions

IBM

HeadstrongSvcs

Genpact

FiservLending

Solutions

Firstsource

EXL

EDS

e4e

Accenture

Source: Gartner (July 2008)


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The support variation shown in Figure 1 is often an indication of the heritage of the vendor:whether the vendor's background is BPO or financial services software; if its customers havebeen based among realtors or banks; the extent of its vertical domain knowledge; its expertise inskills complementary to BPO such as system integration; and so on. Understanding the heritageof a vendor in this way can be important for the cultural fit and, therefore, the relationshipbetween BPO vendor and client. For example, a client that is most interested in augmenting its

staff from offshore locations will be more inclined to go to a "pure" BPO provider, whereas thosethat need to migrate software applications may be more inclined to find an expert in specificfinancial services packages.

2.2 Support for Mortgage Servicing

As Figure 2 shows, the support for mortgage servicing is just as varied as it was for mortgageorigination, but the details are different. For example, at the process level, warehousemanagement is less widely supported than more-popular processes, such as defaultmanagement or collateral management. At the vendor level, Genpact, ISGN, Oracle FinancialServices, UST Global and Zenta still all have wide support of all, or nearly all, the processes inthis space. Most of the vendors support about one-half of the processes across mortgageorigination and mortgage servicing combined, but there are some niche suppliers or specialists,such as e4e, TietoEnator and Wolters Kluwer Financial Services, that support only a very few.

That isn't necessarily a problem. As more FSIs move toward service-oriented architectures(SOAs) and implement business process management (BPM) tools and methods, the potentialand demand for out-tasking in general are likely to increase in the near future. Systems andprocesses are no longer the monoliths they were, and as they become more modular and"chunkable," it's possible and sometimes even desirable to outsource only very specificparts of the mortgage process life cycle, not the entire end-to-end process. Where the difficultywith more specialized vendors may arise, given the lack of standards in the mortgage area, is forusers that want to consolidate on a limited set of MPO providers or to mix-and-match acrossMPO providers.

Note that "decisioning" (for example, for mortgage underwriting) must be owned and performedby the bank/client rather than by the MPO provider. There may be categories that the MPO

provider can approve, but in most cases, banks must maintain control of it.


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Publication Date: 18 July 2008/ID Number: G00159114


Figure 2. Support for Mortgage Servicing

YesNoYesYesYesYesYesYesYesYesYesYesNoNoYesYesNoYesLoan Account Set-up

NoYesNoNoNoYesYesNoNoNoNoYesYesNoNoYesNoNoWarehouse ManagementNoNoYesYesYesNoYesNoNoYesNoYesNoYesNoYesNoYesRelationship Management

NoYesYesNoYesYesYesNoYesYesYesYesNoNoYesYesYesYesCollateral Management

YesNoYesNoYesYesYesYesYesYesNoYesYesNoNoNoNoNoRisk Management

NoYesYesNoNoNoYesYesYesYesNoYesNoYesYesYesNoYesFinancial Managementand Administration

YesYesYesYesYesNoYesYesYesYesNoYesYesNoYesNoNoNoDefault Management

YesYesYesNoYesNoYesYesYesNoNoYesYesYesYesYesNoYesPayoffs Processing

QuatrroBPOS

olutions

Ordina

OracleFS(i-fle

x)

Optimus(Polaris)

NessTechnolo

giess

LydianDataSe

rvices

ISGN

InfosysBPO

iGATEGlobalSolutions

IBM

HeadstrongSv

cs

Genpact

FiservLending

Solutions

Firstsource

EXL

EDS

e4e

Accenture

YesNoYesYesYesYesYesYesYesYesYesYesNoNoYesYesNoYesLoan Account Set-up

NoYesNoNoNoYesYesNoNoNoNoYesYesNoNoYesNoNoWarehouse ManagementNoNoYesYesYesNoYesNoNoYesNoYesNoYesNoYesNoYesRelationship Management

NoYesYesNoYesYesYesNoYesYesYesYesNoNoYesYesYesYesCollateral Management

YesNoYesNoYesYesYesYesYesYesNoYesYesNoNoNoNoNoRisk Management

NoYesYesNoNoNoYesYesYesYesNoYesNoYesYesYesNoYesFinancial Managementand Administration

YesYesYesYesYesNoYesYesYesYesNoYesYesNoYesNoNoNoDefault Management

YesYesYesNoYesNoYesYesYesNoNoYesYesYesYesYesNoYesPayoffs Processing

QuatrroBPOS

olutions

Ordina

OracleFS(i-fle

x)

Optimus(Polaris)

NessTechnolo

giess

LydianDataSe

rvices

ISGN

InfosysBPO

iGATEGlobalSolutions

IBM

HeadstrongSv

cs

Genpact

FiservLending

Solutions

Firstsource

EXL

EDS

e4e

Accenture



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2.3 The Number of Live Clients for MPO by Region

Table 1 shows that the majority of live clients for MPO are in North America (351), with no clientsin Latin America, just 14 in EMEA and 11 in Asia/Pacific. Note that the number of clients doesn'tnecessarily correlate with the volume of business handled. Some vendors have only a few verybig clients rather than many small ones. Tables 2 and 3 will make this clearer.

Although the rest of the world lags behind North America in adoption, the opportunities may bebrighter in other regions. For example, Australian banks and building societies have beendeveloping innovative mortgage products such as top-up loans, reverse mortgages, offsetaccounts and so on. Hence, mortgage-servicing may have greater future traction in the Australia-New Zealand market.

Table 1. Number of Live Clients for Mortgage BPO by Region

NorthAmerica

LatinAmerica EMEA Asia/Pacific

Accenture 1 0 2 0

e4e 20 0 0 0

EDS 1 0 4 2

EXL 2 0 0 0

Firstsource 0 0 1 0

Fiserv Lending Solutions 50 0 0 0

Genpact 6 0 1 2

Headstrong Services 2 0 1 0

IBM 2 0 0 1

iGATE Global Solutions 3 0 0 0

Infosys BPO 5 0 0 1

ISGN 50 0 0 0

Lydian Data Services 40 0 0 0

Ness Technologies 5 0 2 0

Optimus (Polaris) 1 0 0 5

Oracle Financial Services(i-flex)

8 0 0 0

Ordina 0 0 2 0

Quatrro BPO Solutions 8 0 0 0

Satyam 0 0 0 0

Synechron 2 0 1 0

TietoEnator N/A N/A N/A N/A

UST Global 8 0 0 0

Wolters Kluwer FinancialServices

87 0 0 0

Zenta 50+ 0 0 0



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2.4 Top Three MPO Clients by Vendor

Table 2 shows the top three clients for each vendor: the client name or type, where the BPO workis delivered from (it may be the client site, onshore or offshore), where it is delivered to (usually,at the client site), the volume of work handled and the duration of the contract (an average lengthof 48 months).

Most respondents to this question were unable to supply the actual name of the clients forreasons of confidentiality. In some cases, they were also unable to disclose the volume of workdone as that is also confidential (shown as "not applicable"). Some vendors do not have threecurrent clients, and Satyam hopes to acquire its first clients in 2008, but they are not live yet.

What it shows, yet again, is that there is considerable diversity in the business model here (suchas whether offshore resources are used) and the volume of the work handled. That is importantfor clients and the different priorities they assign to cost savings, vendor track record, being in thesame time zone, scalability and so on.

The degree of customization and transformation that clients expect will also be a strong selectioncriterion (that is, whether clients expect a "lift-and-drop" approach to outsourcing, stressingseamless operations), or migration to a utility offering (stressing economies of scale), or a morecustomized, one-off deal (stressing transformation). These approaches are not mutually exclusive

lift-and-drop may be the first phase that is followed later by a more collaborative approachbetween provider and user for transformation programs.

Table 2. Top Three Mortgage BPO Clients by Vendor

Client Type/Name

BPO IsDeliveredFrom(Location)

BPO IsDelivered to(Location)

Volume ofMortgagesHandled per

Year(Loans/Files)

DurationofContract(Months)

No. 1 Client

Accenture Top 10 U.S. lender Bangalore,India

U.S. location 1,189,000 60

e4e Fortune 5 globalfinancial servicescompany

Bangalore,India

U.S.nationwide

360,000 60

EDS A top five Australia-New Zealand bank

Australia, India Australia 800,000 120

EXL U.S. mortgage bank Noida andPune, India

NorthAmerica

2,000,000 Perpetual

Firstsource A top 5 U.K. bank Mumbai andKolkata, India

Gloucester,U.K.

N/A >36

Fiserv LendingSolutions

A top 10 creditunion

Rocky Hill, CT Client site(NorthAmerica)

>15,500 N/A

Genpact A top 10 U.S.mortgage lender

Irvine, CA andGurgaon, India

U.S. 175,000 60

HeadstrongServices

A leadinginvestment bank inU.S.

India U.K. ($2 billion) 12


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Client Type/Name




Year(Loans/Files)


IBM Top national lender Gurgaon

(NCR), India

North

America

N/A Ongoing

iGATE GlobalSolutions

A top 5 nonprimelender in NorthAmerica

Bangalore,Noida

NorthAmerica

400,000 60

Infosys BPO A top five U.S. retailand mortgage bank

India U.S. 2,700,000 24

ISGN A top five mortgageservicer

India U.S. N/A 36

Lydian DataServices

A leading U.S.financial institution

Atlanta, GA;Boca Raton,FL; HaddonTownship, NJ U.S.

North U.S. N/A 36

NessTechnologies

Large super-regional retail bank

India NorthAmerica

($25 billion) 36

Optimus(Polaris)

Confidential N/A N/A N/A N/A

Oracle FS(i-flex)

Top five mortgageservicer company inU.S.

India U.S. N/A 60

Ordina Insurance company Zoetermeer,Netherlands

Alkmaar,Netherlands

60,000 84

Quatrro BPOSolutions

Leading mortgagebankers

Gurgaon (India)andBurlingame, CA

(U.S.)

ThroughoutU.S.

15,000 60

Satyam N/A N/A N/A N/A N/A

Synechron A mortgagebrokerage firm

N/A N/A N/A N/A

TietoEnator Lehman Brothers,U.K.

Client site(remotely)

London andS.E. of U.K.

N/A 36-60

UST Global A major lenderservices provider

Chennai, India NorthAmerica

200,000 36

Wolters KluwerFinancialServices

Servicer Tempe, AZ andSt. Cloud, MN

U.S. 24,000 12

Zenta Top 10 U.S. FSI U.S./India U.S. >50,000 36

No. 2 Client

Accenture Large Europeanfinancial servicesinstitution

Spain Spain 20,000 60


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Client Type/Name




Year(Loans/Files)


e4e Leading residential

mortgage wholesalelender in U.S.

Bangalore,

India

U.S.

nationwide

7,000 36

EDS A top 10 Australia-New Zealand bank

Australia Australia 75,000 144

EXL A U.S. mortgagecompany

Noida, India NorthAmerica

1,000,000 Perpetual

Firstsource A leading U.K.Building Society

Mumbai, India U.K. N/A Pastclient

Fiserv LendingSolutions

A top 10 originator Rocky Hill, CT Client Site(N. America)

>20,000 N/A

Genpact A top U.K. mortgagelender

Jaipur, India U.K. 420,622 36

HeadstrongServices

A top due diligencefirm

India U.S. ($5 billion) 12

IBM A top nationallender

Bangalore,India

Australia N/A Ongoing


A top fiveinvestment banksubsidiary

Bangalore NorthAmerica

500,000 36

Infosys BPO A leading subprimeresidential mortgageservicer

India U.S. 355,000 60

ISGN A top three titleunderwriter

India U.S. N/A 36

Lydian DataServices

A leading U.S.financial institution

N/A N/A N/A 36

NessTechnologies

A global investmentmanagementcompany with anextensive realestate portfolio

India Europe (20 billion) 36

Optimus(Polaris)


Oracle FinancialServices (i-flex)

A top 5 wholesaleand retail originatorin U.S.

India U.S. N/A 36

Ordina A pension fund Eindhoven,

Netherlands

Eindhoven,

Netherlands

8,000 48


Leading foreclosuremanagement lawfirm

Gurgaon (India) East Coast(U.S.)

12,000 60



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Client Type/Name




Year(Loans/Files)


Synechron Mortgage subsidiary

of investment bank

N/A N/A N/A N/A

TietoEnator Merrill Lynch Client site(remotely)

London andScotland

N/A 36-60

UST Global A major settlementservices provider

Chennai, India NorthAmerica

120,000 36


A lender St. Cloud, MN U.S. 180,000 36

Zenta A top 10 U.S.mortgagelender/servicer

India U.S. >75,000 36

No. 3 Client

Accenture A large Europeanfinancial servicesinstitution

Portugal Portugal 24,000 42

e4e A midsizeresidential mortgagelender in U.S.

Bangalore,India

U.S.nationwide

18,000 48

EDS A midtier savingsbank in Spain

Spain Spain N/A N/A

EXL N/A N/A N/A N/A N/A

Firstsource A leading U.S.mortgage lender

Bangalore,India

U.S. N/A Pastclient

Fiserv Lending A top 10 servicer Rocky Hill, CT Client site

(NorthAmerica)

>100,000 N/A

Genpact A top Australianmortgage lender

Jaipur, India Australia 29,661 36

HeadstrongServices

N/A N/A N/A N/A N/A

IBM A midtier creditunion

Charlotte, NC NorthAmerica

N/A Ongoing


A top 20 bankworldwide

Bangalore,Noida, India

NorthAmerica

500,000 60

Infosys BPO A leading mortgageprovider

India U.S. 277,000 96

ISGN A top three MIcompany

India U.S. N/A 36


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Client Type/Name




Year(Loans/Files)


Lydian Data

Services

A leading U.S.

mortgage bank

Atlanta, GA;

Boca Raton,FL; HaddonTownship, NJ U.S.

N/A N/A 36

NessTechnologies

A leading U.S.provider of bankingproducts and homemortgages

India NorthAmerica

($30 billion) 24

Optimus(Polaris)



A top fiveinvestmentmanagement andmortgage servicer inU.S.

India U.S. N/A 36

Ordina N/A N/A N/A N/A N/A


Leading mortgageoriginators

Gurgaon, IndiaandBurlingame, CA

Los Angeles,CA

6,000 60


Synechron A mortgage LOSproduct company

N/A N/A N/A N/A

TietoEnator Cooperativefinancial services

Client site(remotely)

Northwest ofU.K.

N/A 60

UST Global A top 10 mortgage

lender

Austin, TX North

America

120,000 36


A lender Tempe, AZ andSt. Cloud, MN

U.S. 21,600 36

Zenta A top 20 U.S.mortgagelender/servicer (adivision of a largecommercial bank)

India, U.S. U.S. >75,000 36

LOS = loan origin system


2.5 Software Used by Vendors

Table 3 lists the principal software applications and tools used by the vendors for MPO. Thiscovers the vendor's own, proprietary software systems, those it runs on behalf of a client (whichmay be built and owned by the client), and commercial, third-party systems (acquired by eitherthe vendor or the client).

There are some clear differences in the approaches that Table 3 shows. For example:


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Vendors, such as IBM and Wolters Kluwer, tend to use their own, proprietary software.

Vendors, such as Infosys BPO and Zenta, tend to connect via Citrix to the industry-standard applications that are owned by the client.

Vendors, such as EDS (including its subsidiary MphasiS) and e4e, may use acombination of all three types of application (proprietary vendor systems, client-owned

systems and commercial off-the-shelf systems).

The last case is the most common and is typically dictated by the user's situation as well as itsdrivers. Regardless of the software provenance and who owns the intellectual property, there is ashift toward direct delivery of services through secure Internet sessions and browsers, with noadditional client software required.

Table 3. Software Used by Vendors

Software

Accenture Imaging and workflow solution, which can include both Accenture's own andthird-party software. Accenture also can use the Accenture Enterprise Dataand Document Management solution based in its own Global Delivery Centerin San Antonio, TX.

e4e A combination of in-house and third-party software. CRMs RightNow LOS Encompass, Point, PcLender Dialer EPRO Ecommerce Platform Elasticpath BPM Tools Intalio, Tanzax Recording Tools Verint ClientDashboard.

EDS A combination of client-owned, third-party and EDS-developed. Selectiondepends on client situation and key business drivers.

EXL EXL works on client systems through remote Citrix connectivity. Key softwaresystems are:

RightFax

Symposium

Speedpay

Early Resolution

Fidelity

WebXtender

Interlinq

Empower

Fastrieve

Firstsource Firstsource uses third-party and client software systems, including:

CODAR Main Frame

AWD Automated Workflow Distributor Imaging software

UFSS Graphical user interface, which is used primarily in servicing

Mortgage Sales Credit scoring

Fiserv Lending Solutions Fiserv uses many third-party systems. For origination, it uses Fiserv's ownUniFi system.

Genpact Clients can opt to use their own system or leverage Genpact's proprietaryorigination software.

Headstrong Services Proprietary collateral management software as well as client software.


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Software

IBM IBM uses its own software, leveraging the Impact suite in combination withIBM components, including FileNet, WebSphere, DB2, Cognos and otherindustry-leading software.

iGATE Global Solutions VLS (own software from iGATE), Fidelity MSP, Fuego (BPM), Empower,Loan Production System, ValuNet.

Infosys BPO Infosys BPO typically connects to the client's applications via Citrix to performBPO operations. Some of the platforms Infosys BPO uses include FidelityEmpower!, Fidelity MSP (including Director), Rekon2000, FileNet and NewInvoice. In the default management area, Infosys BPO uses F-Laws and NewInvoice apart from the FNMA and FHIMC Web sites. Infosys BPO uses in-house-developed applications in areas like workflow management andreporting.

ISGN Own and third party.

Lydian Data Services Proprietary SOA: Web-based, multilender platform for integration, point ofsale and loan origination. Uses combination of third-party software andproprietary for imaging, classification, workflow and loan virtualization. Alsoleverages connectivity.

Ness Technologies Combination of own software and third-party software to support mortgageBPO operations. ACS, FileNet, Calyx, El Dorado, CSC, i-flex, Fidelity MSP,Director, Empower!, Rekon2000, Capture Professional are the third-partysoftware used. Also leverages Ness's own tools, such as workflowmanagement, imaging and exception management.

Optimus (Polaris) Depending on client's requirements, Optimus can either use its own softwareor work with the client's software.


Depending on client (iGPM business process management, documentmanagement system).

Ordina Ordina's own software or the internal supplier at Ordina's client.

Quatrro BPO Solutions Quatrro's own software systems used to support mortgage BPO operationsare an advanced loan operating system, and an imaging and workflowmanagement application. The third-party software systems used for

mortgage operations are a foreclosure management application and abankruptcy management system.

Satyam Satyam BPO has a workflow and imaging platform built for back-officeprocesses. This platform is based on industry-leading best-in-classpackages. This platform will be leveraged for mortgage origination andservicing prospects.

Synechron For connectivity: Citrix Client applications used via Citrix-based remoteconnectivity/secure VPN/terminal services/Web-based connectivity.

For loan origination: Integra.

For digital document repository: Onbase.

For automated underwriting: Desktop Underwriter, Loan Prospector.

TietoEnator Both in-house developed and owned, third-party software.

UST Global Some are developed in-house, and the rest are customers' systems.


Wolters Kluwer provides document generation, compliance, delivery andfulfillment BPO options using several of its own platforms, including DesertDocument Services, secure document exchange, a data-processingoperation in Tempe, AZ and a large print fulfillment operation in St. Cloud,MN.


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Software

Zenta Primary service delivery is typically through client applications. Zenta hasenterprise process and quality management tools that are Zenta-owned/operated. Zenta delivers ITO work where it supports its clients' serviceneeds, but not necessarily as a core sales/marketing practice.


Using the client's software minimizes disruption (for the client) during the transition to BPO andmaintains (but does not enhance) any competitive differentiation that may be embedded there. Inthe short run, providers may be able to maximize the value of current systems. But it often fails toachieve any economy of scale or standardization and, in the longer run, that can inhibit innovationand differentiation.

The variation here may be that the client's software is not proprietary but an industry-standardpackage that it has purchased and now wants the BPO provider to run on its behalf. In that case,users should find out if the MPO provider has other clients using the same software, if they arebeing run centrally or remotely, and the degree of package customization.

With popular, industry-standard packages, it may be possible to achieve economies of scale andto exploit centers of excellence at a vendor. But, because they are widely used packages, there is

little chance to achieve differentiation through them or to re-engineer the process in any way.

Using the vendor's software may be more disruptive during transition (because the user is notfamiliar with them and must migrate to them), but the vendor is best experienced in thesesystems, because it built them and does not have to complete a learning curve to understandthem. Clients may lose some differentiation if the system is shared across many clients, but theremay be economies of scale and greater flexibility in re-engineering the overlying process.

Potential clients should pay attention to how a new MPO deal will embed innovation anddifferentiation something that is often forgotten or neglected at the planning and negotiationstages.

2.6 Key Metrics for MPO

What stands out in Table 4 is the strong contrast between vendors: Vendors, such as e4e, Quatrro BPO Solutions and Wolters Kluwer, are more focused on

origination than on servicing.

Vendors, such as Accenture, iGATE and Infosys BPO, handle many more mortgages forservicing than for origination (by a factor of 10 or even 100).

Vendors, such as Ness Technologies and TietoEnator, handle roughly equal amounts ofmortgages for origination and servicing.

Table 4. Key Metrics for Mortgage BPO

Number ofMortgages

Originated in Past12 Months

Number ofMortgages

Serviced inPast 12 Months

Average Cost Savingfor Your Clients

Accenture 113,000 1,145,000 >35%

e4e 200,000 0 35%

EDS 225,000 1,000,000 N/A


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Number ofMortgages

Originated in Past12 Months

Number ofMortgages

Serviced inPast 12 Months

Average Cost Savingfor Your Clients

EXL 700,000 2,300,000 45%

Firstsource 300,000 4,500,000 N/A

Fiserv Lending Solutions N/A N/A N/A

Genpact 413,500 250,000 40%

Headstrong Services N/A 7,500 25%

IBM N/A N/A N/A

iGATE Global Solutions 3,000 750,000 30%

Infosys BPO 136,370 10,622,116 45%

ISGN N/A N/A 40%

Lydian Data Services N/A 0 45%

Ness Techs 250,000 200,000 35% to 45%

Optimus (Polaris) N/A N/A N/AOracle Financial Services (i-flex) 36,000 1,020,000 40%

Ordina 6,000 70,000 30%

Quatrro BPO Solutions 1,500 loans 8,000 files 60%

Satyam N/A N/A N/A

Synechron 2934 N/A 60%

TietoEnator 50,000 50,000 10%

UST Global 320,000 100,000 50%

Wolters Kluwer Financial Services 230,000 0 32%

Zenta N/A 200,000+ N/A


There are also big variations in the absolute numbers of mortgages processed from a fewthousand to tens of millions in one case.

Biggest is not necessarily best, of course. Large clients may value small vendors' attention todetail, more-personal service and perhaps their greater flexibility. In comparison, bigger vendorscan offer more in the way of software, economies of scale, multiple sites for processing anddelivery, and so on. The two are not mutually exclusive big vendors also have the resources to(potentially) invest in the processes and technologies that improve quality, flexibility and handlingof detail. The rise of application service provider (ASP) and SaaS delivery models will also erodethe differences between large and small MPO providers.

These factors, in turn, will influence the magnitude of the cost savings that using MPO can offer.

It is impossible to say exactly what the savings will be. That depends on the current status of thecustomer, its size, its outsourcing model (for example the software it uses, whether its own, avendor's or a third party's), the processes covered and where those services are delivered from(whether offshore or onshore).

But a typical, gross figure for offshore, high-volume, transaction-based BPO services is around30% (see "User Survey Analysis: Mortgage Process Outsourcing Clients Report High Levels of


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Savings" and "The Offshore Outsourcing Journey Goes Beyond Labor Arbitrage"). This is beforemanagement overheads and other costs are factored in that tend to diminish the net cost savings.

The average here for MPO is around 38%, which is better than the average for most BPOservices. But the bottom-line result is likely to be less, because all BPO deals take a lot ofmanagement and do involve some risk that must be offset.

Clients should conduct careful cost-benefit analyses before engaging to do MPO and alsoconsider factors (such as whether they want to go offshore) and how else they will benefit fromBPO beyond the immediate savings (such as migrating to a better platform, variable pricing, staffaugmentation and so on).

2.7 Vendor Facility Locations

Table 5 shows where each vendor has its main contact centers and its main data centers. This ispartly dictated by the location of its clients (some insist on keeping contact centers local) andpartly by of the vendor's business model and the extent of its globalization. So, for example,Fiserv Lending Solutions has both its contact and its data centers in Rocky Hill, Connecticut,whereas Infosys BPO and Ness Technologies have all their main centers in India.

Then there are companies, such as Quatrro, using a dual-shore model where, for example, the

front-end customer interactions are handled in the U.S., while the back office is located in India.Furthermore, the data center can be kept in the U.S. but managed and run remotely by ITresources in India.

Many of the queries that Gartner receives have wondered if wage inflation in India means that it isas competitive as it used to be as an offshoring location? The answer is that all BPO vendors areacutely aware of this issue and are themselves looking at achieving greater economies of scale intheir existing operations and/or expanding into new countries themselves (such as China,Indonesia, the Philippines, Sri Lanka and so on).

The recommended reading section includes Gartner research on the viability of alternativeoffshoring locations, but often, these are complementary locations for a major outsourcingprovider, so that it delivers from multiple locations, not just one. Potential users of MPO shouldalso consider the systemic risk in moving operations to new geographies (see "Managing Risk in

Offshore Outsourcing for Investment Banks").

Table 5. Contact Centers and Data Centers

Data Centers Contact Centers

Accenture Spain, U.S., Portugal Spain, India, Portugal

e4e New Jersey, U.S. Bangalore, India

EDS Australia, Spain, India, U.K. Australia, Spain, India

EXL Sunnyvale, U.S. Noida, Gurgaon and Pune, India;Manila, the Philippines

Firstsource N/A Mumbai and Kolkata, India

Fiserv Lending Solutions Rocky Hill, CT Rocky Hill, CTGenpact Cincinnati, OH; El Paso, TX;

Gurgaon, IndiaIrvine, CA; Juarez, Mexico; Jaipur,India; Gurgaon, India

Headstrong Services India, Manila (the Philippines) India, Manila (the Philippines)

IBM Sterling, VA (disaster recovery:Tempe AZ)

Charlotte, NC and Gurgaon (NCR),India and the Philippines


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Data Centers Contact Centers

iGATE Global Solutions Bangalore and Noida, India Bangalore and Noida, India

Infosys BPO Bangalore, Pune, Jaipur, India Bangalore, Jaipur, India

ISGN Atlanta, U.S.; Bangalore, India Philadelphia, U.S.; Bangalore, India

Lydian Data Services Atlanta, GA and Miami, FL Atlanta, GA; Boca Raton, FL;

Haddon Township, NJ

Ness Technologies India India

Optimus (Polaris) Chennai, India Chennai, India

Oracle Financial Services(i-flex)

U.S., India U.S., India, Latin America

Ordina Zoetermeer and Zeist, Netherlands Zoetermeer and Eindhoven,Netherlands

Quatrro BPO Solutions Gurgaon, India and Burlingame, CA Gurgaon, India and Burlingame, CA

Satyam Hyderabad and Bangalore, India Hyderabad and Bangalore, India

Synechron Pune, India Pune, India

TietoEnator Dunstable, Sheffield and Leeds inU.K. Also client sites in U.K. N/A

UST Global Chennai, Trivandrum (both in India)and Austin, TX

Chennai


Texas, Arizona and Maryland St. Cloud, MN and Tempe, AZ

Zenta Mumbai, India; Chennai, India;Charlotte, NC; Florence, NC; andNew York, NY

Mumbai, India and Philadelphia, PA


2.8 Staff Numbers for MPO

It should be no surprise by now that Table 6 also indicates significant differences in the number ofstaff devoted to MPO between the rival vendors. What may be surprising is that it isn't only thebig names (such as IBM and EDS, with its BPO subsidiary, MphasiS) that have more than 1,000staff dedicated to this service, as do less familiar names in the world of outsourcing, such asZenta and Optimus (the BPO division of Polaris).

At the opposite end of the scale are vendors that, although they may be big overall, have a muchsmaller number of staff dedicated to this service (for example, Ordina, Headstrong, Synechronand Wolters Kluwer Financial Services). However, be wary of the conclusion that these are"lesser" providers. The specific processes they support may be fewer in number (for instance,Wolters Kluwer only supports three processes in origination and none in servicing), but they maybe more heavily automated and possibly more easily scaled up.

Table 6. Staff Numbers for Mortgage BPO

Staff Numbers for Mortgage BPO

Accenture 218

e4e Origination 475

EDS Origination 400; Servicing 900


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Staff Numbers for Mortgage BPO

EXL Origination 147; Servicing 269

Firstsource >700

Fiserv Lending Solutions Origination 200; Servicing 60

Genpact Origination 257; Servicing 150

Headstrong Services Origination 55; Servicing 15

IBM >1,000

iGATE Global Solutions 750

Infosys BPO 700

ISGN Origination 150; Servicing 350

Lydian Data Services Origination 178; Servicing 50

Ness Techs 500

Optimus (Polaris) Origination 30; Servicing 2,000

Oracle Financial Services (i-flex) Origination 500; Servicing 700

Ordina 22Quatrro BPO Solutions >150

Satyam N/A

Synechron Origination 15

TietoEnator Origination 200; Servicing 200

UST Global Origination 120; Servicing 65

Wolters Kluwer Financial Services Origination 22; Servicing 25

Zenta >1,200


3.0 SummaryMPO is a relatively mature form of industry-specific BPO, compared to many of the newer andmore-novel offerings now available, and it is especially popular in North America. That lack ofsymmetry is reflected in the rest of this survey.

What stands out in the responses is the great variety, and consequent lack of uniformity, in theofferings from this set of vendors. There are big differences in the portfolio of MPO servicesoffered, the size of deals, the number of staff, the locations the services are delivered from, thetrack record of the providers, and their heritage in IT and outsourcing.

This diversity is no bad thing. Cost savings are always a primary driver for BPO, but there aremany other costs and benefits that should be evaluated, not least the cultural fit between providerand user. The greater the choice and the variety, the better the chance of getting close to theideal fit.

This also resonates with the trend among large enterprises to use the more flexible option of "out-tasking" discrete parts or chunks of processes, rather than the more monolithic end-to-endoutsourcing deals. Simultaneously, small and midsize enterprises that eschewed outsourcing inthe past, because they lacked the scale or technology for such initiatives, can now follow thisroute, because of the platform-based, end-to-end solutions offered by many MPO providers.


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Users will also want to evaluate the fit in terms of their appetite for offshoring and the softwarerequirements (use their own systems, or the vendors proprietary systems, or an industry-standard, commercial third party's systems). Close attention should also be paid to the level ofautomation that is included for a specific service in MPO for origination or servicing.

A frustrating issue for many users of BPO in general is that the providers often don't provide anybusiness level advice or consulting as part of the transition to outsourcing. The providers just

want to come in and outsource without supporting the business, or improving business efficiency,or doing future planning, and so on. Potential users of MPO should do the due diligence to avoidthese pitfalls on the supply side.

On the demand side of the due diligence issue, users of MPO should put in place a governancemodel that will help in vendor and contract management. Most buyers fail to set aside sufficientresources for governance or to do this early enough. It is particularly important to try and ensurethat the transition to the third-party supplier is as smooth and seamless as possible, and that thevision and road map for the transformation to the future state is planned in advance of thetransition. "Offshore Delivery of BPO for Investment Services Firms" provides advice about howBPM methods and tools can facilitate transitions and re-engineering of processes.

Finally, users should also anticipate that this market is likely to see some consolidation and someexpansion of services, and the mechanisms for delivering them as MPO utilities and SaaS

matures. MPO providers may also be looking to take over captive offshore operations currentlyrun by banks. MPO users need to monitor the deals they have and keep exit strategies andrefresh plans up-to-date.

RECOMMENDED READING

"User Survey Analysis: Mortgage Process Outsourcing Clients Report High Levels of Savings"

"Seven Initiatives That Will Improve Mortgage Servicing"

"The Mortgage Servicing Divide: Functionality vs. Architectural Flexibility"

"A Survey of Mortgage Servicing Solutions"

"Offshore Delivery of BPO for Investment Services Firms"

"The Offshore Outsourcing Journey Goes Beyond Labor Arbitrage"

"Managing Risk in Offshore Outsourcing for Investment Banks"

"Gartner's 30 Leading Locations for Offshore Services"


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Documents

Bpo for Mortgage Origination and Servicing 159114