CONFIDENTIAL
Offshoring in Insurance Industry - An Overview
Snippets from Zinnov report
To obtain a copy of the full report, please send your requests to Zinnov LLC [email protected]
September, 2007
This report is solely for the use of Zinnov clients, Zinnov Prospects and Zinnov personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the organization without prior written approval from Zinnov LLC.
1Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3
Case Study &RecommendationCase Study &Recommendation
4
• Models Adopted– Captive /
Vendor/BOT• BOT Benefits and
Challenges• Cost comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
2Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3
Case Study &RecommendationCase Study &Recommendation
4
• Models Adopted– Captive /
Vendor/BOT• BOT Benefits and
Challenges• Cost comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
3Zinnov Confidential
Global insurance outsourcing is expected to grow comfortably at a CAGR of 8 percent to become a US$ 24.5 Billion industry by 2010
Tapped Offshored IT Industry
11%13.8 14.9 16.2 17.5 18.9 20.3 21.7
0.91
1.31.5
1.92.3
2.8
0
5
10
15
20
25
30
2004 2005 2006 2007 2008 2009 2010
Onshore Outsourcing Offshore Outsourcing
Growth trend of Insurance Outsourcing (2004 – 2010)
Siz
e (in
US
D B
illion
)
CAGR ~8 %
Insurance Outsourcing Landscape - 2006Insurance Outsourcing Landscape - 2006
• Currently global insurance outsourcing is worth US$ 17.5 Billion Industry, with a large piece of business still done onshore– Onshore Outsourcing
• It accounts for roughly 92.6 percent of the total outsourcing pie, which stand at USD 16.2 Billion
– Offshore Outsourcing• On the other hand, this segment
account for roughly 7.4 percent of the total outsourcing pie, which stands at USD 1.3 Billion
• Driver for Outsourcing by Insurance industry– Reduce Costs & Improve efficiencies– Enhance customer services– Help enable Business Transformation– Focus more on core-competency
Sources: Gartner, 2005; Nelson-Hall, 2005; Forrester Research, 2006; Zinnov analysis
4Zinnov Confidential
Key structural changes in the Insurance industry are creating new opportunities for Offshoring …
TrendsIn
Global Insurance
• Increased focus on financials• Profit Margins, Earnings per
share, and looming share prices• Low interest rates becoming
order of the day
• Increased complexity in managing risks
• Focus on multiple distribution channels
• Business transformation gaining strength
• Matured premium growth• Increasing globalization• Changing risks with
geographies• Cost reduction
• Consolidation in the industry• Outsourcing various function so
as to increase core-competency
Source: Secondary research and Zinnov Analysis
5Zinnov Confidential
… and further, these changes can become a key differentiator for technology initiatives
Mapping Trends in Insurance Industry with its probable impact on technology initiatives
Source: Secondary research and Zinnov Analysis
Decrease non-core activity expenditure and focus on core processes
TrendsTrends
• IT solutions for re-engineering of knowledge base, integration, and scalability to improve savings
• It will lead to global sourcing initiatives
“ Impact on Technology “
Shift from product based to customer-centric solutions
• Process and service oriented solutions facilitating effective business transformation
Multiple distribution channels need for greater IT support
• Process automation and better workflow management
Greater regulatory compliance • Lesser Control on IT spend
6Zinnov Confidential
In spite of having so many benefits, the current scenario in the industry is playing a restraint for the growth of Offshoring
Current SituationCurrent Situation
• High levels of IT expenditure
• Cautious approach towards Outsourcing
• Lack of skilled workforce
• Lack of clear and sufficient regulations
• Service-oriented architecture (SOA) systems
Restraints for Offshoring Restraints for Offshoring
• Compliance requirements
• Impact on customer/supplier and employee relationships
• Complexity of managing risks
• Language and cultural barriers
• Structural limitations
• Customer and Provider privacy issues
• Policies and regulatory compliance
• Time-zone differences
The Present Scenario
The Present Scenario
• Currently, there is hesitation from insurance providers to pursue outsourcing initiatives• Lack of skilled workforce, and insufficient regulations have led insurance providers to
rely on onshore initiatives rather than offshoring despite cost advantages provided by low-cost offshore locations
• Currently, there is hesitation from insurance providers to pursue outsourcing initiatives• Lack of skilled workforce, and insufficient regulations have led insurance providers to
rely on onshore initiatives rather than offshoring despite cost advantages provided by low-cost offshore locations
Source: Secondary research and Zinnov Analysis
7Zinnov Confidential
… and there are challenges spread across both short term and long term time periods, inhibiting the prospects for offshoring
• Risk and asset management• Profitability from core insurance
activities• Efficient product development and
distribution initiatives• Cost reduction• Maintaining organic growth and
integrating mergers/acquisitions and alliances
• Resolve workforce issues• Increase capability to handle global
economic and industrial fluctuations• Reduce losses
• Effective capital management for long-term visibility and smoother operations
• Streamline sales and distribution networks
• Competition from new entrants
• Customer-specific products and services
• Maintaining profitability and operating margins
• Expansion of business
• Lack of skilled workforce
Short Term Long Term
Source: Secondary research and Zinnov Analysis
8Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3Case Study &RecommendationCase Study &Recommendation
4
• Models Adopted– Captive /
Vendor/BOT• BOT Benefits and
Challenges• Cost comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring
– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
9Zinnov Confidential
Insurance Offshoring though a late starter, going ahead is bound to grow at a CAGR of 30 percent to become a USD 2 Billion industry by 2010
0.50.6
0.7
0.9
1.2
1.5
2.0
0
0.5
1
1.5
2
2.5
2004 2005 2006 2007 2008 2009 2010
Growth trend of Insurance Offshoring to India(2004 – 2010)
Siz
e (in
US
D B
illion
)
CAGR ~23.4 %
CAGR ~30 %
US64%
Total = USD 0.7 BillionTotal = USD 0.7 Billion
Revenue Breakup Insurance Outsourcing in India 2006
Europe28%
Rest Of the World
8%
Source: Nasscom; Zinnov Analysis
10Zinnov Confidential
Factor such as a vast supply of graduates, supported by a good number of Institutions has become a major driver for the Offshoring initiatives…
Cumulative – Total graduates and science graduates Total Engineering graduates passing out annually
In 2005, 450,000 Engineering graduates passed out annually from Indian universities
milli
ons
0.070.10
0.230.26
0.280.31
0.34
0.45
0.0
0.1
0.2
0.3
0.4
0.5
1991 1995 2000 2001 2002 2003 2004 2005
Number of Engineers passing out annually
Year
3.1 3.6 4.6 5.6 6.2 7 8.7 11.2
30.5
37.5
26.424.622.5
19.717.317.4
0
10
20
30
40
50
60
1991 1995 2000 2001 2002 2003 2004 2005
Science Graduates Other
Year
milli
ons
48.7
39.2
33.430.8
28.124.3
20.920.5
Source: NCAER, Education Ministry, Country labor and graduation statistics; Watson Wyatt, Zinnov analysis
11Zinnov Confidential
…currently India has the largest supply of talent pool for the ITO and BPO sectors among its peer nations
727
654
514
427
293285
242232
210
1029
6386
1773
India China Russia Phillippines Turkey*** Thailand*** Poland Brazil Mexico Indonesia 18 other Lowwage
countries
Total supplyof suitablelow wagetalent (28countries)
28%
11%
10%
8%
7%5%
4%4%
4%3%
16%
Aggregate suitable* graduate talent pool for offshore IT & BPOThousands (‘000)
Source: NASSCOM, Zinnov
12Zinnov Confidential
Skill Set (Installed Base) – IT; India has the biggest talent pool in mainframes, Java/J2EE …
Datawarehousing/BIDBA
SAP-allC, C++/Unix
Telecom
Oracle Application DBAOracle Apps-Func & Tech
People SoftPortal and content management
RetekJava/J2EEMainframe
SiebelQuality- SQA and SEPG
EAIABAP
TestingMicrosoft technologies
IT infrastructure
• Details of talent pool size/ breakup are captured in the full report, please send your requests to [email protected]
Source: Zinnov research
13Zinnov Confidential
Bangalore has considerable talent pool available in the IT infrastructure arena compared to other cities in India …..
Datawarehousing/BIDBA
SAP-allC, C++/Unix
TelecomOracle Application DBA
Oracle Apps-Func & TechPeople Soft
Portal and content management
RetekJava/J2EEMainframe
SiebelQuality- SQA and SEPG
EAIABAP
TestingMicrosoft technologies
IT infrastructure
• Details of talent pool size/ breakup are captured in the full report, please send your requests to [email protected]
Source: Zinnov research
14Zinnov Confidential
While, looking from the installed talent point of view, India has the biggest talent pool in traditional BPO functions
Finance and accounting
Outbound Sales ( Voice)
Insurance
HR back office
Tech Help desk
Content development
Clinical Data Management
Procurement
• Details of talent pool size/ breakup are captured in the full report, please send your requests to [email protected]
Source: Zinnov research
15Zinnov Confidential
Offshoring also proves beneficial due to increase in efficiency, triggered by factors like 24x7 operations and access to large talent pool
Access to larger talent
pool
Legal Compliance
Focus Area
24x7 operations
• India produces 3 million graduates every year, who provide the base for the immense growth in this industry
• Time difference between Indian and US enables Insurance providers to run on a day 24x7 basis
• Vendors’/ Captive units’core activity is the process offshored unlike an Insurance provider.
• Offshoring to India helps providers to deal with Insurance Regulation and Statutory documentary requirements
Source: Secondary research and Zinnov Analysis
16Zinnov Confidential
Given huge benefits, more and more companies are recognizing thebenefits of operating global shared service centers
BenefitsBenefits
The number of global centers is expected to increase dramatically in the next several years, as companies recognize the benefits of operating globally
Key Benefits include :
– Consistency of practices
– Time-zone utilization
– Wage-rate advantage
– Increased critical mass
– Reduced duplication
– Potential tax benefits
– Coordination of intra-group transactions
The number of global centers is expected to increase dramatically in the next several years, as companies recognize the benefits of operating globally
Key Benefits include :
– Consistency of practices
– Time-zone utilization
– Wage-rate advantage
– Increased critical mass
– Reduced duplication
– Potential tax benefits
– Coordination of intra-group transactions
Source: Zinnov analysis
Experience LevelAverage CTC Per
Annum, USD
0 - 2 Yrs Entry Level 4,500 – 6,700
2 - 4 Yrs Specialist Level 7,700 – 11,500
4 - 6 Yrs Supervisor 12,500 – 15,500
6 - 8 YrsSr. Supervisor\Deputy Manager 14,500 – 20,000
8 - 10 Yrs
Manager 20,000 – 27,000
10 – 12 YrsSr. Manager\Function Head 27,000 – 45,000
Compensation Levels for F&A services, India (2005 – 2006)
17Zinnov Confidential
The cost reduction potential from a BPO services is a combination of multiple factors
Geographic Savings: Conducting business in a region such as India and China where real estate cost, labor costs and taxes are lower than the national average
Scale Benefits: Leveraging system platforms and management structures, optimizing workforce utilization, and increasing productivity in existing captive operations
Process Reengineering: Best practice policies and processes that include eliminating steps and bottlenecks, simplifying processes, reducing exceptions, prioritizing processing, and automating steps
Geographic Savings: Conducting business in a region such as India and China where real estate cost, labor costs and taxes are lower than the national average
Scale Benefits: Leveraging system platforms and management structures, optimizing workforce utilization, and increasing productivity in existing captive operations
Process Reengineering: Best practice policies and processes that include eliminating steps and bottlenecks, simplifying processes, reducing exceptions, prioritizing processing, and automating steps
DiscussionDiscussion
GeographicSavings
Economies ofScale
Process Re-engineering
Total
35 - 40%
30 - 35%
20 - 25% 100%
Key factors for Successful Offshoring
Source : Zinnov Interviews, Zinnov Analysis
18Zinnov Confidential
… and due to this significant cost reductions and higher efficiency potential, Offshoring is becoming lucrative
Risk of Data Security
Significant Cost Reductions
Increased Efficiency
Costs Reductions
• Insurance providers can save up to 40-45% of costs by offshoring work to India
• This is primarily due to low labor costs in India
• To achieve significant cost reductions, Insurance providers need to scale of processes offshored
Data Security
• There have been recent examples of data threat both from Captive and Vendors
• This is primarily due to lack of effective laws and implementation
• This puts the industry under the scrutiny
Increased Efficiency
• Insurance providers need to compete at all levels to maintain customers’ loyalty
• Offshoring provides a good platform to increase efficiency
• Also various compliance issues have pushed the offshoring trends
Threat
Benefits
Source: Secondary research and Zinnov Analysis
Illustrative List
19Zinnov Confidential
Thereby it is critical to understand the key challenges and address them before the setup of the offshore initiative
Lack of buy-in at different levels in the
organization
Rapid changes to the dynamics of the ODC
location
Resistance to change across the
organization
Difficulty in accessing data points that
allows better decision making
Complexities involved in quantifying the vision for the ODC
Difficulty in allocating dedicated
management time
Key Challenges in planning and
setting up an ODC
Source: Zinnov Analysis
20Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3Case Study &RecommendationCase Study &Recommendation
4
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Models Adopted– Captive /
Vendor/BOT– BOT Benefits and
Challenges– Cost comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
21Zinnov Confidential
P&C Insurance
Sales, Policy Servicing & Claims Processing were among the initial few processes to be Offshored…
Policy Acquisition
Focus Areas
Policy Administration
• Sales• Conversion• Quote Acceptance• Cross & Up-selling • Customer Enquiries• Actuarial Services• Exposure Assessment
Functions Offshored
Sales
• Manual Remittance Exception Processing
• Policy Quotes & Changes• Inbound Customer Service• Endorsement • Policy Renewals
Policy Servicing
• Notification of Loss• Customer Service (Policy
holder & Broker Claim Enquiries)
• Claim Notification Processing
• Adjustments, Endorsements & Renewals
• Claims Assessment• Claims Settlement• Claims Negotiations &
Litigations• Claims Subrogation
Claim Processing
Source: Secondary research and Zinnov Analysis
22Zinnov Confidential
P&C Insurance
… which were closely followed by processes such as Underwriting and Asset Management
Policy Acquisition
Focus Areas
Asset Management
Functions Offshored
Underwriting & Policy Issuance
Asset Administration & Investment Management
• Details of these processes offshored are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
23Zinnov Confidential
Life Insurance
In Life Insurance, corporations are Offshoring a whole gamut of services largely driven by cost imperatives (1/2)
“ Recent spate of Calamities over the last decade has triggered Insurance providers to look to decrease cost to stabilize the ratio of losses to income “
Policy Acquisition
Focus Areas
Payout
Functions Offshored
Sales Policy Benefits Policy Set Up Death Claims
• Details of these processes offshored are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
24Zinnov Confidential
Life Insurance
In Life Insurance, corporations are Offshoring a whole gamut of services largely driven by cost imperatives (2/2)
“ Recent spate of Calamities over the last decade has triggered Insurance providers to look to decrease cost to stabilize the ratio of losses to income “
Agent Services
Focus Areas
Premiums Administration
Functions Offshored
Agency Administration
Premium
• Details of these processes offshored are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
25Zinnov Confidential
Healthcare Insurance
Offshoring Healthcare Insurance processes emerged in 2002 with Aetna tasting success in offshoring its claims processing (1/2)
Contract Set Up
Focus Areas
Contract Delivery
Functions Offshored
Medical Summaries
Policy Issue
Claims
Agency Administration
• Details of these processes offshored are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
26Zinnov Confidential
Healthcare Insurance
Offshoring Healthcare Insurance processes emerged in 2002 with Aetna tasting success in offshoring its claims processing (2/2)
Premium Processing
Focus Areas
Contract Servicing
Functions Offshored
New Business Data Entry
Policy Benefits Application Digitization
• Details of these processes offshored are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
27Zinnov Confidential
Mortgage Insurance
Processes such as Sales & Marketing, Underwriting and collections are being Offshored by mortgage Insurers
Illustrative List
• Target Marketing• Campaign Management• Sales Force Support• Lead Generation• Customer Enquiries
• Loan Application Processing
• Loan disbursement• New loan setup• Tax and escrow setup• Insurance setup• Property valuation
1. Sales & Marketing 1. Sales & Marketing
2. Servicing & Administration
2. Servicing & Administration
3. Loan Approval & Issuance
3. Loan Approval & Issuance
DescriptionDescriptionMortgage Insurance Functions
4. Risk Management
& Underwriting
4. Risk Management
& Underwriting
5. Collections5. Collections
6. Policy Origination6. Policy
Origination
DescriptionDescriptionMortgage Insurance Functions (contd’)
• Risk profiling• Portfolio management• Investor repurchase
requests• Exceptions management• Held offering management
• Escrow analysis• Tax payments & audit• Insurance deficiency • follow up• Draws processing• Real estate surveillance
• Early stage collections• Late stage collections• Tracing• High risk collections• Charge offs• Customer follow up letters• Dispute escalation support
Source: Secondary research and Zinnov Analysis
28Zinnov Confidential
Annuities & Pensions
Annuities & Pension providers too have been offshoring functions such as Receive & Distribute, Cashier & Reconcile funds etc (1/2)
Premium Processing
Focus Areas
Contract Servicing
• Indexing• Correspondence
& funds• Applications• Checks• Wires• Emails• Phone calls• Document Review• Licensing &
Follow up
Functions Offshored
Receive & Distribute
Post Issue Servicing
Cashier & Reconcile
Funds
Client RelationshipManagement
• Details of these processes offshored are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
29Zinnov Confidential
Healthcare Insurance
Annuities & Pension providers too have been offshoring functions such as Receive & Distribute, Cashier & Reconcile funds etc (1/2)
Problem Resolution
Focus Areas
Contract Set Up
• Receive & distribute• Benefit payment mode• Client info changes• Termination of contract• Resolve customer
issues• Deliver checks and
corrections
Functions Offshored
Resolve Customer
Issues
Submit & Invest
Contract Delivery
Deliver Policy or Transfer LoA
• Details of these processes offshored are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
30Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3Case Study &RecommendationCase Study &Recommendation
4
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Models Adopted– Captive /
Vendor/BOT– BOT Benefits and
Challenges– Cost comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
31Zinnov Confidential
Companies have moved from offshoring less complex work like maintenance to high-end complex services such as product development
Illustrative List
IT Services OffshoredIT Services Offshored
• New Application– Prototype– Development– Testing
• Infrastructure– Management – Monitoring– Maintenance
• EnhancementProjects– Feature
enhancement– Conversion – Porting– Version
enhancement
• Application Mgmt– Legacy Migration– eBusiness Solutions– Web Services– Enterprise Solutions
• Maintenance– Management – Monitoring– Maintenance
• Business Intelligence – Data Porting– Data Mining
Value Chain of the IT Offshored Activities
Maintenance
Enhancement Projects
Valu
e
Application Management
Business Intelligence
New
Application
Infrastructure Support
Source: Secondary research and Zinnov Analysis
32Zinnov Confidential
IT Infrastructure operations have emerged as the fastest growing activities outsourced by the large corporations in US and Europe
IT Infrastructure Operations
IT Infrastructure Operations
Information Security
Information Security
Illustrative List
ServerServer Application Services
Application Services
Network Infrastructure
Network Infrastructure DesktopDesktop
Commonly Offshored Processes
• Installing and configuring operating system
• Fault monitoring and management
• Job scheduling/ monitoring
• Performance Monitoring
• Service pack installation
• Disk / swap/ backup space management
• Domain policies and security management
• Applications running on the server
• Fine tuning• Database creation and
maintenance • User account
management • Clean up of file systems • Automated schema
analysis• Partition maintenance• Database/ application
packaging and realizing• Performance tuning
• Management of network devices (Routers / switches)
• Monitoring of network traffic in LAN
• Monitor VLAN• Monitor of network
servers • Bandwidth
management • Network policy
Enforcement• Management of
User access to network
• Backup• Personal firewall• Application access
setup• Running onsite and
remote help desks to cater to desktop and server issues
• Creating and maintaining a knowledge base for help desk users
• Supporting users on desktop applications
• Creation of policy of software deployment on user desktops
• Peering• Gatekeeper• Firewall Intrusion• Installation and
upgrade of antivirus software
• Deployment and upgrade of anti virus software on user desktops
• Security Policies• Remote Access• PKI
Source: Zinnov Analysis, Literature Search, Primary research
33Zinnov ConfidentialComplexity of Interaction
HR Policy Administration
Overall HR Strategy
Integrated Disability Care Management
International Service Personal Administration
Compensation & Benefit Policy Design
HRIS
Employment Changes
Job Posting
Training AdministrationPolicy Inquiries & Resolution
Benefits Administration
Payroll
Benefits Sign UpForm Submission
Employee Record keeping
Recruitment, Assessment & Selection
Labor Relations Strategy
In-Business HR
Strategic Workforce Planning & Analysis
HR Policy
Labor Relations
Vendor ManagementChange Management ConsultingLearning Management
Performance Management
Processes not likely to be offshoredHigh
LowHigh Low
Valu
e A
dded
A myriad of services are outsourced in the Human Resource vertical, however companies do not offshore complex HR process
Source: Secondary research and Zinnov Analysis
34Zinnov Confidential
Overview of range of F&A related offshored services catered by Indian based operations
Illustrative List
General Accounting
• Maintain chart of accounts• Maintain general ledger• Monthly, quarterly and year-end
reporting• Consolidations• Inter-company accounts
Revenue Process
• Sales order processing• Credit and bad debt collection• Customer invoicing• Accounts receivable• Contract accounting
Vendor and Payment Process
• Purchasing• Accounts payable• Freight payment processing• Travel and entertainment expense
Tax Compliance
• Calculate and record taxes• Tax returns, refund and reports• Tax accounting
Cost and Inventory Accounting
• Inventory records• Develop and update costs• Variance analysis• Inter-company transfer pricing
Fixed Asset and Capital Accounting
• Calculate depreciate tables• Write-offs and valuation
adjustments• Work-in-progress accounts• Reconcile fixed asset accounts
and ledger entries
Management Reporting
• Assemble reports• Management reports• Risk and financial analysis
Regulatory Compliance and Reporting
• Compile information for SEC and other regulatory bodies
• Regulatory filings, requests and reports
• Regulatory audits
Financial Reporting
• Financial analysis• Prepare financial results• Presentations for Board,
Committees, and Auditors
Low Complexity Medium Complexity High Complexity
Processes not likely to be offshoredSource: Secondary research and Zinnov Analysis
35Zinnov Confidential
BPO ServicesBPO Services
IT ActivitiesThere is a whole gamut of BPO and KPO services that Financial Institutions are offshoring/ outsourcing to India
Transaction Processing Accounting
Application Receipt Payables/
Account Opening Receivables
Data Input Reconciliation
System Operation Expense Accounting
Statement Generation Journal Accounting
Account Administration Account Consolidation
Database Maintenance Cost Center Accounting
Budgeting/ MIS
Customer Service Credit UnderwritingInbound Calls Credit Decisions
Outbound Calls Risk Assessment
Telemarketing Scoring Models
Price Quotes Credit Policy
Query Handling Compliance
Complaints Documentation
KPO ServicesKPO Services
• SWOT Analysis• M&A Analysis• Era Analysis• Executive Movement• Projections• Best Practice Analysis• Business Strategy/Plans
Analysis
Business Research
• Industry Dynamics• Competitive
Benchmarking• Competitor
Intelligence• Growth Forecast• Go-To-Market Strategy• Analytics• Market Mapping
Market Research
• Patent Searches• Product profiling (cost,
feature analysis)• Influencer Identification• Target Market studies
Technical Research• Financial Statements• Market Valuations• Company Performance
Valuations• Profitability, Turnover,
Liquidity, Solvency Analysis
Financial Analysis
• Venture Capital• Private Equity• Investment Banking
Investment Analysis
Illustrative List
Source: Secondary research and Zinnov Analysis
36Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3Case Study &RecommendationCase Study &Recommendation
4
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Models Adopted– Captive /
Vendor/BOT– BOT Benefits and
Challenges– Cost
comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
37Zinnov Confidential
Companies can choose either between the Captive Set-Up, 3rd Party Vendor or the hybrid model to offshore work to India
Captive Set - Up Vendor Model• Costs
– Capital Intensive– Initial resource costs high as training is
also involved– Payback period between 3 to 5 years of
operation
• Key Benefits– Ability to attract high end talent – Data Security levels are high– Economies of Scale– Decision taking authority lies within the
company – Can train staff on company specific
processes
• Major Disadvantages– Legal & compliance rules– Capital & time intensive while setting up– Sourcing and training of talent Pool– Higher management commitment
• Costs– Unit costs high (includes vendor’s
margin)– Shorter payback period (12-18 months)
• Key Benefits– No capital / infrastructure costs involved– Vendor has expertise in doing similar
jobs for other clients– Can move to another vendor if work
unsatisfactory or any other situation arises
– Ability to ramp up and down quickly
• Major Disadvantages– Risk of Data security– Vendors inability to attract high end
talent limits offshoring activities – Higher attrition as vendors typically
move resources to provide career growth
Inspite of the Capital intensiveness of the captive models , companies prefer it due to the control over data security and economies of scale over a period of time. Most companies inspite of having captives also offshore low security processes such as outbound sales and non core activities such as HR & IT Development & Support to competent vendors
Source: Secondary research and Zinnov Analysis
38Zinnov Confidential
BOT Model – BOT has not been tried by many companies because of varied level of complexities involved across various stages
• The vendor selected may not understand the BOT model and their role to make it a success
• The vendor might use the model to entice new clients and cause problems during transfer phase
• The skill set of offshore team might vary with that on the onsite team causing frustrations
• Risks can be covered across the chain on BOT, i.e– Build (B) – Issues with regard to ownership of IP created by Offshore vendor,
Ownership of infrastructure (software /hardware) purchased for engagement– Operate (O) – The resources working with offshore vendor might be in constant
dilemma if they belong to vendor or the client organization– Transfer (T) – The resources might not be willing to move to the subsidiary and
might want to remain with the vendor
• Provide companies the ability to ramp up fast with low initial investment • Provide enough time to understand government and cultural issues• Provides an option to pilot a variety of projects before setting on the project that provide
the maximum benefit when executed offshore• Vendors local presence is utilized to easily hire talents • Vendors process capabilities are utilized to setup Offshore vendor partnership's
BOT (Build Operate Transfer) – Discussion
The Pros
The Cons
The Risks
Illustrative List
Source: Secondary research and Zinnov Analysis
39Zinnov Confidential
Implementation of key best practices will reduce the risks involved in BOT model (1/2)
IBuild Phase
Vendor Selection Contact negotiation Resource setup
• Work with medium sized vendors (tier II)
• Select vendors with relevant experience
• Select vendors with good brand name in selected location
Source: Secondary research and Zinnov Analysis
• BOT best practices are captured in the full report, please send your requests for the report to [email protected]
40Zinnov Confidential
Implementation of key best practices will reduce the risks involved in BOT model (2/2)
IITransfer Phase
Infrastructure transfer Resource transfer
• Decide between using the vendor infrastructure vs. own infrastructure
• New infrastructure will require Custom de-bonding of the existing facility
• Decide on hardware transfer vs. new hardware
Process transfer
Source: Secondary research and Zinnov Analysis
• BOT best practices are captured in the full report, please send your requests for the report to [email protected]
41Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3Case Study &RecommendationCase Study &Recommendation
4
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Models Adopted– Captive /
Vendor/BOT– BOT Benefits and
Challenges– Cost comparisons
– Engagement models of key Insurance Companies– Aviva– AXA– Prudential– Allianz– Principal– Aetna
– Location Analysis
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
42Zinnov Confidential
Most of the Insurance providers having an offshoring presence in India have a captive centre, complimented by vendor services
Insurance Company Captive Vendor Hybrid Location Discussion
Aviva
AXA
Prudential
Allianz
Principal
Aetna
• Details of captive locations, their evolution etc. are captured in the full report, please send your requests for the report to [email protected]
Source: Secondary research and Zinnov Analysis
43Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3Case Study &RecommendationCase Study &Recommendation
4
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Models Adopted– Captive /
Vendor/BOT– BOT Benefits and
Challenges– Cost comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
44Zinnov Confidential
NCR is the leader in ITES while Bangalore tops the IT landscape
ITES Landscape IT Landscape
Hyderabad
Chennai
Cochin
Bangalore
NCR
Chandigarh
Pune
Ahmedabad
Mumbai
Hyderabad
Chennai
Cochin
Bangalore
NCR
Chandigarh
Pune
Ahmedabad
Mumbai
21.52
23.33
11.6
1215.2
7.4
3.8
.78
Kolkata
1.24
3.13Kolkata
4.81
27.18 16.7
14.513.3
12.2
8.43
1.74
.54
.41
Note: Bubble represents percentage breakup of talent pool availability across India
Source: Zinnov research
45Zinnov Confidential
Bangalore
Similar pattern is followed by Insurance companies with the Tier 1 & 2 Cities as the popular destinations for setting up Captives or Vendors tie ups
Chennai
◘ Company A
◙ Company B
♦ Company C
א Company D
Mumbai
Delhi
Pune ◘
Tier 1 City
Tier 2 & 3 Cities
◘ ◘
◘
◙
◙♦
א●
♠
♠
∞∞
• List of companies in each location are captured in the full report , please send your requests for the report to [email protected]
Source: Zinnov - Primary Research
46Zinnov Confidential
Bangalore
… and the same is true for Banks with captive centers in India
Chennai
Hyderabad◘ Company A
◙ Company B
♦ Company C
© Company D
Vishakapatnam
Kolkata
Delhi
◙
◙Pune
♦
♦◘
©
©
א
▲
▲●
● ●
●
♠
∞
Tier 1 City
Tier 2 & 3 Cities
Insurance Outsourcing Landscape - 2006Insurance Outsourcing Landscape - 2006
• Tier 1 Cities such as Chennai, NCR & Mumbai have been popular destinations for Banks to set up their Captives
• Chennai , Mumbai & Pune have been popular destinations for IT Support & Software Development captive teams to be situated
• Banks are now looking at Tier 3 Cities such as Vishakapatnam to set up their captives due to the low cost of Setting Up and availability of Talent PoolMumbai
• List of companies in each location are captured in the full report , please send your requests for the report to [email protected]
Source: Zinnov - Primary Research
47Zinnov Confidential
AGENDA
Offshoring LandscapeOffshoring Landscape
1
Processes OffshoredProcesses Offshored
2
Offshoring: Models AdoptedOffshoring: Models Adopted
3Case Study &RecommendationCase Study &Recommendation
4
• Insurance Processes Offshored– P&C Insurance– Life Insurance– Health Insurance– Annuities– Mortgage Insurance
• IT & Shared Services– IT – Infrastructure
Management– HR– F&A– KPO
• Models Adopted– Captive /
Vendor/BOT– BOT Benefits and
Challenges– Cost comparisons
– Engagement models of key Insurance Companies
– Location Analysis
• Industry Analysis– Global Market– Growth trends in
India– Driver– Challenges
• Insurance Offshoring & India– Evolution of
Insurance Offshoring– Market Size– Drivers– Restraint
• Case Study– Aviva BOT
Model with WNS EXL and 24/7
– Evolution inception-2007
• Recommendation
• Appendix
• About Zinnov
• Comprehensive case studies are captured in the full report. To obtain a copy, please send your requests to [email protected]
48Zinnov Confidential
With its inception in early 2003, Zinnov has had successful evolution in terms of the entire lifecycle of offshore advisory and market expansion
2004
2005
2006
• Sourcing strategy• Captive Setup• Marquee Clients
– 4 NASDAQ Listed– 2 Fortune 1000
• 12 engagements• 10 employees
• Expanded services within Market Expansion Consulting
• Added six “Fortune 1000’customers
• Grew to 40 employees by end of 2006
• 62+ engagements till date• Sourcing Assessment• Market Expansion
Consulting• HR Consulting• Added five “Fortune
1000” customers• 25 engagements• 20 employees
2003• Outsourcing research• Vendor partnerships• Added start-up
Technology companies• 2 clients• 3 employees 2
12
25
48
2003 2004 2005 2006
Num
ber of Client Engagem
ents
CAGR: 121%
Zinnov has created deep expertise with the end to end lifecycle of market expansion & offshore
advisory
49Zinnov Confidential
Zinnov offers offshore advisory services (offshore strategy, offshore setup and assessment of existing setups)
Assessment of Existing SetupsSetupStrategy
Business case
Outsourcing vendor Selection
India center setup
Performance and efficiency reviews
Knowledge workshop
Governance framework
Compliance and process audits
Offshoring roadmap
Portfolio analysis
Geographic analysis
Organization design
Benchmarking
50Zinnov Confidential
…as well as market expansion consulting to help clients in a variety of areas to penetrate the emerging markets
Market Engineering and Analysis
BenchmarkingMarket
ExpansionConsulting
M&A Target Identification
Growth modeling
Localization Strategy
Competitive intelligence
51Zinnov Confidential
Zinnov hosts a quarterly India Development Center (IDC) Forum for the executive management teams of companies, which enables Zinnov to get first hand information on challenges and best practices
Limited Decision making power with offshore management teams
Lack of requirement sharing from Customers
Lack of technical and managerial resource allocation from US
Others
Various Organizational Challenges
47%
27%20%20%
73%
53%
7%7%
Product Management Talent shortage Technical Architect Talent shortageEngineering Talent shortageOthers
Talent shortage a big challenge
Percentage Respondents
Topics of Discussions (sample)
• Productivity• Human Resources• Intellectual Property• Infrastructure • Technology Deployment
• Optimal Processes• Engagement Models• Improving Customer
Satisfaction• Government initiatives • Experiences at IDC
52Zinnov Confidential
Zinnov’s unique value proposition lies in its extensive experience withOffshoring
Illustrative
Zinnov – Unique Value Proposition (USP) besides ‘Objectivity’, which most Consulting Firms would bring in
Extensive experience with Offshoring
Significant presence in offshore location compared with other similar companies
Zinnov has helped multiple clients across domain to optimally strategize their offshore operations and to overcome organizational challenges across phases of offshoringOnly consulting companies to
host forum designed for MNC captive centers
Follows a low-touch consulting model to reduce the total cost of consulting to our customers
53Zinnov Confidential
Thank You !
Zinnov Contactwww.zinnov.com [email protected]
29/4, 3Rd Floor H M Strafford7th cross, Vasanth Nagar Bangalore, KA 560052India
Phone: +91-80- 41127925/6
575 N. Pastoria AveSuite JSunnyvaleCA – 94085
Phone: 408-716-8432
21, Waterway Ave, Suite 300The WoodlandsTX-77380
Phone: 281-362-2773