1. The Future of Business Process Outsourcing

2. The BPO Hype Cycle Source: Gartner Group, The Hype Cycle for IT Services, June 6, 2003.

Rising investments

Explosion in # of new entrants

Market confusion

Valuation spikes

Market CAGR estimates range from 50% - 80% for the next five years

3. Long-Term Business Pressures Drive More Outsourcing 4. Moving Up the Value Chain Source: Edelweiss Capital, Business Process Outsourcing: Coming of Age?, May 2003 Future Simple Processes Complex Processes Business Functions 5. The Evolution of BPO Models TransformationalOnshore BPO Example: Sabre (Travel Services) Onshore Offshore Commodity BPO Transformational BPO CommodityOnshore BPO Example: CSC, EDS(IT Services) CommodityOffshore BPO Example: GE Capital (Payroll Services) TransformationalOffshore BPO 6. Approaches to BPO Simple bulk transactions processing Broad shared services High-volume vertical processes Niche vertical apps Bottom-Up Approach Top-Down Approach Source: Cognizant Analysis of Forrester Research Report: BPOs Fragmented Future, August, 2003.

Leverage:

Economies of scale

Labor arbitrage opportunities

Industry best practices

To Create:

Best-of-breed commodity services

Immediate cost savings

Flawless process execution

Growth Opportunity:

Identify complex processes that require industry / domain expertise

Build differentiated competencies that boost market position

Leverage:

Deep process expertise in vertical industries

Trusted partner relationships and reputations

To Create:

Highly customized, industry-specific services

Long-term differentiation / competitive advantage

Growth Opportunity:

Leverage outsourcing competency to reduce costs and boost performance throughout value chain

Consider retailing services to competitors

7. Emerging Offshore BPO Opportunities

Transaction processing

Credit Card / Check processing

Loan processing

Mortgage processing

Collections

Insurance application processing

Claims processing & adjudication

Member management services

Medical billing

Claims processing & adjudication

Member management services

Medical transcription

Banking / Financial Services Insurance Healthcare

R&D

Equity Research

Clinical Trials

Revenue Accounting (Airlines)

Engineering Design

Architecture

Other Verticals Sales and Marketing Contact centers, telesales/telemarketing, customer care, web sales and marketing, market analysis Human ResourcesPayroll processing, benefits administration, HR administration Finance and AccountingAccounts receivables / payables / general accounting, financial reporting, shareholder services 8. Possible BPO StructuresService Arrangement Joint Venture Outsourced Service Build Operate Transfer Service Management People & Investment Pros Cons

Can get going quickly

Lower client management overhead

Higher ongoing P&L cost vs. alternatives

Limited value creation potential for client

Less control

Eases entry into offshore operation with experienced partner

Lower long-term cost

Complete control

Limited value creation (captive)

No ownership Day 1

Retention

Only 2nd tier partners

Leverage partners offshore infrastructure and experience

Ownership Day 1

Lower costs (initial and long-term)

Limited value creation (captive)

Leverage partners offshore infrastructure and experience

Value creation opportunity (if non-captive)

Exit issues

9. Offshoring and Reengineering Can Lead to Dramatic Performance Improvements 10.

LOB

Bank card processing/ receivables

Telemarketing services

Mutual fund services

Opportunity for Value Creation - FDC (FORMERLY AMEX INFORMATION SERVICES)

Highlights

• Provides bank card processing, payment products for Mastercard, Visa, American Express, and numerous private-label cards

• Recent expansion in receivables management (American Creditors Bureau, Ingram)

• Provides inbound and outbound telemarketing services and, through joint venture with AT&T, interactive services for 800/900 telephone industry

• Manages the processing for 20 million mutual fund shareholder accounts

Results

• 2002 Revenues: $7.636 billion 2002 Earnings: $1.238 billion

• AMEX sold 40 million shares (40% ownership) in early 1992 for $22/share; recently traded at $160/share (split-adjusted)

• AMEX further reduced stake to 22% through second offering worth approximately $1 billion in 1993

• Acquired FFMC (August 1995) for expanded operation and greater economies of scale

• Finalizing acquisition of Concord EFS

Source: FDC annual reports; industry articles; Datamation 11. Cognizants Initial Approach

Deep Process Experience

Deep Industry Expertise

Industry Value Chain

Industry Competitive Forces

Company Core Competencies

Business Strategy

Company Outsourcing Readiness

Excellence in Offshore Recruiting/People, Processes/Infrastructure

Excellence in Delivering High-quality Services Remotely

Established Market Leader in the India Space

Clients Cognizant Joint Analysis Transformational Outsourcing

Strategic Outsourcing Decisions

Highly Customized Service Offerings

Long-term Competitive Advantage

12. Strategy To Drive BPO DecisionsScope Discovery Analysis Feasibility Assessment

Inventory key business processes and current SLA parameters

Catalog support technology platform requirements and skill sets of support staff

Identify root drivers of process costs and inefficiencies

Gather transaction volume data and model across processes

Map underlying support systems

Determine BPO structure model

Identify pilot

Determine resource requirements

Identify changes to support process in onshore/offshore model

Determine cost savings per business process based on task migration and improvement

Identify costs of process migrations

Identify any key sequencing needs

Undertake a BPO strategy assessment to determine which processes to outsource, financial impact and implementation plan 13. Cognizant Service Offering

Cognizants Business Technology Consulting Group in concert with its vertical practices, works with clients in BPO strategy engagements

These engagements last from 8-12 weeks, depending upon scope typically deliver:

• An assessmentof suitability of select business process outsourcing based on economics, integration with other processes, systems and skill requirements

• A step-by-step plan for creating a BPO operation that mitigates risk and provides senior management focused measures and controls for BPO management

For for information, contact:

Kaushik Bhaumik

VP, Business Technology Consulting

(925) 790-2012

[email_address]