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: - Websters

Trend: BPO Market will grow to 146 billion dollar industry by

2008 - Forrester

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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, Its 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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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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BPO Is A Transformation Strategy

Transformation Is About Change, Its Not Repeating Or Replicating
Todays 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

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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 Companys
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 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

Havent Driven Savings From All Aspects
Of The Business
Replicate The Deficiencies Under The
Management Of Others
Viewed As A Technology Solution

You Havent Positioned Your Business

For Growth And Business Results Are
Not Self Evident

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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