BPO: A Transformational Strategy
Chuck Clement, Andesa Services
Rob Mattioda, The Life & Annuity Group, Inc.
© 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
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by 2008 - Forrester
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© 2005 Cognizant
Business Objectives Today Are
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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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© 2005 Cognizant
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
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© 2005 Cognizant
The Legacy Transformation Value Triangle
Application Software Platform
Time to market improvement
Consolidation = lower maintenance costs
Enables process improvement
Legacy /
Business
Transformation
Business Processes
Labor Costs
Time to market improvement
Greater degree of automation
Increased productivity
Lower effort per transaction
Lower cost per policy
Less training / fewer resource management
issues
Outsourcing (BPO)
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© 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
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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
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© 2005 Cognizant
Why BPO As A Transformation Strategy
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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, ReEngineering 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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© 2005 Cognizant
Conventional BPO Vs. Transformational BPO
Conventional Outsourcing
BPO Transformation
Operations and Technology Focus
Business Focus – Business Driven
Benefits Derived From Labor
Arbitrage
Process Improvement – Creates
Value – Labor Arbitrage
Isolates – Delivers Some Degree
Of Control
Deliver Confidence – Manages
Risk
Executes Legacy Business
Processes
Modern Business Re-Alignment,
Technology & Services
Delivers Higher Performance –
Specialized Company
Delivers Higher Performance &
Economies Of Scale
Reduces Non Core Functions From
The Business To Provide A Single
Release Of Capitol
Business Transformed Enabling
Sustained Savings & Sustained
Value
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© 2005 Cognizant
BPO Transformation
BPO Is Less Effective When:
BPO Transforms When:
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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
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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
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© 2005 Cognizant
BPO Transformation Components
• Business Processes
• Strategic Outsourcing
• Technology
• Infrastructure
• Methodology
• Systems
• People
• Management
• Value
• Cost Containment
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© 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%
Discretionary
Spending
20%
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© 2005 Cognizant
Transformation Effects
Implement
BPO
Consolidate
Legacy Apps
Improve
Process
Re-Direct
Resources
Labor
Arbitrage
Maintenance Budget
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© 2005 Cognizant