1321514616full Shared Services PDF

India Shared Services opportunity
Nov 2011
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for distribution outside the client organization without prior written approval from Zinnov.
IT, BPO, KPO delivered from a Global center are typically shared by business
units across the organization & hence the name Shared Service Center
Shared Services Center

Shared Service Center: Definition
Enabling Process
Services
Core Business
Services
Corporate Processes that

are support structures to
the main business
Processes that administer

the core business of the
company
Example:
Auto:
Complete Vehicle
Repurchase
administration
Dealer Parts Location
& Ordering Support
IT Services
IT Services delivered for
the parent Organization
Application
Development
Analytics
Infrastructure
Management Services
Application Support &
Maintenance
HRO
Finance & Accounting
AP
AR
GL
Payroll
Reconciliation
Sales & Marketing
Procurement
Vendor Management
Marketing / Campaign
Management
Retail:
Order Management
Returns Management
Promotional Planning
Banking:
Credit card processing
Mortgage processing
Asset Servicing
Shared services involves bringing

together a set of back office or front
office services common to multiple
business units within a single
organization or across a number of
organizations. These services tend to
share relatively standard end to end
processes and associated enabling
technology. The relevant parts of these
are placed into a single delivery structure
that is customer focused and
performance managed.
Services suitable for sharing can be
characterized as:
Transactional process driven
Common processes that can be
standardized
High Volume
Geographically independent
Requiring specialist personnel
Source for Shared Service Center: Definition - www.cbi.org.uk

Zinnov Management Consulting Pvt Ltd (Confidential)
|2
Scope of discussion
India the hottest

destination for
Shared Services
Increased Global
Competition &
Challenges for
India Centers
Innovation is the
new India Value
Proposition
Evolution of India
Centers
Vertical Specific
Insights
|3
Agenda
India The hot destination for Shared Services
Global Competition & Challenges for India centers
Evolution of India Centers
Vertical Specific Insights
Innovation is the new India Value Proposition
|4
Forbes Global 2000 is a comprehensive report that analyzes the world's

biggest companies and the best performing of these titans
Geographical spread of HQ of
Global 2000
Africa
2%
Americas
41%
Australia
3%
Europe
22%
Top 15 verticals contribute to about 1500 companies
Verticals considered for

analysis by Zinnov
350
300
250
200
150
100
50
0
Asia
32%
Revenue based distribution of
Global 2000
>$100bn
2%
<$10bn
63%
$50100bn
4%
$1050bn
31%
Next 12 verticals contribute to about 500 companies

50
45
40
35
30
25
20
15
10
5
0
Source: Forbes Global 2000 report
|5
Almost all the centers were set up in the last decade when Cost and
Talent were the drivers of Globalization in the Shared Services space
Captive Centers Per Geographic Region
160
Location Criteria
146
Infrastruct
ure
Country
6%
Governme
Risk
nt Policy
3%
7%
140
120
100
Unknown
37%
80
80
60
52
Cost
18%
52
Talent
29%
40
20
11
0
India
China Rest of South Africa Eastern Ireland

Asia America
EU + / Wales
Russia
Source: Zinnov Research, Prof: Illan Oshri
Source: Prof: Illan Oshri
|6
BFSI segment accounts for about 30% of the centers; Bangalore is the
leading location
Vertical wise spread of Global 2000 firms with
India center
HQ wise distribution of companies with

India presence
35
30
Asia
9%
25
Australia Africa
1%
1%
20
N. America
15
10
Europe
35%
N. America
54%
Europe
Asia
Australia
Africa
Location spread of MNC Subsidiaries in India

NCR
20%
Others
6%
Distribution of Services offered from

India center
Bangalore
31%
IT Services
35%
Chennai
10%
Hyderabad
9%
45%
Mumbai/Pun
20%
e
24%
Source: Zinnov Analysis of Forbes Global 2000 companies, Secondary Research
Business /
Knowledge
Services
Others
|7
Agenda
|8
Lot needs to be done to sustain the India value proposition as emerging

offshore service locations are fast catching up on cost & talent arbitrage
Newly established captive centers per period per region
25
The rise in establishment of new captive

centers in Eastern EU is primarily due to
the accession of 12 countries into the EU
(10 in 2004 and 2 more (Bulgaria and
Romania) in 2007
Some locations present unique

opportunities with specialist talent
Example: Hungary has the largest talent
pool for procurement management skills,
Sri Lanka has the most number of UK
certified accounting professionals etc,.
Energy majors like Chevron and Shell and

Logistics majors like DHL have significant
presence in Malaysia because of availability
of specialist talent between Malaysia and
Singapore
Countries like Morocco, Tunisia, and other

Latin American countries leverage on their
European language skills to attract shared
service centers
Most of the competing offshore

destinations offer 10 year tax exemptions
on IT/ITeS exports and labor costs are near
the same as an Indian destination
20
20
18
17
18
15
12
10
10
China
9
6
India
6
44
8
6
Rest of Asia
6
Eastern EU+Russia
Source: Outsourcing Strategies Evolving Captive Center models
|9
This phenomenal growth and transformation that India centers have

undergone over the last decade has resulted in a new set of challenges
India center Challenges
Year 2000 - 2010
India center Challenges

Year 2010 and Forward
Aspiration Management
Lack of integrated career paths
Inadequate domain experience
Productivity & Utilization
Lack of value / maturity assessment

capabilities
Poor knowledge management
Lack of vendor management experience
Cost Escalation
Attrition
Competition from Service Providers
Inadequate engagement models to

align closely with the business
Lack of clarity in the vision for the
center
Building a Business Case for Globalization

In sufficient span of control to make
strategic investments
Lack of support structures for
innovation
| 10
Agenda
| 11
India centers will continue to adapt to changing business demands by

adopting various business models
Offshored
Function 1
Offshored
Function 2
Offshored
Function 1
Offshored
Function 2
Offshored
Function 3
Offshored
Function 4
Offshored
Function 3
Offshored
Function 4
Basic Model
(Completely In-house)
Outsource to
Local Vendor
Hybrid Model TESCO

(In-house + Outsource)
Offshored
Function 1
Offshored
Function 2
Build strong capability in a given function

and start servicing external clients
Client 1
Client 2
Offshored
Function 3
Offshored
Function 4
Client 3
Shared Model
BOSCH
(In-house + Service other clients)
Source: Zinnov Analysis and Secondary Research
| 12
With increased maturity & capability in service delivery, India centers are
better placed to support the parent companys globalization efforts
Globalization Adoption Curve* Across Functions
Globalization Rate
Technical Support/
Customer Support
Finance &
Accounting
Application
Development &
Maintenance
Infrastructure
Management
Services
Professional
Services IT
Consulting, System
Infrastructure
Sales &
Knowledge
Marketing Based Services
Procurement
& Logistics
Year 2000
Human
Resource
Emerging
Engineering
Services/
Software Product
Development
Year 2011
Rapidly Growing
Mature
Maturity
Note: *Directional Only
Source: Zinnov Analysis of the interviews from Country Managers of 40 captives across different domains in India; Secondary Research
| 13
Agenda
| 14
Banking, Financial Services and Insurance segment has utilized India

centers the most, with 20 large corporations having back office operations
Revenue wise split of Financial Institutions
that have India center
Revenue wise distribution of Global 2000 Banking and Financial Services companies
& how they have leveraged India Shared Services Opportunity
20
18
16
2
5
14
<$10bn
12
$10-50bn
10
$50-100bn
$10-50bn
Growth Opportunity
India Shared Services presence
$50-100bn
>$100bn
Total
Growth Opportunity
6
4
<$10bn
>$100bn
5
20
40
60
80
100
0
Source: Zinnov Analysis of Forbes Global 2000 report and Secondary Research
Notes:
Chennai
The financial institutions cover both Banks (13) and Diversified Financial services firms(7)
There is a huge opportunity, with the trend of Banks making $50-100bn USD revenues, planning
to set up India centers to increase their processing capacity & improve operational efficiency
The spurt in derivatives and mortgage business in the US, triggered the set up of India centers for
increased throughput processing. Over the last year, these financial captive centers are evolving
Bangalore continues to be a preferred ITO destination of most of these financial services

institutions. Pune/Mumbai and NCR lead the pack on BPO / KPO front
Hyderabad
Bangalore
Mumbai /
Pune
NCR
| 15
7 out of the Top 20 Insurance majors have Shared Services Operations

in India
Revenue wise distribution of Insurance companies in Global 2000
& how they have leveraged India Shared Services Opportunity
HQ of the Insurance Majors with

India Service Centers
1
$10-50bn
Growth Opportunity
5
India Shared Service

presence
$50-100bn
Growth Opportunity
Europe
US
Canada
Total
>$100bn
10
20
30
40
Notes:
Contrary to the overall trend of North American companies leveraging India Services
capabilities, in the Insurance segment, European majors are way ahead of the pack
There are about 64 Insurance companies with Sub $10 bn revenue. They do not have India
presence
Most of the U.S Insurance companies still do not have a captive center
Aviva and AON had India service centers in Bangalore which were later acquired by WNS and
Hewitt
NCR
Bangalore
Mumbai
Trivadrum
| 16
Drugs, Healthcare & Bio-tech vertical has seen a spurt in IT/ITeS

sourcing, with 7 MNCs setting up their Indian subsidiaries since 2005
12
Typical Services delivered from India center
# of companies
10
8
6
4
2
0
1995
1997
1999
2001
2003
2005
2007
IT (ADM / ASM / Infra)

Clinical Trials
Drug development (R&D)
Clinical Data Management (ITeS)
Business process support
F&A
Literature Search
Regulatory Submissions
Analytics
2009
Notes:
Clinical trials and drug development are the core focus areas of 3 (Amgen, of the firms. China is
the clear leader in Clinical Trials segment
Hyderabad
Patent / IP regulation in India is a cause of concern for most of these companies and hence the
are hesitant to set up India R&D centers. So, this particular segment cannot avail the trend of
MNC subsidiaries setting up R&D / Engineering services and then leveraging the IT / ITeS
capabilities
Chennai
Others
NCR
Bangalore
However companies like Pfizer, Novozymes, Novartis, Merck still source significant IT / ITeS
services from India
UHG & Cardinal Health (Operating under CareFusion brand) are couple of large Healthcare
service providers that have India centers delivering IT and BPO services to their parent
businesses
Mumbai/Pu
ne
| 17
6 Auto majors have set up India service center since 2003. Denso will soon
establish a technical center in India
Coming soon
Chennai is the leading location for
Automotive shared service centers
NCR
Chennai
Bangalore
Typical Services delivered from India center
Notes:
Growing domestic demand has resulted in many new auto companies entering the India
market
As the domestic business of the auto companies grows, the need for servicing India business
and customers will also grow. This could trigger a move for Globalizing their service operations
via the India center
Volvo IT, Daimler, Renault Nissan, Ford, Yamaha Motors all have shared services operations
that cater to the IT / ITeS needs of their parent organizations
Introduction of Formula 1 in India will fuel the growth of automotive segment in India
Continental already has a Engineering center in India, this could potentially be followed by
Goodyear, Bridgestone, Michelin,
Financial Services (F&A) processes

Dealer Management
IT Management
Transactional processing e.g. Ford Credit
Market Research
Global Warranty fulfillment management
Marketing support
Customer Relationship Management
| 18
Aerospace and Energy/Oil & Gas are two segments to watch out for, since
there has been a significant focus in India business operations lately
Shell Business Services delivers following processes to support their Global Finance Operations
Order to Cash
Purchase to Pay
Record to Report
MIS
Manual of Authority
BI & Strategy Analysis
Control & Compliance
GSAP
Continuous Improvement & Service Delivery
Source: Company Website and Secondary Research
Notes:
Since the Indian Defense Offset Policy of 2007, Aerospace companies have made significant investments in Engineering captive centers, which
could potentially become Shared Service centers
NCR region has 6 centers for Aerospace & Defense Engineering Services
Shell is the pioneer in leveraging ITeS services in the Energy & Oil/Gas segment
United Technologies (has an India delivery center) & is a typical example of a Shared Service center that caters to 7 business houses, through one
centralized service center for technology
| 19
Agenda
| 20
Moving on from the head start given by cost and labor arbitrage,
Innovation will be the key to demonstrating India value proposition
The Next Growth Wave for India centers
CURRENT STATE
INCEPTION
Competency Creation
Innovation from India Centers
Paradigm
Shift
Increasing Maturity
Maturity Levels
Direct Cost
Savings
Innovation
Capability
Management
Overheads
Employee
Productivity
Ease of
Knowledge
Transfer
Business
Continuity
Risk
Transformation Hub
Capability Unit
Delivery Center
Operations Center
None
Low
Medium
High
Very High
Favorable
| 21
4 brick and mortar retailers have re-fit their India centers to build and grow
innovation or new business initiatives instead of commoditized services
Outsources traditional IT
Set up in 2005
Set up in 2009
.com business set up in 2009
Set up Walmart e-commerce

division in late 2009
.com and e/m-commerce

teams set up in early 2010
.com product development

focus 2011
Employee Strength: ~900

(Technology & Operations)
Employee Strength: 45
(Technology)
Employee Strength: ~250:

(Technology & Operations)
Employee Strength: Ramp up

plans to about 400
(Techology)
Innovation Structure: Yes

Innovation Infrastructure:
Retail Test Labs
NA
Innovation Structure: Yes,

Focus on Smart Design
Innovation Infrastructure:
Proof of Concept Labs
Engineering (Online &

Mobile), Marketing, Search &
Social Media, Operations
Development, Finance,
Publishing
Engineering (Online)
Engineering (Online), Content

Management, Online-brand
Management, Marketing,
Search & Social Media,
Merchandise Planning
Engineering (Online & Mobile)
CEO visit - 2011
VP Engineering hired in Dec

2011
CIO visit 2011
CIO visit 2011
Set up 2004
Source: Media, Secondary Research

| 22
With increase in sourcing of high end capabilities from captive centers, the
India centers will be required to deliver business transformation projects
Finance
Processes
HR
Processes
Value Growth
Financial Planning/ Modeling /

Analysis
Procurement
Processes
Source to Pay Strategy
Governance, Risk & Compliance

Management
Strategy and Governance
Spend Data Management
Treasury & Tax
Learning & Development and

Performance Management
Strategic Sourcing
Closing & Reporting
Recruiting and Staffing
Vendor Management
General Accounting
Benefits Administration
Demand Management
Finance Operations
Payroll Management
Procure to Pay
MIS
Workforce Administration and

Leave Management
Procurement Systems
Management
Sample set of processes and growth in value of services delivered from India center
| 23
Knowledge Services offers higher intellectual arbitrage and large MNCs will
look set up specific practices and build new capability
Distribution of Services Lines
Business Research
Data Analytics
Legal Research
Data Management
Market Research
Others
1%
12%
7%
Domain
Company
Insights
Retail
Target
Have dedicated business

analytics teams Global
head of analytics of Target
operates out of Bangalore
Center.
Media
TIME
TIME magazine has set up a

specialized division in India
to source only analytics
capability
Conglomerate
GE - JFWTC
Patent Network Team

Intellectual Property
Research for GE Corporate
Electronics
Dell
Dell Global Analytics has a

team operating out of
Bangalore with strong plans
for growth
44%
17%
19%
Source: NASSCOM, Zinnov Research
Source: Zinnov Research
Drivers of Knowledge Services Sourcing

Knowledge
Economy
Improved Time to
Market
Need for Business

Analytics
Access to
specialized skills
| 24
Introduction of disruptive technologies and focus on emerging markets will

be the pivotal drivers for the next wave of growth of shared service centers
Business Drivers to set up Shared
Services Centers
Banking &
Financial Services
Insurance
Retail
Automotive
India
Value Proposition
Technology Disruption
Online Operations
Enterprise Mobility
Big Data
Installed Specialist Talent Pool for

Business services
Availability of talent & R&D eco-system
to deliver cutting edge software products
U.S Insurance majors having to cope with

the recently passed HealthCare reforms
Cost and Talent arbitrage
Changing Business Models

Online Operations
Big Data
Increasing Digital Startups in the e/m

commerce space and hence increased
opportunity for tech and business
process innovation
Market & Capacity Expansion
Innovation capability (New product

Development, Engineering Services and
Knowledge of Services provisioning for
emerging markets)
| 25
It is a great exaggeration when analysts talk about death of captive

centers, instead we see that captives have evolved & adapted well
160
100%
140
90%
100%
90%
80%
120
No Change to
Captive Strategy
70%
100
Outsourced
operations
80
Captive
Operations
60
40
20
0
Large Global
Corporations
60%
50%
Changed their
Captive Strategy
40%
80%
70%
61%
60%
Terminated
50%
Divested
40%
30%
30%
9%
6%
20%
20%
11%
10%
10%
13%
0%
0%
Captive Centers
Wholly owned
Shared
Hybrid
Captive
Centers
Source: Prof. Ilan Oshris assessment of 80 captive centers of large global companies (in India)
| 26
Key Takeaways
India: Most preferred

destination
Sheer number of Global 500 firms having India service centers re-affirms the proposition of
captive centers as a viable sourcing strategy. With about 115 MNCs having set up their own
centers,India continues to be the hottest offshore destination
Global Competition
& Challenges for
India centers
There is an increased competition from other Global locations and cost and talent arbitrage are
not sufficient conditions for location choice anymore Innovation and value addition are
emerging as the new India Value Proposition and many companies have recognized this trend
Evolution of India
Centers
IT services is the first port of call for some of the newer captives, and they have subsequently
gone on to expand the range of services they source from India. These centers have grown in
maturity and capability and have adapted well with innovative business and delivery models
Vertical Specific
Insights
Banking/Financial Services & Insurance are the most mature segments with most of the industry
leaders leveraging India for their Shared Services needs
Retail and Healthcare (Drugs/Bio-Tech/Pharma) are the emerging verticals, as far as the shared
services opportunities are concerned. Both these segments have significant technology and
increased processing throughput needs to expand their business operations
Innovation is the new

India Value Proposition
Many Shared Service Centers support scaled operations, drive innovation, have reached the
critical mass and, are a huge success delivering optimal value to the parent Many India centers
have taken Global Leadership roles through increased focus on innovation and value creation
There have been innumerable literature about how unviable the captive centers are and some
even predicted the death of captive centers. But the captive center segment has evolved and
adapted well and continue to grow
| 27
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Phone: +1-281-362-2773
A typical Combined Services Center has significant upsides and can

help drive better operational efficiencies
Captive centers can leverage economies of scale and hence

deliver more for every $ spent on services provisioning
End-to-End process ownership provides for an integrated global
career path and hence helps in improving retention rates at
India centers
Build true Centers of Excellence and hence deliver better
efficiencies to the parent
Provides the center with a clear vision and hence enables the
site leadership to make strategic investments
Helps create and operationalize a sustained innovation agenda
| 29
List of Global 2000 companies that source Shared Services capability

through their India center
Insurance: (9)
Banking & Finance: (22)
Retail: (6)
Healthcare: (8)
Automotive: (7)
AXA Group
Allianz Cornhill
MetLife
Prudential Financial
Swiss Re Group
Sun Life Financial
Fortis
Willis Group Holdings
Fidelity National Financial
Others: (2)
Shell Business Services

Maersk
Bank of America
JPMorgan Chase
HSBC
BNP Paribas
Wells Fargo
Royal Bank of Scotland
Barclays
Deutsche Bank
Socit Gnrale
Goldman Sachs
Credit Suisse
UBS
Morgan Stanley
ANZ Banking
American Express
Bank of New York Mellon
Nomura
Franklin Templeton
Fidelity
The Northern Trust
World Bank
Lloyds Bank
TESCO
Target
Wal-mart
Amazon
E-Bay
Sears
Metro
Cerner
UHG
TriZetto
Pfizer
Novartis
Novozymes
Johnson & Johnson
Merck
Industrial: (16)
Hi-Tech / Telecom: (19)
SIEMENS
Royal Philips Electronics
ABB
Honeywell International
3M
Schneider Electric
Emerson Electric
John Deere
Ingersoll-Rand
Eaton
Vestas Wind Systems
SKF Group
Flowserve
Rockwell Automation
United Technologies
Dupont
Toyota Motor
Ford Motor
Daimler
Volvo Group
Renault*Nissan
Yamaha BPO
Continental
AT&T
Avaya
Hewlett-Packard
Verizon Communications
Microsoft
Dell
Cisco Systems
Intel
BT Group
Arrow Electronics
EMC
Qwest Communications
Applied Materials
CA
NetApp
Adobe Systems
Amdocs
Vmware
Citrix Systems
Non-Exhaustive
| 30

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India Shared Services opportunity

Shared Services Center

Corporate Processes that

Processes that administer

Shared services involves bringing

Source for Shared Service Center: Definition - www.cbi.org.uk

India the hottest

Zinnov Management Consulting Pvt Ltd (Confidential)

India The hot destination for Shared Services

Global Competition & Challenges for India centers

Evolution of India Centers

Vertical Specific Insights

Innovation is the new India Value Proposition

Zinnov Management Consulting Pvt Ltd (Confidential)

Forbes Global 2000 is a comprehensive report that analyzes the world's

Top 15 verticals contribute to about 1500 companies

Verticals considered for

Next 12 verticals contribute to about 500 companies

Source: Forbes Global 2000 report

China Rest of South Africa Eastern Ireland

Source: Zinnov Research, Prof: Illan Oshri

Source: Prof: Illan Oshri

Zinnov Management Consulting Pvt Ltd (Confidential)

HQ wise distribution of companies with

Location spread of MNC Subsidiaries in India

Distribution of Services offered from

India The hot destination for Shared Services

Global Competition & Challenges for India centers

Evolution of India Centers

Vertical Specific Insights

Innovation is the new India Value Proposition

Zinnov Management Consulting Pvt Ltd (Confidential)

Lot needs to be done to sustain the India value proposition as emerging

The rise in establishment of new captive

Some locations present unique

Energy majors like Chevron and Shell and

Countries like Morocco, Tunisia, and other

Most of the competing offshore

Source: Outsourcing Strategies Evolving Captive Center models

Zinnov Management Consulting Pvt Ltd (Confidential)

This phenomenal growth and transformation that India centers have

India center Challenges

Productivity & Utilization

Lack of value / maturity assessment

Inadequate engagement models to

Building a Business Case for Globalization

India The hot destination for Shared Services

Global Competition & Challenges for India centers

Evolution of India Centers

Vertical Specific Insights

Innovation is the new India Value Proposition

Zinnov Management Consulting Pvt Ltd (Confidential)

India centers will continue to adapt to changing business demands by

Hybrid Model TESCO

Build strong capability in a given function

India The hot destination for Shared Services

Global Competition & Challenges for India centers

Evolution of India Centers

Vertical Specific Insights

Innovation is the new India Value Proposition

Zinnov Management Consulting Pvt Ltd (Confidential)

Banking, Financial Services and Insurance segment has utilized India

Bangalore continues to be a preferred ITO destination of most of these financial services