© 2005 Cognizant
BPO: A Transformational Strategy
Chuck Clement, Andesa ServicesRob Mattioda, The Life & Annuity Group, Inc.
Page 2 © 2005 Cognizant
Definitions
• DEFINITION: Business Process Outsourcing occurs when an organization turns over the management and optimization of a business function, such as accounts payable or purchasing, to a third party that conducts the activity based on a set of predetermined performance metrics. – Computer World
• DEFINITION: - Transformation a : to change in composition or structure b : to change the outward form or appearance of c : to change in character or condition: - Webster’s
• Trend: BPO Market will grow to 146 billion dollar industry by
2008 - Forrester•
Page 3 © 2005 Cognizant
Business Objectives Today Are
• Increase Share Holder Value
• Time To Market – New Products
• Cost Containment – Delivering Lower Unit Cost
• Processing Flexibility That Adapts to Business Direction & Strategy
• IT solutions That Support And Deliver The Business
• Adding Functionality Without Complexity
• Growth – Organic and Mergers & Acquisitions
* Have These Really Changed Over The Years?
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Business Transformation
• Transformation Is About Change, It’s About Business Improvement- Better Delivery – Products & Services
- Better Processes – Streamlined & Clean
- Lower Costs – Business & IT
- Greater Flexibility To Grow The Business
- Consolidation – Fewer Moving Parts
- Increased Share Holder Value
• Business First – Technology Second
Page 5 © 2005 Cognizant
The Legacy Transformation Value Triangle
Legacy / Business
Transformation
Legacy / Business
Transformation
Labor Costs
Greater degree of automation
Lower effort per transaction
Less training / fewer resource management issues
Outsourcing (BPO)
Labor Costs
Greater degree of automation
Lower effort per transaction
Less training / fewer resource management issues
Outsourcing (BPO)
Business Processes
Time to market improvement
Increased productivity
Lower cost per policy
Business Processes
Time to market improvement
Increased productivity
Lower cost per policy
Application Software Platform
Time to market improvement
Consolidation = lower maintenance costs
Enables process improvement
Application Software Platform
Time to market improvement
Consolidation = lower maintenance costs
Enables process improvement
Page 6 © 2005 Cognizant
BPO Is A Transformation Strategy
• Transformation Is About Change, It’s Not Repeating Or Replicating Today’s Limitations & Issues
• BPO Is Transformation- Delivers Better Processes – Facilitates Today's Business Objectives, Best Of
Breed
- Delivers Modern Applications – No More Piecing Together Disparate Packages
- Delivers End To End Well Configured Components – Common Look and Feel Across All Products
- Delivers Time To Market and Lower Cost
Page 7 © 2005 Cognizant
Why BPO As A Transformation Strategy
• BPO Is a Bundled Approach To Transformation – Processes, Technology, Service & People
• Legacy Applications Are So Intertwined Within A Company’s Infrastructure That Change Becomes More Difficult And More Expensive
• BPO Strategy Focuses On Core & Non Core Functions By Bundling Technology, Business Process Improvement, Re-Engineering And Productivity Improvements Implemented As A Program In One Box
• BPO Transformation Is A fundamental Change From Legacy Business Problems And Legacy Applications To Best Of Breed Business Processes And Modern Technology Platforms
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Conventional BPO Vs. Transformational BPO
Conventional Outsourcing BPO Transformation
Operations and Technology Focus
Benefits Derived From Labor Arbitrage
Isolates – Delivers Some Degree Of Control
Executes Legacy Business Processes
Delivers Higher Performance – Specialized Company
Reduces Non Core Functions From The Business To Provide A Single
Release Of Capitol
Business Focus – Business Driven
Process Improvement – Creates Value – Labor Arbitrage
Deliver Confidence – Manages Risk
Modern Business Re-Alignment, Technology & Services
Delivers Higher Performance & Economies Of Scale
Business Transformed Enabling Sustained Savings & Sustained
Value
Page 9 © 2005 Cognizant
BPO Transformation
BPO Transforms When:
• You Derive Value From Every Aspect Of The Business – Not Just An IT Solution
• Deliver The Business Consistently Across Products – Fewer Resources Required
• Business Processes Align With Business Objectives
• Legacy Maintenance No Longer Stifles Business Growth
• Business Results Are Improved
BPO Is Less Effective When:
• Outsource The Business, Focused Only On The Savings From Labor Arbitrage
• Haven’t Driven Savings From All Aspects Of The Business
• Replicate The Deficiencies Under The Management Of Others
• Viewed As A Technology Solution
• You Haven’t Positioned Your Business For Growth And Business Results Are Not Self Evident
Page 10 © 2005 Cognizant
BPO Transformation Components
• Business Processes• Strategic Outsourcing• Technology• Infrastructure• Methodology• Systems• People• Management• Value• Cost Containment
Page 11 © 2005 Cognizant
Business Growth Through Budget Transformation
• The Current Budget Paradigm Does Not Support Growth
• Budget Dollars Are Consumed By Maintaining The Business
Application Maintenance
70%
Amortization Expense
10%
DiscretionarySpending
20%
Page 12 © 2005 Cognizant
Transformation Effects
ImplementBPO
Labor Arbitrage
Re-DirectResources
Improve Process
ConsolidateLegacy Apps
Maintenance Budget