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The gateway to the global sourcing of IT and BPO services

September 2008 Vol. 03, Issue 32

Process Frameworks: Helpor Hindrance? p. 32

Is LPO Right for YourCompany? p. 36

Buyers and vendors votefor EquaTerra, Everest and

TPI to lead the pack

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Building on Our Global Heritage

The Taj Mahal is acclaimed as a masterpiece of architecture and of the heart—an enduring testament to the power of love and a builder’s passion for creating beauty. At Genpact, we too, are passionate about our work and see beauty in managing and simplifying business processes for companies around the world.Our 31,700+ associates span 9 countries are united by a passion for excellence and commitment to work as a team. By combining our passion for excellence with teamwork, Genpact redefines what is possible, expanding from service to one company, GE,to more than 35 global enterprises in less than three years.

Cultivating Quality: Lean and Six Sigma

As companies wrestle with growing global complexity and competition, they look to Lean Six Sigma and Reengineering methods to ensure consistently high levels of performance and service delivery. As part of their efforts to sustain customer and shareholder value, global leaders search for partners whose dedication to process excellence is part of their DNA. Like other great builders, Genpact has the culture and tools to get it right the first time. Our building blocks are the deep industry domain knowledge, technology know-how and multi-shore delivery that we combine with Lean Six Sigma to ensure process excellence with every customer engagement.

Working Together: IT-Enabled BPO

Enterprises are searching for ways to continuously improve what they do. An emerging trend is the integration of Business Process Outsourcing (BPO) with Information Technology Outsourcing (ITO) to create even greater value. Genpact’s propriety technology tools, coupled with domain knowledge in major industry verticals, transforms client cost structures while reducing complexity and risk.

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ISG.qxp 12/20/2007 1:23 PM Page 15

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FEATURES

By Ed Nair and Phil Fersht

18

September 2008 Vo lume 03, I ssue 32

4 GlobalServices www.globalservicesmedia.com September 2008

32PROCESSFRAMEWORKS: HELP ORHINDRANCE?

Survey

Advisers

The Definitive

of Sourcing

IS LPO RIGHT FOR YOUR COMPANY?By Daniel A Masur &Sonia Baldia, MayerBrown LLPObjective gating analysis in legal process outsourcing

36By Namita GoelDo process frameworks such as ITIL, SixSigma and Lean deliver in the context of ser-vices outsourcing? A look at the challengesand opportunities in making them work

contents_IK.qxp 8/21/2008 11:37 PM

LISA ROSSLisa is the CEO andfounder of FAO Research,an independent researchfirm focused exclusivelyon the FAO and procure-ment outsourcing mar-kets. As a leading analyst

in the outsourcing industry for more than 12years, she works closely with customers, advi-sors and suppliers of outsourcing services.

SHYAMANUJA DASShyamanuja pioneeredoutsourcing journalism in India in1998 with bpOrbit, anewsletter for the domestic Indian BPOindustry. He is nowEditor, Dataquest magazine, Cybermedia.

LORI BLACKMAN Lori is the Founder andPresident of DNLGlobal. DNL Globaloffers solutions acrossthe entire lifecycle of tal-ent management.

ALLAN SCHWEYERAllan is the President and Executive Director of the Human CapitalInstitute and author ofTalent ManagementSystems.

PHIL FERSHTPhil is Research Director,Business ProcessOutsourcing, offshoringand IT sourcing, for lead-ing industry analyst firmAMR Research, Inc.

24X7 COLUMNISTS

GOVT. DEFENSECONTRACTS RULETHE TOP 10 CHARTSBy Datamonitor

10

45THE PARADOX OFCURRENCY-ADJUST-ED GROWTHBy Shyamanuja Das, CyberMedia

48 50THE POWERFUL LINKBETWEEN TALENTMANAGEMENT & BIZPERFORMANCEBy Allan Schweyer, HCI

42OUTSOURCING STRATEGY SET? DON’TFORGET CUSTOMER COMMUNICATIONSBy Bryan Baker, Thought Leader and EnterpriseConsultant, Xerox Global Services


EXPERT VIEWS

CUSTOMERS EYEINGSMALLER PLAYERSFOR INNOVATIONBy Imrana Khan

10

MANY GERMAN,BRITISH CO.S GETSOLD IN JULY ’08By Tholons

14

OVER 100,000 JOBSCUT IN JULY ’08By Namita Goel

17

AN ITO PROJECTWELL DONE17 days of Beijing Olympics arebacked by four years of planning

and technology integration

By Imrana Khan

9

CAPTIVES REFUSETO GO AWAYBy Imrana Khan

9

GREEN: THE NEW COLOR OF OUTSOURCINGBy Namita Goel

15

OUTSOURCING TO MOROCCOBy Keerthi Nair

16JOINING HANDS TOAMEND INDIAN POLICIESBy Imrana Khan

12

INFOSYS, TCS SET TOCOMPETE WITHACCENTURE, CSC & IBMBy Imrana Khan

12

INDIAN DOMESTICOUTSOURCING MAR-KET ON AN UPTICKBy Imrana Khan

12

THE PARAMETERS OF EVALUATINGSOURCING ADVISORYFIRMSBy Phil Fersht, AMR Research

contents_IK.qxp 8/21/2008 11:38 PM

ED NAIREditor

EDITOR’S NOTE

[email protected]

Every crisis brings withit some opportunity.

nfosys reported profit growth of 18 percent in 2007, down from 56 percentin 2006. TCS recorded just 4.9 percent increase in net profit in Q2 ’08 com-pared to 37 percent in the same quarter last year. Wipro’s annual profit growth

slowed to 11.6 percent last year compared to 42.3 percent the year before. Thethree companies are more or less in the same league, face the same demand andsupply dynamics, largely follow the same business model, and compete for thesame set of customers. The situational reasons for the fall in performance includecrisis in the financial sector in the U.S., slowing of the U.S. economy, risingvalue of the rupee against the dollar, rising inflation and wage costs in India.

The slowing of growth of Indian services companies is now in focus. Onthe basis of the recent financial results, stock analysts have been markingmany of them down to the “underperform” category, while the business andgeneral press have been reporting the near end of the Indian story in theservices industry.

The reality is that these companies are at the brink of a chasm that they willhave to cross to scale the next peak. Every crisis brings with it some opportu-nity. The Y2K crisis was a defining opportunity for India’s ascent into the glob-al services industry. The dotcom bust and the recession in 2001 helped sepa-rate out the stronger companies from pure body shoppers. The current economicfactors are forcing these firms or rather giving them the opportunity to relookat business models, geographies, portfolio of offerings and financial strategies.

In short, the companies will have to deliver on innovative and new valuepropositions in global services. There is evidence that these companies have start-ed work in this direction. Some of them are combining IT and business processoutsourcing in unique ways, some are combining business-process knowledgeand analytics, and yet others are creating new intellectual assets in the form ofsolutions. All of this will force companies to move away from number of employ-ees as the key measure of expansion and growth to looking at multiplying therevenue per employee.

The leaders should have the magnanimity and courage to leave the erstwhilevalue proposition of being the low-cost destination and supplier of skills to oth-ers and get on to the new bus of opportunity. The period of transition is goingto be painful. Decidedly, the future is not going to be as racy and rapid beatas the past. Let us learn to settle down to a period of sober growth rates, chop-py earnings, and bated return on investments. GS


I

Are We at the End of the India Story?

editors note_final.qxp 8/21/2008 11:54 PM

ad.qxp 8/22/2008 2:35 PM Page 29


Offshore Product Development

September 24, Santa Clara

Includesl Event Sessions and

Keynote

l Breakfast, lunch and networking breaks

l Event handouts

l Stipend of $100 towards travel reimbursement

08:00 to 08:30 Breakfast and registration

08:30 to 08:35 Welcome address Ed Nair, Editor, Global Services

08:35 to 09:10 Keynote address Vamsee Tirukkala, Co-Founder & Managing Principal, Zinnov

09:15 to 09:35 Emerging Models and Value Implications in Product Development Partnerships

09:40 to 10:00 Choosing the Right Destination for Offshoring Product Development

10:05 to 10:20 Networking Refreshment Break

10:20 to 10:55 Developing Enterprise Software –A Case Study in OPD

11:00 to 11:20 The Scope for Innovation

11:25 to 11:45 The Future of Outsourced Product Development

11:50 to 12:30 Panel Discussion and Q&A Forum: Moderated by Ed Nair, Editor, Global Services

11:50 to 12:30 Networking Lunch

www.globalservicesmedia.com/events/opd

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Key Points of DiscussionIf you are an ISV or technology manufacturer or a key decision-maker in outsourcing, this event will help you in:l Planning your project – leverage best practices to avoid common mistakes l Assessing the growing number of OPD outsourcing destinations l Differentiating the numerous providers in this space l Managing the projects and building a provider relationship–Governance issues l Ensuring that offshore outsourcing delivers innovation, not just savings.

Vamsee TirukkalaCo-Founder & Managing Principal, Zinnov

Ed Nair Editor, Global Services

Featured Speakers

Sponsored by:

Aug. 8th, 2008: When the entireworld was counting down to the

opening of the Beijing Olympics andeagerly awaiting their favorite ath-letes to make them proud, a few thou-sands — the minds behind the mas-sive IT required for the games — hada “different” goal to achieve by Aug.24th. Every second was crucial asthere were no second chances given.

To accomplish the technologytasks, Beijing Organizing Committeefor the Olympic Games (BOCOG)set up a consortium of nine technol-ogy providers and partners — Omega,Kodak, Lenovo, Panasonic, Samsung,China Network, China Mobile,Sohu.com and Atos Origin. Atos,which managed and handled theentire team for the games, has been theprime IT outsourcing contractor forOlympic Games’ since 2002.

For the 2008 games, the technol-ogy integration timeline for the gamesstarted with the defining of the ITstrategy and IT master plan and con-ducting knowledge-transfer workshopsin 2003. An estimated 4,000 ITexperts from Atos Origin were respon-sible for the flawless delivery of the ITinfrastructure — 10,000 computers,1,000 servers, 200,000 accreditations,5,000 result-system terminals and4,000 printers to name a few —required at 39 competitions and morethan 31 non-competition venues formaking the event memorable for ages.

And Atos accomplished each task. Inaddition, Atos’ responsibilities alsoincluded IT risk management and ITsecurity tasks during the games.

The most challenging part of theproject was to meet the stringentdeadlines. Atos Origin started on theroad to Beijing in Nov. ’04 and havebeen working on since then. The test-ing phase was covered in detail sever-al times to ensure perfect delivery.Another test was to ensure the seam-less integration of technologies of theother eight members of the tech con-sortium. After the Beijing gamesfinale, Atos Origin will be executing acarefully honed approach based on theyears of experience and knowledgegained to work on the Vancouver2010 Olympic Games and the Lon-don 2012 Olympic Games.

“For the 2010 Olympics games, wealready have people who are workingon the project in Vancouver. When wewere doing the Torino games, maybea month or two after that, we startedworking on it. And, for the OlympicGames in London we’ve started trans-ferring knowledge. However, we havenot started working on the basic pro-ject. As soon as the Beijing project getsfinished, we’ll start working on theseprojects as well,” said Jeremy Hore,Chief Technology Integrator for AtosOrigin, working with the BOCOGand the consortium of technologyservice providers. GS

4x7An ITO Project Well Done17 days of Beijing Olympics are backed by four yearsof planning and technology integration


BY IMRANA KHAN

Outsourcingto Morocco

pp.. 11662

24x 7

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Captives Refuse toGo Away

Captives still continue to grow.From Jan. ’08 to Apr. ’08,

the industry saw 15 to 20 new captives across the globe, says a recently released research by EverestResearch Institute.

Of these, seven to 10 captives wereset up in India — including BT’s glob-al operations center with 250 to 500employees in Gurgaon and Chrysler’scontact center in Chennai. BarclaysBank and DuPont also announced theopening up of new captive centers withmore than 1,000 and 250 to 500 Full-time Employees (FTEs) in Noida andHyderabad (India), respectively. Thequarter also witnessed establishment offour to five new centers in EasternEurope — including P&G’s develop-ment center (with 100 to 250 FTEs),Honeywell’s development center (with500 to 1,000 FTEs) and Microsoft’sinnovation center (not known) inCzech Republic, Ellentric 80’s R&Dcenter in Poland — two in the Philip-pines — Nestle’s shared services center(with 100 to 250 FTEs) in Manila andHSBC’s (with more than 1,000 FTEs) business-process outsourcingfacility. However, one of the mostpromising outsourcing destinations,Latin America, witnessed no majorcaptive announcement.

The quarter also had companiessuch as Unilever, Shell and AOLannouncing their plans for divestingtheir offshore captives in Q2 ’08. GS

BY IMRANA KHAN

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10 GlobalServices www.globalservicesmedia.com September 200824x 7

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Govt. Defense Contracts Rule the Top 10 Chart BY DATAMONITOR

ITdeals

Scarcity of talent and increased dea-mand for knowledge-base services has

led to a proliferation of offshore providers.The increase in the number of serviceproviders has been noticed in the innova-tion-services — such as engineering, designand research to name a few — and knowl-edge-services spaces. The number ofKnowledge Process Outsourcing (KPO)firms has almost doubled and grown to 95percent since 2000, according to a recent-ly released study by Duke University andBooz & Company, a global management-consulting firm. Of them, smaller providersare creating “pockets of expertise,” states thestudy titled Offshoring the Brains as well asthe Brawn.

“Smaller firms tend to be very focusedon industrial sector. That enhances theiroverall value. Because knowledge spacerequires relatively less scale to be efficient,the scale advantages with the big guystend to diminish, if not eliminated whenthey compare them with small guys,” saysVikas Sehgal, Principal, Booz & Company.

Smaller KPOs — largely specializing inIT and outsourced product developmentservices — are heavily enticing talent andtaking lesser time to hire them than theirmid-sized or larger counterparts. Smallercompanies take an average of four weeks tohire an employee with Master’s degree,while large firms require nine weeks. Whenit comes to hiring talent with higher qual-ification (Ph.Ds), even the smaller firmsneed an average of six weeks.

However, big KPO companies take 14weeks to hire such staff. These advantagesare showing up in staff composition levels,with 35 percent of employees at smallproviders holding Master’s degrees, versus23 percent who can make that claim atmid-sized to large providers.

“KPOs tend to have, not always but inmany cases, retention of employees. UnlikeTCS, Wipro, Infosys, small firms have a

July ’08 saw government defensecontracts dominating the top 10,

with Lockheed Martin winning thebiggest of the bunch — a $1,200 mil-lion eight-year deal from the Trans-portation Security Administration(TSA) to manage its integrated hiringoperations and personnel program.

Lockheed Martin will develop aHR application to support the recruit-ing, assessing, hiring, paying and promotion of all TSA employees, andalso operate its HR systems. The dealis one of the largest public-sector HROutsourcing (HRO) deal, and is amajor win for Lockheed in an areaoutside its typical business. This contract could signal a move into thewider commercial HRO market in the future.

Another five contracts making upthe top 10 this month were U.S.defense related.

The largest of which was CSC’s dealwith the Department of HomelandSecurity for secure managed data-cen-ter services. The contract is structured

as a six-month base period and sixoption years.

The second largest overall deal forthe month of July was WNS GlobalServices’ $1 billion contract with theU.K.-based insurance giant Aviva. Thedeal, which will run for about eightyears, was negotiated as part of WNS’$228 million acquisition of Aviva’sBusiness Process Outsourcing (BPO)arm Aviva Global Services, which has5,800 employees in centers in Indiaand Sri Lanka. WNS will provideBPO functions such as policy admin-istration, finance and accounting andcustomer care.

Having paid BT Group $110 millionfor exclusive negotiation rights, TechMahindra saw a return on that invest-ment with the announcement of a $700million deal with the U.K.-basedtelecommunications provider. Underthe contract, Tech Mahindra will assist BT in accelerating BT Group’stransition to the platform-based ser-vices strategy focused on improving itscustomers’ experience. GS

CustomersBY IMRANA KHAN

THE TEN LARGEST IT SERVICES DEALS IN JULY 2008

* Application Development & Maintenance; SOURCE: DATAMONITOR IT SERVICES CONTRACTS DATABASE

Customer Provider Engagement(s) Value Duration($ mn) (yrs)

l Transportation Security Lockheed Martin Application development 1,200 8Administration and support

l Aviva WNS Global Services Business process outsourcing 1,000 8 (est.)

l China Mobile Nokia Siemens Network integration 869 —Networks

l BT Group Tech Mahindra Infrastructure mgmt. 700 5

l South Tyneside Council BT Group Infrastructure mgmt. 597 10

l Dept. of Homeland Security CSC Data center outsourcing 391 8 (est.)

l U.S. Army Invertix Maintenance/support 300 5

l U.S. Army Stanley Computer engineering 300 5

l Dept. of Defense Northrop Grumman Application mgmt. 240 4.5

l NASA Qinetiq Infrastructure mgmt. 225 9

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unique culture. Employees are more sat-isfied with their work and they knoweveryone who is around. In fact, the man-agement also has a better pulse overwhat’s happening. But it doesn’t apply foreverybody because a lot of small guys willget bought out in the near future. Theguys who survive tend to have at leastsome scale. For example, a KPO shop of50 people will have a hard time. On theother hand, if the number is between 50and 1,000 where you tend to have a scale,you start becoming a specialized player,”adds Sehgal.

The study suggests that these smallerfirms can not only offer better quality andspeed of execution, but also suit well interms of taking on customer-specificprocess. Larger companies rely on morestandardized offerings.

However, challenges are no less. Therespondents to the study reveal that 85percent of KPO providers cite the avail-ability of talent as one of the biggest risksthey face in their own businesses. Asmany as 81 percent say financial com-pensation, and 77 percent say the need toprovide challenging work make their

business challenging. The study surveyed120 service providers spread across theU.S., Europe, China, Brazil, India and

other countries, exploring the opportu-nities and challenges facing innovation ser-vice providers.

In fact, customers’ satisfaction is anemerging issue. More educated talentdoesn’t automatically translate into customer retention. Around 65 percent ofrespondents to the study cite insufficientservice quality as most common reasonsfor terminating a contract. “And 38 per-cent state that their targeted cost savingshad not been achieved. Some of this dis-satisfaction is reflected in KPO deal renew-al numbers, which trail those of traditionaloutsourcing agreements. Offshore arrange-ments focused on finance and accounting,and marketing/sales, have a 83 percentrenewal rate. By contrast, 68 percent ofengineering-focused contracts are renewed,followed by 62 percent of new productdevelopment deals, and 61 percentresearch and development partnerships,”exhorts the study. GS

Metrics

SOURCE: DUKE UNIVERSITY OFFSHORING RESEARCH NETWORK SERVICE PROVIDER SURVEY

PROVIDERS PLANNING NEW SERVICES BY SERVICE PROVIDER SIZE (%)

Engineering

ProductDevelopment

Research &Development

Knowledge/Analytical

Services

Small providers Mid-size providers Large providers

Eyeing Smaller Players for Innovation

0 5 10 15 20 25 30 35 40

35

24

11

24

11

14

14

12

22

SOURCE: DUKE UNIVERSITY OFFSHORING RESEARCH NETWORK SERVICE PROVIDER SURVEY

DELIVERY CENTER LOCATIONS — ALL PROVIDERS (%)

India

Western Europe

China

Latin America

Eastern Europe

U.S.

Canada

Philippines

Other Asia

Mexico

Russia

Africa

Middle East

Australia

0 20 40 60

54

24

21

21

19

19

18

14

14

13

6

5

5

5

Western Europe (not China) is the toplocation after India

Deliv

ery

cent

er c

ount

ries

24x7_Final786.qxp 8/21/2008 11:30 PM

Metrics


News

Gone are the days when Indian’s largeIT companies were less interested in

the nation’s domestic outsourcing market.For all major deals, they were eyeing U.Sand Western European companies. But thetrend changed significantly in 2007 whenthe actual twist came in. Indian companiesfetched many major outsourcing deals.The Bank of India-HP deal, the Depart-ment of Company Affairs-TCS deal, theDena Bank-Wipro deal, the Tata Teleser-

Indian DomesticOutsourcingMarket on anUptick

Global Services’ article U.S. MayCap Investments in India, Inc.,

published in the July 2008 issue,highlighted the concerns aroundthe nation’s government policiesmentioned in Financial Bill 2008that might make it difficult for theIndian outsourcing industry togrow the base of its U.S. customers.It seems that the industry is notignorant about changing policiesfor its betterment and thus, amend-ments and reforms are being con-sidered after proper consultationbetween the practitioners active inthis space. The consent on the con-cept of home agents, simplificationof documents needed for offshoreservice providers registration,removal of restriction on outgoingPublic Switched Telephone Net-work lines for domestic call-centers,are some of the recent examples ofsuch practices. A newly set up asso-ciation, Others Services ProviderAssociation of India (OSPAI), tookthe responsibility to request thenation’s Department of Telecom-munication to consider these favor-able changes.

“OSPAI objectives will coverthe outsourcing industry, whichcurrently has approximately 2,500BPOs, KPOs, LPOs, and call cen-ters operational across Indiaemploying approximately 700,000direct and two million indirect,and generating a revenue ofapproximately $1 billion. Indianoutsourcing industry is expected togrow at more than 25 percentcompound annual growth rate andexpected to reach $50 billion by2012, creating direct employment

to about 2.7 million people.OSPAI will look forward for addi-tional policy changes from time totime that will enable India as a pre-ferred outsourcing destination,”said S. V. Ramana, President,OSPAI, and Chief TechnologyOfficer, Genpact, an Indian BPOand IT solutions provider and amember of OSPAI.

This non-profit and non-gov-ernmental association has been setup to promote the KnowledgeProcess Outsourcing (KPO), Busi-ness Process Outsourcing (BPO)and call-center industries by rec-ommending and assisting in policychanges based on the industry aswell as the market needs.

“Even though Indian outsourc-ing industry has come a long way,whatever we have created is just 4percent of global IT-enabled servicesmarket. There exists an opportuni-ty to tap the remaining 96 percent.There is business sitting up to bepicked up. Thus, as we are a grow-ing industry, there should always bea dialogue between regulators andoperators. We see this [association]as a gain changer and we’ll havesuch a long-term impact that thisindustry will change significantly.Look at the talent sitting at home.They too have a desire to work.Imagine if the educated housewivescould be unleashed, how we wouldcreate a revolution. Such is thepower of a dialogue. This is a bigstep and Quatrro is proud to be apart of it,” said Raman Roy, Chair-man and Managing Director, Qua-trro, a BPO company and a mem-ber of OSPAI. GS

Joining Hands to AmendIndian PoliciesBY IMRANA KHAN

BY IMRANA KHAN

BY IMRANA KHAN

Despite dollar depreciation and eco-nomic downturn, India’s top-tier IT-

services companies, especially Infosys andTCS, are not only increasing their globalpresence by announcing new centers everyother day but also posting higher rev-enues — TCS registered profit margins ofmore than 20 percent and Infosys record-ed 27 percent net income. They con-sciously aim to compete with global play-ers such as Accenture, CSC and IBM,according to a recently released study byForrester. In 2008 India’s top three com-panies — Infosys, TCS and Wipro — col-lectively claimed 46 percent (up from 41percent in 2007) revenue share in thetotal IT-services export earnings fromIndia. Even the next bests including Cog-nizant, HCL and Satyam continue togrow. However, tier-2 and tier-3 companies“stand to lose out.” GS

Infosys, TCS

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vices-TCS deal, the Bharti-IBM deal, theDabur-Accenture deal, and the Ministry ofFinance-HP-Microsoft deal are the onesinked on a larger platform by Indian com-panies. Initially the buzz started with IT-ser-vices deals, but it is now gradually expand-ing to the Business Process Outsourcing(BPO) segment as well.

The Indian domestic BPO market,which presently stands at $1.41 billionmark, is likely to increase by 35 percent to$5.38 billion by 2012, according to arecently released study by ValueNotes, abusiness intelligence and research firm.With growing awareness among customersand increasing interest and surging matu-rity among providers in the domestic mar-ket, the share of third-party providers —that presently stands at about $424 million— will increase significantly by 44 percentto 1.82 billion by 2012. GS

Set to Compete with Accenture, CSC & IBM

THIRD-PARTY PROVIDER SEGMENTATION

Group Providers Key characteristics

International IBM-Daksh, HTMT, l Established BPO provider with total Leaders MphasiS BPO, Firstsource, employees > 5,000

HCL, Intelenet l Primary focus on international mkts.l Presence across multiple locationsl Typically < 20% revenues from domestic customers.

India Leaders Aegis BPO, Andromeda, l Established BPO provider with InfoVision, OmniaBPO total employees > 5,000

l Primary focus on domestic marketsl Typically > 60% revenues from domestic customers or substantial scale of domestic operation.

Emerging Co.s ATS Services, Caretel, l Employee size 500 to 5,000Intouch, Kankei, Magus, l Limited to specific verticals or Spanco, vCustomer horizontals; specialized offerings on a

small scale onlyl Cater to domestic and/or international customers.

‘Me-too’ Players GK Management, Access l Typically < 400 employeesSystems l Offering undifferentiated low-value

servicesl Limited presence in terms of delivery centers and marketing setup.

SOURCE: VALUENOTES RESEARCH

OFFSHORE VENDOR REVENUES FOR 12 MONTHS ENDED MARCH 31ST, 2008 ($ MILLIONS)

MOUNTING POLARIZATION SINCE 2006COMPARING THE REVENUES OF TOP PUBLICLY TRADED COMPANIES

$6,000$5,000$4,000$3,000$2,000$1,000

$0

$6,000$5,000$4,000$3,000$2,000$1,000

$0

TCSInfosys

Wipro

CognizantSatyam

HCL Tech

Tech MahindraPatni

SyntelPolaris

Hexaware

NIIT TechMastek

SonataiGate

Zensar

MindTree

KPIT Cummins

Top publicly traded Indian/India-centric technology firms

Revenue of top publicly traded offshore firms (12 months ended March 31st, 2006 and March 31st, 2008)

Top three Next three Polarization prone < 1 billion

FY 2008

FY 2006

SOURCE: FORRESTER RESEARCH

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6

Many German, British Co.s Get Sold

Global IT and Business Process Out-sourcing (BPO) industry continues to

witness large number of Merger and Acqui-sition (M&A) transactions early in the sec-ond half of year 2008. In July ’08, with atotal of 133 transactions being announced,

30 of which were of significant size asagainst 40 in June ’08. These 30 deals in Julywere considerably larger than the 40 in theprevious month on an average basis andhence, drove the total deal size in dollar termsto $3 billion against the $1.3 billion in June.

Overall, the 133 transactions accounted foraround $4 billion of acquisitions with anaverage deal size of $28 million.

Market dynamics, sub-prime crisis andunstable exchange rates have propelled theIT and BPO players to adopt a risk aversestrategy, thereby diversifying the businessinto newer geographies. The U.S.-basedcompanies continued to top the list both interms of domestic and cross-border acquisi-tions followed by the U.K.-based ones.Japan and Brazil were more active on thedomestic transactions, whereas Canada,India and Switzerland were more active onthe outbound transactions. Germany andFrance witnessed more inbound transactionsthan outbound and domestic ones. The U.S.and the U.K. topped the shoppers’ listannouncing most number of transactionsboth on own land and on foreign shores, fol-lowed by Japan, Canada, India, Germanyand Switzerland.

One of the major deals July ’08 wasCapgemini, a French IT-services provideracquiring the Netherlands-based business-application division of Getronics for $400million. The acquisition is primarily toleverage the high concentration of public-sector customers served by Getronics

MEGA M&As OF JULY '08Acquirer Target Area Deal size

($ mn)

l Capgemini Getronics PinkRoccade IT services 400 Business Application Services

l IBM Ilog IT software 340

l Sophos Utimaco Safeware IT software 340

l Convergys Intervoice IT services 335

l WNS Holdings Aviva Global Services BPO 230

l Cisco Systems Pure Networks IT software 120

l BT Ribbit IT software 105

l Avocent Touchpaper Group IT services 45

l SemanticSpace Prolofics IT solutions 40

l BT Ufindus Internet 40

l Interwoven Discovery Mining IT software 36

l Allied Digital Services Enpointe Global Services IT services 30

l Know IT Net Result Consulting IT consulting 29

l Avocent Ergo 2000 IT software 28

l Reply SpA glue: IT consulting 18

l SI International Arrowpoint IT services 16

l Open Text Spicer’s format viewer IT software 12 software division

l Ariston Global ACE*COMM Corp. IT services 12

l Know IT Helikopter Systemutveckling IT software 6

l Micro Focus International Liant Software IT software 5

l BT Stemmer IT software —

l BT SND IT services —

l COMSYS IT Partners Symmetry Workforce Solutions IT software —

l Imtech Ebit IT services —

l Imtech Thinking Solutions IT services —

l Luxoft ITC Networks IT services —

l Fluensee TrenStar Tracking Solutions IT software —

l Wolters Kluwer Compliance Online Internet —

l Oracle Global Knowledge Software IT software —

l Quatrro BPO Babel Media Gaming —

SOURCE: THOLONS

BY NISHANT VERMA, PRINCIPAL, AND AVINASH VASHISTHA, CEO, THOLONS

TOTAL DEAL VOLUME BY TARGET COUNTRY (%)

SOURCE: THOLONS

Canada: 11..99

Germany: 88..55

Others: 2200..88

U.S.: 38.7

Brazil: 22..88

France: 33..88

Britain: 1144..22Japan: 77..55

Spain: 11..99

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September 2008 www.globalservicesmedia.com GlobalServices 15 24x 7

7

in July ’08

PinkRoccade Business Application Servicesin the European region. In another largedeal, Sophos, the U.K.-based IT playeracquired German software company, Uti-maco Safeware,employing over 300 people.The targets were valued at an average rev-enue multiple of 3x signifying a premium ofover 200 percent on their total revenue.Other major acquisition of the month isWNS Holdings, the U.S.-based BPO majorwith large India presence, acquiring the fouroffshore BPO centers of the U.K.-basedinsurance major Aviva Global Services for $230 million. The deal will furtherramp up the resources of WNS in India and Sri Lanka.

During the month, acquirers based in theU.S. contributed to 30 domestic and 22cross-border deals spread across the U.K.,France, Germany, New Zealand, Switzerlandand Ireland. Acquirers based in the U.K. slat-ed out seven domestic and 10 cross-borderdeals spread across the U.S., Australia, Franceand Germany.

Amongst the target geographies, the U.K.and Germany — after the U.S. — seemed tobe the markets of next best interest. GS

TOTAL DEAL VALUE BY TARGET COUNTRY (%)

Green: The New Color ofOutsourcingBY NAMITA GOEL

SOURCE: THOLONS

Half of 738 companies respondingto a Forrester Research survey in

April said they consider green criteriaduring their IT-procurement process,and four out of five have recycling pro-grams. IT leaders and organizations canincrease their influence by helping busi-nesses curb their environmental impact,not only from IT equipment and oper-ations, but also from other businessprocesses, Forrester VP ChristopherMines said in the report.

That is, the role of services compa-nies is no less than that of equipmentproviders in making the world greener.

This “go green” trend has led to adevelopment of a lot of new Special Eco-nomic Zones (SEZs). Currently, inIndia, there are around 513 SEZs thathave been approved by various state gov-ernments, of which 250 have alreadybeen notified under the SEZ Act 2005,and over 150 of them are designed tosuit the needs of IT and IT-enabled ser-vices industry. Earlier this year, WNStook its first step toward turning carbon-neutral and launched a “The Green Lean

Sigma Program,” which will includesetting up of overall objectives and strat-egy to drive the program globally.

Interestingly, the research revealsthat by adopting green initiatives indata centers across the globe only 2 percent of the current ecologicalissues can be solved. The challenge forthe providers is to improvise these ini-tiatives at the customer site, and fur-ther spread awareness so that even theycan derive the cost and energy savingbenefits. IBM on Aug. 18th, 2008launched Green Sigma to assist its cus-tomers lower their environmentalimpact, increase efficiency and reducecosts by applying Lean Six Sigmaprinciples to energy and water usagethroughout their operations.

“Companies are making investments,and last year in U.S. alone over $3 bil-lion were invested in green initiatives bycompanies. It is not just the corporatesocial responsibility but also the businessneed to turn green,” says Kothandara-man Karunagaran, Director, Infrastruc-ture Services, CSC India. GS

Canada: 00..11

Germany: 66..33

Others: 2288..44

U.S.: 2200..88

Brazil: 99..33

France: 77..55

Britain: 1188..88Japan: 00..55

Spain: 88..33

KEY IT-BPO PLAYERS & THE RECENT GREEN INITIATIVES

SOURCE: GLOBAL SERVICES

Company Green Activity

Accenture Introduced Green Technology Suite to help organizations use IT to assess and improve green agenda in July ’08

WNS Launched Green Lean Sigma Program in Feb. ’08 to move toward carbon neutralization

IBM Introduced IBM “Green Sigma” Consulting

ACS Launched a white paper “Shades of Green: The BusinessApproach” stating the green policies at ACS

HP Partnered with Xtreme Energetics (XE), a solar energy system developer based in Livermore, for the development of a solar energy system designed to generate electricity at twice the efficiency and half the cost of traditional solar panels

Wipro Joined The Green Grid, a global consortium dedicated to advancing energy efficiency in data centers and business computing ecosystems. Wipro’s other recent accomplishments include receiving U.S. Green Building Council Certification for two of the company’s existing facilities

Patni New green IT-BPO in Noida, India.

24x7_Final786.qxp 8/21/2008 11:32 PM


8

TangierThis city is the gate-

way to Africa for manytravelers. Tangier charmsyou with highlights thatincludes the medina, theKasbah and the Ville Nouvelle. The city’s beautifulbeaches make it a favored destination amongtourists, artists, poets and writers.

FezAn ancient and

religious capital city ofMorocco, Fez (Fès inFrench) is the livingexample of a medievalArab city with popularmonuments and architecture. The most famousplace in Fez, Fez el-Bali, is a huge medina filledwith thousands of twisting alleyways and hundredsof mosques.

Marrakech It is known as

the beautiful culturalcenter or imperialcapital of SouthernMorocco. This city ismost known for itstranquility and peace; its beauty lies in the atmos-phere honeycombed alleys and minarets quiveringin the moonlight. It is here that time becomes sus-pended and you catch a glimpse of the past — sorich and so remote and yet so palpable.

CasablancaThis city, the modern

face and economic capital ofMorocco, has one of thelargest artificial ports in theworld. Two places — theCasablanca Central Marketand the Habbous SoukDistrict — bustle with activity and thrill you withtheir variety of attractive merchandise.

RABATThis city

(transliterated asar-Rabat or ar-Ribat) is the capitalof Morocco as wellas the Rabat-Salé-Zemmour-Zaerregion. Situated on the Atlantic coast, it has nicewide-open boulevards and shopping centers withrelatively important textile, food processing andconstruction industries.

Fiveplaces to visit

Situated in northwestern Africawith coasts on the Atlantic Ocean

and the Mediterranean Sea, Moroc-co ushers in dynamism and consti-tutes a link between Africa, Europe,the Occident and the Middle Eastmaking it a preferred regional busi-ness center.

Morocco’s fate changed with theconstruction of the CasaNearShorePark — the first business area ded-icated to offshore services and out-sourcing in Dec. ’05. Another park,Technopolis, constitutes engineer-ing, colleges and R&D spaces to tar-get service providers.

Morocco boasts of a large pool ofHR as well — producing up to50,000 university graduates annual-ly. To ensure that the talent is well-suited to BPO, ITO and KPO indus-try, promotion of technology andprofessional training for 25,000recruits are being provided — fromlow-level administrative functions totechnicians to engineers to man-agers. All measures are being taken toboost skilled talent to 100,000 by2015, in order to maintain an abun-dant supply of labor and preventwage inflation. World leaders of ITand communication established inMorocco include Cisco, Capgemini,Compaq and more.

Such is the level of developmentthat Morocco’s employment min-istry indicates a fall in the overallunemployment rate — from 13.9

percent in 1999 to 9.8 percent in2007 and 9.6 percent over the firstquarter of 2008 — and is againexpected to drop to 9.2 percent in thesecond quarter of this year.

According to McKinsey’s ownstudy, when compared with com-petitors such as Mauritius, Senegal,and Tunisia, Morocco is geographi-cally closer to France, has a larger andmore qualified talent pool, and boastsa better telecommunications infra-structure. When measured againstEastern European countries, Moroc-co presents reduced labor costs and alarger pool of French speakers. Rabatis the commercial and industrial cap-ital, Casablanca, the major econom-ic capital, and Marrakech, the com-mercial and cultural destination.

A strong intellectual propertyrights legislation, economic reforms,privatization program, willingnessto build long-term trade and invest-ment ties, a highly motivated, youngand skilled labor pool (well-versed inFrench and Spanish), reliable tele-phone infrastructure and reducedoperating costs are attracting multi-national corporations to invest inMorocco. With state-of-the-art high-speed transportation lines, ports andharbors, railways, principal highwaysand airports with paved runways,Morocco’s success story till date iswidely seen as a foundation to devel-op more offshore services there gen-erating value. GS

BY KEERTHI NAIR

Compiled by Keerthi NairSOURCES: APEBI, MOROCCAN FEDERATION OF INFORMATION TECHNOLOGIES, TELECOMMUNICATIONS AND

OFFSHORING; SHAREDXPERTISE FORUMS; MOROCCAN AMERICAN TRADE AND INVESTMENT CENTER (MATIC) ;SITEL

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September 2008 www.globalservicesmedia.com GlobalServices 17 24x 7

9

July ’08 has shocked the jobs marketwith 103,312 jobs cut in the month.

Even more alarming is the fact that thenumber of jobs cut has crossed the100,000 mark the second time in theyear and twice in the same quarter,according to Challenger, Gray andChristmas, a global outplacement con-sultancy firm. The number is 141 per-cent more than what itwas a year ago and 26percent more than whatit was a month back.Ironically, in 2007, Julyreported the least num-ber of jobs cut that year.

Market conditionsstill tops the chart ofreasons for jobs cut inJuly, while outsourcinghas moved further downto the last but third posi-tion among the list ofreasons. Surprisingly, ris-ing costs due to inflationthat’s making news thesedays does not featureamongst the severe rea-sons for job loss.

All the five majorindustries — financial, automotive,transportation, government / non-prof-it and retail — have seen an increase injobs cut as compared to the last year.The transportation sector has been themajor contributor to this number with17,051 jobs lost. This was quite expect-ed considering the way airlines are cut-ting costs — reducing number of

flights, workers and services offered tocustomers — to meet the increasingfuel prices.

Next in line is the financial sectorclaiming 15,517 jobs cut in July. In the year-to-date category, the finan-cial sector has seen the highest num-ber of jobs lost, and have alreadyannounced 100,775 jobs cut that is 50

percent more than the2007 seven-month totalof 67,006.

New York Cityheadquartered firmshave reported the max-imum number of cutsyear-to-date. Region-wise, West and South-west U.S. — particu-larly Texas — reportedthe maximum job loss,and East — Delaware— reported the leastnumber of jobs cut.

The hiring plansreleased by various sec-tors during the monthstood at 19,661, revealsthe monthly report. Itcannot possibly com-

pensate for the number that is a littleover five times this figure. The year 2008 has also seen a trend of“Interim CEOs,” and the averagetenure among Interim CEOs throughJuly ’08 was about six months.Seventy one interim CEOs have beenreplaced by permanent successors,including six in July this year. GS

Over 100,000 Jobs Cut in July ’08BY NAMITA GOEL

Jobscut

MONTH BY MONTH TOTALSMonth 2008 2007l April 90,015 70,672l May 103,522 71,115l June 81,755 55,726l July 103,312 42,897

Month 2008 2007l April 21,145 2,505l May 15,505 3,948l June 18,936 3,713l July 14,735 1,175

JULY ’08 JOBS CUT REASONS

MORTGAGE / SUB-PRIME LAYOFFS

Reasons Number of layoffs

l Market conditions 38,959l Closing 23,779l Bankruptcy 11,259l Restructuring 8,706l Cost-cutting 6,268l Demand downturn 5,728l Relocation 2,405l Voluntary severance 2,271l Reorganization 1,550

/consolidationl Merger/acquisition 1,033l Unknown 403l Fluctuating sales 253l Rising costs 200l Technological update 200l Outsourcing 150l Order cancellation 143

/reductionl Firing 5Total 103,312

SOURCE: CHALLENGER, GRAY & CHRISTMAS

“We have seen job cuts increase in the majority of industries that we track, indicating that the downturn, which was isolatedto the housing and financial sectors just a few months ago, has spread throughout much of the economy. While the latest

reading on gross domestic product confirms that we have not yet fallen into recession, the big worry is that the economy willcontinue to under-perform. If that persists for several quarters, or even years, it will be seen as a recession, particularly for

job seekers," said John A. Challenger, CEO, Challenger, Gray & Christmas.

MARKET CONDI-TIONS STILL TOPS

THE CHART OFREASONS FORJOBS CUT IN

JULY, WHILE OUT-SOURCING HAS

MOVED FURTHERDOWN TO THE

THIRD-LAST POSI-TION AMONG THELIST OF REASONS.

SOURCE: CHALLENGER, GRAY & CHRISTMAS

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Survey ofThe Definitive

cover story_final.qxp 8/22/2008 1:11 AM

AAAWelcome to the first ever study on sourcing advisory

companies that covers the views of service buyers and providers

SOURCING ADVISERS ARE A unique breed — some sort of a hybridbetween operations and strategy consultants, with an added eye forresearch. As all good things, they were born out of a necessity. Orga-nizations looking to outsource and offshore pieces of technology work

did not have the requisite understanding of the dynamics of outsourcing toa third party or of setting up offshore captives. Sourcing advisories came into facilitate the process and ended up playing variegated roles of being a pre-ceptor, an adviser, a coach and a dealmaker. In the past decade, they havegrown to become entities with formidable influence and impact on the glob-al services industry.

This study is an attempt to understand what sourcing advisories do andwhat do customers of services and service providers expect from them.

SourcingAdvisersBy Ed Nair, Global Services, and Phil Fersht, AMR Research


What’s on OfferThe breadth of services that sourcing advisory companiesoffer are a reflection of two clear trends in the practice ofglobal sourcing of services — increased complexity and grow-ing maturity. Much of global sourcing continues to be an areathat requires specialized knowledge and expertise where thescope for black box solutions is less. No wonder then thatmore than half, up to nearly a third of advisers, are frequentlyengaged in pre-transaction services like business-case devel-opment, RFP formulation and provider selection. Theother clear finding is that with sourcing contracts gettingmore complex, which in itself in an index of growing matu-rity, the need for governance-related services are on the risecompared to what it was two years ago. More than 50 per-cent of the advisers reported the increased need for gover-nance services.

The Source of SourcingHow do sourcing advisers develop their business? While

many of them have both customers and service providers intheir client roster, it is the latter that seems to keep the con-sultants’ clocks ticking. With half the advisers citing theirrelationships with providers as their primary source of newbusiness, this does raise concerns over the bias in the selec-tion process. In other words, if provider X recommends toits prospective customer the use of adviser Y, will adviser Ybe more incented to recommend provider X in the hope ofsecuring future business opportunities with that provider? Socustomers need to avoid relying solely on their advisers’ rec-ommendations and access other independent research andadvice to validate their decisions.

Faster is BetterGlobal sourcing deals no longer have the luxury of time

— companies are realizing that it is no longer about cost sav-ings but the missed opportunity on value-add and compet-

itiveness. Sourcing advisers are expected to transact sourcingdeals far more rapidly and often under a six-month time-frame. To achieve this, most of them have reusable templatesto assist in various stages of the sourcing lifecycle. While thereare obvious risks in rushing through a deal, as long as theright provider is selected, a suitable master services agreementand base-line pricing structure developed, the adviser hasdone her job at this stage of the sourcing process. There havebeen many instances where the adviser spent too long work-ing on pre-transaction activity with the customers, resultingin expensive consultant fees and, in hindsight, many of theissues are better resolved during transition and governanceprocesses, where “on-the-job” experience often leads to bet-ter decisions.


Special Report

SURVEY METHODOLOGY ANDRESPONDENTS' DETAILSThe Definitive Survey of SourcingAdvisers was conducted jointly by GlobalServices and AMR Research. The onlinesurvey was done during the month ofJuly 2008 with participation fromrespondents all over the world. In addi-tion, the sourcing advisory companieswere asked to submit detailed informa-tion about their firms.


Now the Oscars … Well, Not QuiteThe traditional areas of the sourcing-advisory cycle, name-

ly outsourcing strategy/business-case evaluation, providerselection and contract-negotiation skills, which are the“bread-and-butter” skills needed to get to an outsourcingtransaction, were where the long-time established sourcingadvisers performed the best, notably EquaTerra, EverestGroup and TPI. Clearly, deal experience, existing intellec-tual property and a good base of industry research serve thesefirms well in doing their job. The experience of the individualadviser — a veteran with deep business experience whounderstands broader issues than simply executing an out-sourcing transaction, and the corporate politics of out-sourcing — is also of high importance to customers. Apart

from EquaTerra, Everest Group and TPI, Deloitte Con-sulting performed well in this category in addition to someof the boutique firms, namely Alsbridge and the W Group,which favor hiring veteran consultants. The other area ofincreased importance involves the ability of the sourcingadviser to deliver governance support and the nuances of sup-porting post-transaction activities. Booz & Company and theHackett Group, with their experience working with complexchange in mature organizations, were noted high-perform-ers in this category.

Providers’ VoiceThough sourcing advisories have most of the lead-ins

coming from service providers, providers are peeved aboutthe aggressive sales agenda from sourcing advisers. Providersalso came up with a litany of expectations from sourcingadvisories. Notably, providers want more quality commu-nication from sourcing advisers; they want their share ofvoice in the deal-making cycle. Also, service providersexpect sourcing advisers steeped in real-life outsourcingexperience to be brought into play in a variety of deals. Soa love-hate relationship between providers and sourcingadvisories, in some cases, and an unholy nexus in others,characterizes the relationship.

Customers’ ByteCustomers were found to be more equivocal about their

expectations from sourcing advisers. Their expectations arebasic — sourcing advisers should have extensive processknowledge, deep provider knowledge, and solid expertise inthe overall sourcing-evaluation methodology.

All-in-all, the role of the outsourcing adviser hasbecome a lot broader than simply administering an out-sourcing transaction. Some advisers recognize this fact whilesome, unfortunately, do not. Customers not only cited deepprocess acumen and provider knowledge as two of the crit-ical elements, but also mentioned their global perspectiveand post-transactional knowledge as being important. Ascustomers strive to globalize their business models, theyview outsourcing as one vehicle to access low-cost offshoretalent, and stay competitive and nimble in global markets.Hence, while achieving a successful outsourcing engage-ment is critical, the ability to tie their outsourcing envi-ronment to their needs to be more competitive at a glob-al level is equally important. Added to this is the fact thatmost customers cannot simply reach out into the market-place to hire seasoned executives with outsourcing experi-ence — in most cases they have to re-train their existingmanagement to run a successful outsourced operation andfocus on adding higher-value competency to the business.The more the outsourcing adviser can engage in those high-er-level conversations with their customers, the more suc-cessful they will be, and the higher the value-impact theywill have on their customers. GS


Special Report

KEY FINDINGS OF THE SURVEY

Are you primarily a customer, adviser or provider of outsourcing services? (%)

l Most demand is for pre-RFP services, but the needfor governance work is much greater than what itwas two years ago

l Half the advisers frequently won their business viaprovider relationships — does this encourage bias?

l Demand for rapid-transactions in under six-monthtimeframes

l Traditional “big 3” — EquaTerra, Everest Group andTPI — perform most consistently across all cate-gories. Booz & Company, Deloitte, PWC and theHackett Group perform well in some areas, butaverage in others

l Many of the small boutiques performed strongly,example Alsbridge and the W Group, whose perfor-mance is clearly centered on consultant experience

l Providers want more communication in the processand advisers with genuine outsourcing implementa-tion experience (not simply strategy)

l Some customers want a tighter methodology toshorten the advisory cycle and advisers with moredomain expertise.

n=530

Customer of outsourcing services/currently evaluating outsourcing

Outsourcingadviser/consultant

Provider of outsourcing services

23

53

24

SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008


100

80

60

40

20

0

Provid

er relatio

nships

Attending co

nfere

nces

Direct

sales

Word-o

f-mouth

Adverti

sing

100

80

60

40

20

0

Business

-case

evaluatio

n

RFP dev

elopment

Provid

er select

ion

Transa

ction n

egotiatio

n

Govern

ance se

rvice

s


Special Report

The Sourcing Advisory BusinessTYPICAL SOURCING ENGAGEMENTS

What typical sourcing engagements areyour clients requesting? (%)

How does your firm source most of yourcustomer leads? (%)

How quickly are your clients generally expectingyou to finalize an outsourcing transaction?

l Customers are primarily looking for pre-transac-tion work: Business-case evaluation, RFP devel-opment and provider selection

l Governance services are now much more indemand — over half the advisers surveyed arefrequently asked to provide them.

TIME TO TRANSACTl Transaction expectations are firmly in the

four to six month bracketl Most providers are responding to RFPs in

a two-week timeframe.

WHERE ADVISERS ARE SOURCING CUSTOMER LEADS FROMl Word-of-mouth clearly is the most frequent

source of business leads for advisersl Sourcing new business through provider-rela-

tionships is as common as direct sellingl Advertising not a particularly used technique.

Frequently

n=115 Advisers

Occasionally Never Frequently

n=114 Advisers

Occasionally Never


n=113 Advisers

7 to 12months

Less than 3months

4 to 6months

21

47

32

cover story_final.qxp 8/21/2008 11:48 PM


Special Report

Which of the following third party advisers have you worked with, and how would you rate your overall experience with them? (%)

The Advisory Ratings

Category High performers

l Outsourcing strategy/business-case evaluation TPI, Booz & Company, Everest, EquaTerra, Deloitte

l Provider selection TPI, Booz & Company, Equaterra, Everest, PwC, PA Consulting

l Industry knowledge/research Everest, EquaTerra, TPI, The Hackett Group

l Experience of advisers Equaterra, TPI, Everest, Deloitte

l Contract-negotiation skills Equaterra, TPI, Everest, The Hackett Group, neoIT

l Governance support TPI, Booz & Company, Equaterra, The Hackett Group, Everest

HIGH PERFORMERS (CUSTOMERS)

THE OVERALL EXPERIENCE (CUSTOMERS)

n=64 Customers


0 20 40 60 80 100

Poor Average Good

TPI

PwC

PA Consulting

neoIT

KPMG

The Hackett Group

Everest Group

EquaTerra

Deloitte

Booz & Company

Others



The Advisory RatingsVALUE FOR MONEY (CUSTOMERS)

In terms of the adviser(s) you have used, how would you rate the value for money you received from their services? (%)

THE OVERALL EXPERIENCE (PROVIDERS)

Which of the following third-party advisers have you worked with, and how would you rate your overall experience with them? (%)

n=62 Customers

n=119 Providers

0 20 40 60 80 100

Poor OK/Good Great

Others*

TPI

PwC

PA Consulting

neoIT

KPMG

The Hackett Group

Everest Group

EquaTerra

Deloitte

Booz & Company

Alsbridge

0 20 40 60 80 100

Poor Average Good

Others

The W Group

TPI

PwC

Pillsbury

PA Consulting

Pace Harmon

neoIT

KPMG

The Hackett Group

Everest Group

EquaTerra

Deloitte

Booz & Company

Archstone

Alsbridge


Special Report

* INCLUDES ARCHSTONE, PACE HARMON, PILLSBURY & W GROUP; ALL ADVISERS HAVE A MINIMUM OF SIX RESPONSES FROM BUYERS WITH EXP. SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008



Expectations from AdvisersWHAT CUSTOMERS WANT FROM ADVISERSHow critical are the following elements of a sourcing adviser relationship to you? (%)

What would be your preferred pricing forsourcing advisory services, if you were to usethem again in the future? (%)

Will you use a third-party adviser again in thefuture for sourcing advice?

n=66 Customers

n=63 Customers n=64 Customers

0 20 40 60 80 100

Nice-to-have, but not important Quite important Critical

Governance/provider management knowledge

Negotiation skills

Global perspective

Its approach to changemanagement

Process knowledge

Overall sourcing evaluation methodology

Deep provider knowledge

Industry research data

Benchmarking data

Tools and templates

Low-cost consulting fees

Monthly flat fee14

Flat total project fee62

Billable hours24

No8

Yes56

Don’t know36SOURCE: GLOBAL SERVICES MEDIA / AMRRESEARCH SOURCING ADVISER STUDY, JULY 2008


SOURCE: GLOBAL SERVICES MEDIA / AMRRESEARCH SOURCING ADVISER STUDY, JULY 2008

Special Report



Statements: If you use a sourcing adviser again in the future, what would you do differently?

PROVIDERS ON ADVISERS…

In your opinion, have sourcing advisers beena positive or a negative influence on assistingtheir customers’ sourcing strategies? (%)

n=106 Providers

Are there sourcing advisers with whom yourefuse to work? (%)

n=103 Providers

l Ensure they have an established and comprehensive process for reducing provider-selection time.

l Focus more on the skills of advisers than the reputation of the company

l Use RFP process to select adviser

l Have them provide a broader set of services to manage the post-selection transition

l Be better prepared internally when they arrive, use them sooner in the process

l Select individual consultants on the basis of their CVs rather than a consultancy company against a RFP

l Use different outsourcing advisers for expertise in a domain with a proven track record for innovative management

l Be clear of their role and ensure it does not restrict access to providers’ value add

l Use targeted assignments that are smaller in scope with very tangible deliverables

l Ask for more sushi at dog n' pony shows.

From your experience, how can advisers improve their sourcing process/methodology?l By NOT pushing their own agenda (sales) at every instance

l Start focusing on the mid market customers too and also customize their RFPs to their needs

l More frequent communication with service providers

l Advisers with more hands-on experience and greater understanding of how sourcing is changing

l Keep learning and educating themselves and networking and helping each other

l Allow the providers to have a dialogue with the prospect during the sales process

l They must be open to encouraging lesser-known, yet competent, providers and not follow the trodden path only

l Reduce number of providers considered

l Have right attitude versus “beat up provider” mentality

l Hire people who have real-life experience in outsourcing delivery and implementation.

WHAT BUYERS WANT FROM ADVISERS

Positive83

Negative17

No75

Yes25

Special Report



Advisers’ dashboardName

Alsbridge 2002 100 — 15 1 ND* ND* ND* ND* ND* ND*

Archstone 2003 40 0 2 0 In 5 210 In 1 40 — —Consulting countries country

Avasant 2006 40 100+ 11 1 7 81 1 20 1 50

Deloitte 1840s 420 300 ND* 20 892 440 419 230 178 50

EquaTerra 2003 225 15 50 ND* 4 194 5 90 2 6

KPMG 1987 250 400 — 0 In 4 ND* In 10 ND* In 7 ND*countries countries countries

neoIT 1999 ND* ND* ND* 3 1 ND* 1 — — ND*

PA 1943 400 0 100 0 11 410 14 2,055 7 135Consulting

Pace 2003 38 22 3 1 2 63 0 0 0 0Harmon

Pillsbury 1868 55 2 3 — 4 49 1 8 0 0Winthrop Shaw Pittman

The W Group 2002 25 15 5 25 1 45 0 0 0 0

TPI 1989 ND* ND* ND* 1 ND* ND* ND* ND* ND* ND*

Yearfounded

Total staff Staff tomanageserviceproviderrelations

Global presence

Full-timeemployees

Part-time /contractedadvisors

Americas

Office(s) OAS per-sonnel

Europe Asia PacificOther



*NOT DISCLOSED; SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

SOURCING ADVISERSARE EXPECTED TO

TRANSACT SOURCINGDEALS FAR MORE

RAPIDLY AND OFTENUNDER A SIX-MONTH

TIMEFRAME.

THE ROLE OF THEOUTSOURCING ADVISER

HAS BECOME A LOTBROADER THAN

SIMPLY ADMINISTERING AN OUTSOURCING

TRANSACTION.

Special Report



Name Revenues in2007(A: $1 to$10 mn; B: $11 to$50 mn; C: $50to $250 mn; D:$251 mn+)

% of RevenueAttributed to A: SourcingStrategy & Evaluation; B:Solution, Design &Contracting; C: Transition &Governance Services

How do you charge yourcustomers? (A: Flat projectfee; B: Billable hours; C: Fixedproject fees + billable hours;D: Monthly flat rate; E:Annual subcription; F: Other)

Where do you see achange*? (A: Flat projectfee; B: Billable hours; C: Fixedproject fees + billable hours;D: Monthly flat rate; E:Annual subcription; F: Other)

In the next 18 months,changes expected in A:Sourcing Strategy &Evaluation; B: Solution,Design & Contracting; C:Transition & Governance

Archstone B (sourcing A = 50, B = 25, C = 25 A C and D A = up**, B = up, C = upConsulting revenues) and

C (total consul-ting revenue)

Alsbridge B A = 33, B = 34, C =33 B B A = up, B = up, C = up

Avasant B A = 32, B = 38, C = 30 A, B, C B A = no change, B = no change, C = no change

Deloitte Not Disclosed A = 40, B = 30, C =30 B A = up, E = continental A = up, B = up, C = upfee arrangements

EquaTerra Not Disclosed A = 15, B = 60, C = 25 A, B, F (at risk based on A and F (at risk based on A = up, B = down***, outcomes) outcomes) C = up

KPMG C A = 20, B = 40, C = 40 A A A = up, B = up, C = up

neoIT Not Disclosed A = 50, B = 30, C = 20 A — A = up, B = no change, C = up

PA C A = 30, B = 30, C = 40 C A A = up, B = up, C = upConsulting

Pace B A = 20, B=40, C = 20 B C and D A = up, B = up, C = upHarmon

Pillsbury B A = 40, B = 50, C = 10 B A and C A = up, B = up, C = upWinthrop Shaw Pittman

The W Group B A = 50, B = 30, C = 20 D — A = up, B = up, C = up

TPI C A = 35, B = 50, C = 15 B — —

Special Report

* In the next 18 months



Functional Expertise Change in functional areas you servein the next 18 months

Industry Expertise

Deep Some Cursory Deep Some Cursory

Decrease Same Increase

IT infra, app.s, HR Claims — HR, call IT infra, app.s Consumer packag- Retail, automotive, Chemicals, F&A, procurement, Proces- center F&A, procurem- ed goods, financial other mfg, telecom, public call center sing, en- ent svcs, health care tech, transportation

gg., & logistics, utilities, design media

IT infra, app.s, Call center, RPO, — Call cent- IT infra, app.s, Financial svcs, tele- Retail, consumer —F&A, HR, procure- product KPO er, M&As F&A, HR, procur- com, high-tech, util- packaged goods, aut-ment, M&As development ement, KPO ities, media, public omative, other mfg,

transportation &logistics

IT infra, app.s, KPO — HR IT infra, App.s, procure- Retail, chemicals, Consumer packaged — F&A, HR, procure- F&A, call ment, M&As other mfg, financial goods, automotive, ment, call center center, svcs, telecom, hi-te media

KPO ch, health care, util-ities, public

IT infra, app.s, F&A, — — — — IT infra, app.s All — —HR, procurement, F&A, HR, call center procurement.

call center

IT infra, app.s, F&A — — — HR, proc- IT infra, app.s, All — —HR, procurement, urement, F&Acall center call center

App.s, F&A, IT infra, HR, — — — IT infra, app.s, Mfg, financial svcs, Retail, consumer pa- Chemicals,procurement call center F&A, HR, telecom, tech, ckaged goods, auto- transpor-

procurement health care motive, utilities, med- tation & logis-call center ia, pubic tics

IT infra, app.s, F&A, HR, procem- — — App.s, HR, IT infra, F&A High tech, telecom Retail, mfg, financial — high-tech, media ent, call procure- svcs, insurance, hea-

center ment, call lth care, media, utili-center ties public

IT infra, app.s F&A — — IT infra, App.s, F&A, HR, Financial svcs, Retail, consumer pa- —HR, procurem- call center procurement insurance, telecom, ckaged goods, chem-ent, call center tech, utilities, health icals, automotive,

care, media, public other mfg, transpor-tation & logistics

IT infra, app.s, HR — — Procuem- IT infra, app.s, Retail, other mfg, Consumer packaged —F&A, procurement, ent, call F&A, HR financial svcs, high goods, automotive,call center center -tech, telecom, utili- transportation & log-

ties, health care istics, media, public

IT infra, app.s, F&A, — — — App.s, HR, IT infra, F&A, Retail, consumer Automotive, transpo- Chemicals, HR, procurement, call center procurement, packaged goods, rtation & logistics, publiccall center facilities mgmt., other mfg, financial utilities

telecom, manag- svcs, telecom, tech, ed network svcs health care, media

IT Infra, app.s F&A, HR, pr- — — HR IT infra, app.s, Retail, consumer pa- Transportation & log- Chemicals,ocurement, F&A, procureme- ckaged goods, mfg, istics, utilities automotive,call center nt, call center financial svcs, telec- public

om, hi-tech, health care, media

IT infra, app.s, HR, F&A, procur- — — — — All — — F&A, BPO, multi- ement, callprocess center

Special Report

** INCREASE; *** DECREASE; SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008


nCounter Series

Roundtable Series

Destination Events

GS Conference

Outsourcing Summit

e-Magazine

GS 100 Survey

nCounter is an event series that connects 10 to 15 buyers of outsourcing services to five service providers in order to facilitate global outsourcing relationships. It is a closed room discussion where the providers present their perspectives on a pre-defined subject.

A roundtable is a half-day formal gathering of qualified business technology buyers, and is a sole sponsorship-driven custom event. It also provides a platform to sponsors for lead generation and insights from business technology professionals.

Destination Series is a dedicated event to educate the buyer community about the benefits of offshore or nearshore locations. Each event occurs for five hours with industry experts, including Global Services’ editor, an analyst, and sponsors.

The annual Global Services Conference offers sessions, peer discussions, workshops, and real-life case studies that highlight the latest outsourcing strategies, new and emerging technologies that enable seamless global services, and best practices. It is full-day event with parallel track sessions.

Outsourcing Summit is an annual, one-day event that encourages buyers of global IT and BPO services to discuss, learn and experience outsourcing trends with, and from, the renowned experts.

This is a user-friendly media tool that helps you to enjoy reading and downloading the entire issue of Global Services magazine in a digital format (available at www.globalservicesmedia.com)

A list of world’s 100 most innovative IT and BPO service providers, which are selected on the basis of an annual survey conducted by neoIT and Global Services.


www.globalservicesmedia.com

PORTFOLIO

PRInT OnLInE EvEnTS CuSTOM

A print advertorial section that focuses on a category — highlighted in the Global Services 100 survey. This helps Global Services 100 Companies to showcase their leadership qualities that make them distinguished in their categories.

Microsites are dedicated platforms for buyers developed on chosen subjects based on industry or process specific topics. It helps the buy-side decision-makers to observe the available content — features, experts’ comments, news.

Global Services’ Newsletters (twice a week) deliver top stories, a blog, a write-up by an expert, upcoming events’ details, digital magazine, and exceptional features on the topics to the newsletter subscribers. The Global Services Team carefully chooses the newsletter content for its large base of opt-in subscribers.

Global Services Connect is a series of special, sponsored newsletters, which deliver top stories, a blog, a write-up by an expert, and exceptional features on specific topics. The connect also includes the best of Global Services’ print and online published content.

An annual directory of about 1,000 global IT and BPO services providers’ listing and profiles. It is available in four formats: Print, online (www.osourcebook.com), CD, and digital editions.

Article reprints are professional, customized, high-quality, printed copies of magazine articles. They are innovative and powerful marketing tools that feature your company, product, service or industry.

GS 100 Showcase

Microsites

newsletters

GS Connect

The OSourcebook

Reprint Services

www.globalservicesmedia.com

More information available at www.globalservicesmedia.com/images/Offerings.xls


feature-processes.qxp 8/22/2008 12:05 AM

By Namita Goel

FRAMEWORKS ARE MEANT TO simplifycomplex processes and make them more effi-cient. But processes themselves are so dynamicthat it forces one to revisit the framework andreadapt it to use. If you add outsourcing to that,

the complexity increases much more. Therefore, to keep upwith this change and manage the complexity, training pro-grams in organizations are a fine mix of standardized frame-works and need-based concepts.

Most of these frameworks such as IT InfrastructureLibrary (ITIL), Six Sigma and Lean help customers as wellas service providers in getting rid of the waste in the process,explained Derek Lonsdale, Managing Consultant-ITPractice, PA Consulting. In some cases, they help the cus-tomers in understanding what part of the process to out-source. Agreeing with Lonsdale’s point of view, MuditSaxsena, SVP and Global Six Sigma and Transitions Leader,Genpact added, “These frameworks help in assessment ofdata and identification of the waste in the processes toincrease the overall efficiency of the processes.”

While Six Sigma and Lean are generic frameworks

borrowed from the manufacturing world, and can beused in outsourcing any kind of process, ITIL is more IT-focused, and can be used in any IT process. The trendover the past few years has been such that many providershave come out with their proprietary frameworks, inwhich they pick up best practices from the existing stan-dard frameworks.

Challenges in Adopting FrameworksThese frameworks are all organization driven and require

an effort to ensure that the employees take them seriously.“At IBA, we have optimized the procedures of incorporatingand deploying the frameworks, and are carried out throughthe implementation of an automated project-managementsystem here. We also organize trainings of software develop-ers and regular auditing of the employees to test the processunderstanding,” explained Zinaida Larionova, TopManagement Quality Representative, IBA, an IT serviceprovider based in Eastern Europe.

Apart from ensuring that frameworks are well under-stood, the challenge also lies in the seamless integration of


Tools & Technologies

Do process frameworks such as ITIL, Six Sigma and Lean deliver in thecontext of services outsourcing? A look at the challenges and opportuni-ties in making them work

Process Frameworks

Help or Hindrance?


the customized framework into the existing one. “Many ofthese processes are being performed in some form or fashionin the customers’ environment before they begin to adoptITIL standards. The challenge they face is in adapting theircurrent processes to take advantage of the standards and todeploy the standards for those processes that are absent.With the proper sponsorship and investment, incorporatingthe processes isn’t difficult. Without that sponsorship and

investment, it’s next to impossible to be successful,”explained Kevin Smilie, Director, Chief InformationOfficer-Services, TPI, a sourcing advisory firm.

Training is another challenge that many firms face. “TheITIL framework has five modules and each of which isaround 250 pages long so for an employee to read throughover 1,000 pages of information becomes a challenge. Sohere at PA Consulting, we modify the frameworks as per theprocess requirements so that the employees can relate to itand understand it better,” added PA Consulting’s Lonsdale.

“Incorporating these frameworks at the customer site inthe customer processes is another challenge,” added TajinderVohra, SVP and Business Leader, Genpact. Change man-agement is an integral part of outsourcing and in most of thecases, despite the fact that the work is outsourced to theprovider, the customer is expected to have the same level ofunderstanding of the framework as the provider to be ableto govern the sourcing relationship better. So, it is theproviders’ responsibility to ensure that the people involvedin the sourcing process from the customer side are on thesame page. Herein, conducting regular training sessionswould help.

The Drivers- Customers or Providers? Both the customer and the provider could be the driver.

“Based on experience, almost 95 to 98 percent of proposalsthat we respond to, the customers are very keen to under-stand quality assurance processes, the approach we will fol-low to deploy quality practices, our continuous improve-ment focus and how we’ll bring value addition to theirprocesses year on year,” said K.V. Rammohan, VP, Infosys.

“It is both. We have had situations where we have askedour customer to be certified because of the work they aredoing, and we also have had contracts where the customershave said we will sign the contract with you on a conditionthat you have to get ‘x’ number of people in the certified,”explained Debora Verisario, Global Program Manager,Process Standards Center of Excellence, IBM.

In some cases, it is mutual adoption of frameworks thatwins the case. “Where the customer’s process maturity isbelieved to be below that of the service provider, the cus-tomer will adopt the service provider’s process. For the cus-tomer team, it means understanding the service provider’sprocess and how it’s different from the current customerprocesses to be able to make the changes. In other cases, thecustomer will require the service provider to integrate to thecustomer’s process. This is a matter of understanding thepoint in the process where the customer’s process stops andthe service provider’s process begins once the service hasbeen outsourced,” explained Smilie of TPI.

The Sourcing DecisionThe customer’s perception of the service provider’s

process maturity is factored into the selection decision.



CASE STUDY - I

Change Management / ITILCustomer: A global chemical company

Provider: IBM

A global chemical company outsourced its IT infra-structure to IBM to improve end-user IT services. ITILstandards were chosen as the means to standardizethe IT infrastructure across providers.

Challenge:

After a year into the contract, the infrastructure-service levels failed to improve as intended, andIBM’s account team investigated the issue. The maincause was determined to be the number of emer-gency changes that the customer approved. IBM initiated a Change Management Improvement “Team consisting of members of the CAB (ChangeAdvisory Board), the IBM Change Coordinator and aProcess Specialist.

Solution:

The ITIL change process was used as a guide todetermine gaps in the current change managementprocess. The team determined that the normalchange cycle time was too long, and that the projectmanagers had not been trained on the changeprocess when implementing software changes.

Results:

l The cycle times for non-emergency changes withinthe customer’s process were examined and restruc-tured. By using Lean to eliminate waste, the cycletimes were greatly reduced so fewer emergencychanges were requested

l Through the implementation of a more thoroughchange form template, the change process improved.So the customer’s CAB had better information at thestart of their process, thereby reducing the time ittook to ask additional questions

l By providing project managers with training anda calendar to use for advanced scheduling, thenumber of emergency changes were cut in halfafter three months

l Due to the improvements in change management,the overall stability of the IT environment increasedand end-user satisfaction improved.


These frameworks are utilized through the entire service-management life-cycle, and are required for different aspectsof the service provided to the customers. “For example, inthe ITIL framework, ‘incident management’ is utilized forensuring the customer is up and running quickly; ‘problemmanagement’ is utilized to ensure the root cause is identifiedand corrective and preventive action is appropriatelyapplied. ‘Change management’ is utilized in concert with‘configuration and release management’ to ensure thatchanges to the client’s environment are stable and stay cur-rent while all the required information is tracked appropri-ately so that the relationships and interfaces are known andlike wise. To keep these processes efficient, these frameworksplay an important role,” adds Beki Picus, AVP, ServiceManagement and Compliance, ACS.

“Prospects and customers demand seamless, consis-tent and reliable service based on industry best practicesand standards such as ITIL-based Service Managementand ISO 20000,” explained Neeraj Garg, GeneralManager, CSC India on how customers are demandingthese standards.

Is it important for an organization to undergo the frame-work route when processes themselves are a moving target?The answer is yes. It is like a person who after working for afew years understands the business quite well, but still opt-ing for a management degree to get the experience of a struc-tured learning. The person knows that eventually the knowl-edge will get old and would need continuous upgrading, butin order to upgrade one needs to have a thorough ground-ing in the basics. So is the case with these frameworks. Nomatter how old they get and no matter how much cus-tomization they need, these frameworks will always be treat-ed as a book with multiple editions. GS



CASE STUDY - II

INFRASTRUCTURE MODEL

Fraud Analysis/Lean and Six SigmaCustomer: A global health-care service provider

Provider: Genpact

Challenge:

l Current processes not streamlined — multiple handoffs and backlog inventory situation

l Controllership issues around claims inventory man-agement, process metrics and quality audit process

l No report generation processes to monitor paidout of compliance.

Solution:

l Out of compliance payment reduced from target50 to 25 percent (Further reduction projected withadequate capacity planning.)

l Automated report-generation process created with new process metrics and daily inventory management

l New Quality audit process introduced for newprocesses.

Results:

l 25 percent fraud reduction, saving to customer

l Revenue gain — $1 million per annum

l 32 FTE Reduction — $1.2 million saving.

SOURCE: CSC INDIA

Busin

ess

Ser

vice

Man

ag

ement

Information

Manage m

en

tand

Security

This infrastructuremodel shows a set ofend-to-end integratedservices that arefocused on maximizingefficiency and effective-ness whilst minimizingrisk. These include: l An integarted portfo-lio of end-to-end securi-ty services for optimumprotection

l End-to-end servicemanagement that helpsimprove the customerexperience.


MANY CORPORATE LEGAL DEPART-MENTS and even law firms in the U.S. areexperimenting with Legal ProcessOutsourcing (LPO) as a means to reducecosts and increase efficiencies without sac-

rificing, or sacrificing too much, the expected Quality ofService (QoS). The momentum behind the current popu-larity of LPO is a reaction to the steadily increasing legalcosts in the U.S. and to some extent as well the economicheadwinds in a recently faltering global economy. LPOgrowth potential may perhaps directly correlate with theoverall size and projected growth in the legal-services marketin the U.S. In 2006 the legal-services industry in the U.S.

generated $236 billion in revenue, and is expected to growsteadily at a rate of over six percent per year for the nextdecade, according to the U.S. Census Bureau. This sizeablemarket offers a ripe and lucrative environment for LPO totake hold.

Indeed, to meet perceived growing demand, innumer-able LPO providers have entered the marketplace offeringalternative service, resulting in the outsourcing of certainlegal tasks and services. Only a few years ago, the LPOmodel was viewed with substantial skepticism and raised thequestion of whether it was “even legal,” but LPO is nowviewed as a viable alternative in certain circumstances forcompanies’ legal needs. With that said, the framework


By Daniel A Masur & Sonia Baldia, Mayer Brown LLP

Objective Gating Analysis inLegal Process Outsourcing

for your companyRIGHT

LPOIS?

feature-LPO_Final.qxp 8/21/2008 10:59 PM


required to regulate the LPO industry properly and toaddress the legal and ethical issues that are certain to ariseis still in the nascent stage but is evolving. While the U.S.legal community has yet to take any kind of definitivestance on the viability of the LPO model, the LPO indus-try appears eager to embrace some form of self regulationto establish itself.

Specifically, a company selectively delegates certainlegal functionalities and services that are traditionally per-formed in the U.S. to an LPO provider at an offshore loca-tion, such as India. That provider offers the combined ben-efit of a skilled or trainable workforce that is available atwages significantly lower than those demanded by U.S.counterparts. In other words, the basic value propositionof the LPO is that outsourced legal work is performed inthe offshore location by trained lawyers (licensed in thatjurisdiction) and paralegal staff at some fraction of the costof having the same work performed by the U.S.-based legalprofessionals. Services subject to LPO can range from taskssuch as legal coding and legal transcription to moreinvolved projects involving legal research, litigation sup-port, document review, contract drafting and manage-ment, legal publishing, and Intellectual Property (IP) relat-ed services, such as patent application preparation. In addi-tion to the cost considerations of LPO, it may also enhancehome-base productivity by “freeing up” the customer tofocus on strategic and value-added legal work as well as totake advantage of time-zone differences in offshore loca-tions, thus enabling 24x7 operations. For these reasons,among others, LPO presents a new strategic option forlegal departments and law firms.

Whether a real benefit is available through LPO to a spe-cific company, however, depends sub-stantially on a sober assessment of thecompany’s legal needs and require-ments, and whether the legal servicesand tasks at issue can be realisticallyoutsourced without sacrificing impor-tant qualitative considerations —meaningful quality degradation cancounter productively result in theadded cost of home-base “redo” as wellas increase the company’s risk profile. Aproperly performed initial assessmentof the virtues and vices of an LPO, orbasically an “LPO gating analysis,”should determine the answers to thequestions of whether, to what extent,where and how a company may suc-cessfully deploy the LPO model to

meet its legal needs consistent with its overall strategic busi-ness goals and objectives.

Some of the fundamental assessments under a thought-ful LPO gating analysis include: What are the legal needs,services, and requirements that may be suitable for an LPO?What are the dependencies where a complete handoff of thelegal tasks and services is not possible? Are the services need-ed on a recurring basis (such as patent application prepara-tion), a non-recurring basis (such as unique litigation involv-ing facts peculiar to a large contract) or an intermittentlyrecurring basis (such as periodic product-liability claims orcertain due diligence tasks associated with transactions or fil-ings)? Do the services at issue relate to core or non-core busi-ness functionalities? Does the customer take on some levelof additional risk related to the source of the need for thelegal services by engaging in an LPO with respect to the ser-vices, and if so how much? How important is cost savingsvis-à-vis QoS? How do the possibly outsourced services sup-port or fit with the overall strategic corporate business goalsand objectives?

As part of the LPO gating analysis, companies contem-plating LPO must also carefully assess the generically applic-able risks, ramifications and ethical concerns inherent in off-shoring legal work that come hand in hand with the bene-fits of LPO. Some of these key risks and ethical considera-tions peculiar to an LPO include (i) the risk of unauthorizeddisclosure of confidential information, (ii) liability concernsrelated to the unauthorized practice of law, (iii) how to pro-tect, and avoid, the unintended or inadvertent waiver of theattorney customer privilege and assessing whether it evenwould apply in the first place, (iv) the lack of robust proce-dures to identify and resolve conflicts of interest, (v) the

recognition when applicable of theneed for client consent, (vi) fee-sharingarrangements and customer disclosure,and (vii) compliance with export con-trol laws with respect to offshoringinformation regarding U.S.-originatedinventions for patent-drafting services.

Most LPO demand in the U.S. cur-rently involves “low-value” labor-inten-sive legal services, such as legal tran-scription, document conversion, legalcoding and indexing, and legal dataentry, predominantly provided byIndia-based LPO providers. As theLPO industry matures, the outsourcedlegal work will move up the valuechain. A research company,ValueNotes, estimates that in 2006

MOST LPO DEMAND INTHE U.S. CURRENTLY

INVOLVES “LOW-VALUE” LABOR-INTEN-SIVE LEGAL SERVICES.AS THE LPO INDUSTRYMATURES, THE OUT-

SOURCED LEGAL WORKWILL LIKELY MOVE UP

THE VALUE CHAIN.



India’s LPO industry generated $146 million in revenue andprojects it to grow to $640 million by 2010, and by thattime LPO firms in India are expected to employ over 32,000professionals. While another research company, Evalueserve,is more conservative in its LPO projections, the fact thatLPO is likely to become a sizable mainstay in the U.S. legal-services market is increasingly difficult to question.

India’s emerging prominence in LPO is not surprisinggiven the remarkably successful Indian market for IT out-sourcing (ITO) and Business Process Outsourcing (BPO).More recently, many U.S. companies have engaged in whatare known as Knowledge Process Outsourcing (KPO) trans-actions, which leverage India’s vast resource of highly skilled,educated workers to perform knowledge-driven or “high-end” processes that require specialized domain expertise.LPO — a specific example of KPO — is one for whichIndia offers enormous potential because of its large reservoirof English-speaking lawyers and paralegals whose salarydemands are extremely competitive at typically only 10 to15 percent of those of their U.S. counterparts. This profes-sional labor pool shows no sign of shrinking; indeed approx-imately 80,000 Indian lawyers graduate each year from lawschools. These graduates are also particularly well-suited toservice the U.S.-based legal needs because, like the U.S. andthe U.K., India’s legal system follows the common lawmodel and its rapidly modernizing legal and regulatory envi-ronment is based on the U.S./U.K. model of jurisprudence.

Most of the LPO demand has been met primarily by twoservice delivery models: Captive centers of U.S. corporationsor law firms in India (such as those set up by GE, Cisco,Oracle, Dupont, and Bickel & Brewer, to name a few) and

third-party LPO firms that provide legal services to U.S.corporations and law firms (these firms include niche firmssuch as Pangea3, Qusilex and Lexadigm that only providelegal-services and multiservice firms such as Infosys andWNS, which provide legal services in addition to other BPOofferings). Variations of these models will emerge as theLPO industry matures to better service LPO customers.

Each model has its own advantages and risks that mustbe evaluated carefully so as to identify and assess the relativepros and cons for a particular LPO strategy. LPO customersshould adopt different delivery models taking into accountnumerous variables, including the nature and scope of theactivities to be offshored, previous offshoring experience, aqualitative due diligence review of the potential providers’work, concerns about security and control of confidential orprivileged information, risk tolerance, tax considerationsand budgetary constraints.

In sum, LPO can present a viable alternative to compa-nies seeking to reduce their legal costs. Its usage, however,must be considered very thoroughly and carefully takinginto account the circumstances and needs involved. A com-pany considering an LPO must, therefore, objectively eval-uate the specific and unique gating issues described aboverelating to the value proposition of a particular LPO, thegenerically applicable risks of any LPO, the offshore locationand the provider involved, and the type of LPO model thatbest suits the needs of the potential LPO customer. GS

T he legal-services offshoring business in India isgrowing at a tremendous pace. Even as several othersegments within BPO are being buffeted by the

global economy, outsourcing legal services is steamingahead with robust growth rates of over 40 percent. Whileseveral large, mid-size and small companies are enthusias-tically entering LPO, the industry is rapidly movingtoward more innovative business models and offerings ledby the earlier entrants, as they try to differentiate them-selves from the pack.

Though the LPO industry is growing rapidly, it address-es a mere three percent of the offshorable potential. Indiarevenues from LPO were $225 million in 2007, and are

expected to reach $640 million by end 2010. The Indianprovider landscape comprises over 100 players employingmore than 7,500 people. There are around 12 to 15 large-service providers who employ over 100 employees. Third-party providers dominate the segment by employing themajority of the workforce in the sector.

Over the last two years, the LPO space has seen a rapidchange in terms of attracting investors, maturing providercapabilities and luring large BPOs to enter the market.

Investors Get Interested Most providers started off as self-funded companies and

a few received funding from angel investors. In order to

Processes: Legal Process Outsourcing

Dan Masur and Sonia Baldia are partners in the Business & Tech-nology Practice Group at the law firm Mayer Brown LLP in Wash-ington, D.C.Mayer Brown LLP

India: The Hottest Offshoring Destination for Legal ServicesBy Neeraja Kandala, Principal Analyst, Legal Services, ValueNotes



build marketing presence or significant knowledge baseahead of others, LPO providers are also seeking out VentureCapitals (VCs)/Private Equity (PE) players/angels. Fundingfrom VC/PE firms has now started coming in, but is stilllimited as most companies are quite small.

Moving up the Value Chain Legal transcription and litigation support were amongst

the initial services to be offshored to India. However, overtime, service providers have developed additional capabili-ties, and are offering a far broader range of services today.The leading vendors, such as Pangea3, QuisLex,Mindcrest, LawScribe have now built multiple capabilitieswithin their focus areas. Services such as transcription anddocument review are now provided by a majority of serviceproviders, all of whom claim experience and capability inthese areas.

Among the various functions in the legal-services seg-ment, the non-core and manpower intensive processes aremore easily offshored. The relatively low-value, high volumeservices include processes like legal transcription, documentconversion, legal data entry, legal coding, indexing, onlinecontent management, paralegal services and database man-agement. These jobs are typically quite process-oriented, donot require very specialized legal skills, and hence are billedat lower rates, typically $10 to $25 per hour.

In contrast, the high-end jobs such as legal researchand patent-related work require relatively higherskill/knowledge levels and a professionally qualifiedworkforce, and hence command a higher billing rate,between $25 and $90 per hour, depending on the specif-ic service and nature of content.

Large BPOs Jump in While the pure-play legal-services providers are gearing

up with aggressive growth plans, there is rising competitionfrom large, cash-rich, generic BPOs such as Infosys BPOand Wipro. The entry of large players will help boost aware-ness of the possibilities in offshoring legal work, which inturn will expand the overall market. However, the pure-playlegal-services providers will now have to work harder toattract and keep talent. Further, the race to acquire capabil-ities and scale will trigger inorganic growth.

“It makes logical sense for large generic BPOs to addlegal services to their service offerings. They could enter intothis business through acquisitions or even grow organically,though execution is going to be key,” says Ram Vasudevan,CEO, QuisLex. These companies are likely to focus initial-ly on the high-volume, process-driven markets such as doc-ument review, conveyancing services and other process-dri-ven legal-support activities. The larger amongst legal-ser-vices providers today employ less than 350 people in its off-shore center. Infosys on the other hand aims to employ over1,000 people over the next five years. As these large multi-service players actively look to build presence and scale, theacquisition of smaller providers is an option.

Greater Acceptance and Growing InterestAmong Customers

The U.S. has been a pioneer in offshoring legal services.Among the trendsetters are Bickel & Brewer, who offshoredlegal services to its Hyderabad (India) captive center wayback in 1995. This is now a separate company calledImaging & Abstract International, and handles work fornon-Bickel and Brewer customers as well.

Another pioneer is GE, which began offshoring legal ser-vices, especially drafting of patents to its development cen-ter in Bangalore (India) in 2001. Currently, they have over60 IP professionals at their India office. Many other compa-nies including Cisco, Sun, Oracle, DuPont also manage apart of their legal-services needs either from their Indian off-shore offices or with the help of third-party providers.

Clifford Chance, the world’s largest law firm, signed onIntegreon to offer a variety of legal and support services.Integreon has set up a 300-seat facility in New Delhi, India,dedicated to Clifford Chance. While this cannot be classi-fied as a large deal compared to other BPO services, it is asignificant and noteworthy deal in the Indian LPO segment.

Currently, very few law firms are convinced about off-shoring, even when it comes to support and back-office ser-vices. Growing workload and increasing cost pressures areforcing legal counsel as well as law firms to outsource to costeffective service providers, whether local or offshore. Mostleading law firms are concerned about the data privacy andconfidentiality. However, the situation is changing gradual-ly. According to a leading U.S.-based law firm, “Given therising costs of in-house counsel, corporates are beginning to


The Legal Services Value Chain

Complexity

Val

ue

Patent analytics, patentapplication drafting, cor-porate due diligence

Legal research, contractdrafting, contract man-agement/abstraction

Legal transcription, docu-ment review, secretarialsupport services

Litigation support, legalresearch, prior artsearch, proofreading,drafting, trademarksearch, legal publishing

SOURCE: ValueNotes Research



explore offshoring as an option. Currently, law firms don’tsee the need to offshore and even in the future corporateswill tend to be more open toward offshoring.”

Vendor Positioning The Indian LPO industry has been the fortunate benefi-

ciary of the success of the country’s BPO industry. As inmany new, high-growth, high-potential areas, entry intolegal services has been mostly opportunistic rather than ledby strategy. The current growth rates in LPO are certainlypromising, and provide significant opportunity. However, tosustain growth and profitability, in an environment ofalmost negligible barriers to entry (today), every LPO firmwill need to develop and implement a well-defined strategy.In fact, the frontrunners will build the tallest and the mostdefendable barriers to entry in their respective niches.

While some third-party (pure-play) players such asPangea3, QuisLex and Mindcrest have been able to establishthemselves as well-known names, many others are yet toestablish themselves and/or clearly define their strategies and

business models. While the captives are short on scale, they typically offer

higher-end services to the parent company. Most of the thirdparty multiservice providers offer a wide mix of services.With scale being their driving “mantra,” a large part of theirofferings comprise low value high-volume services.

Historically, captive centers of multinational corpora-tions have been set up to handle complex and high-end taskswhich the company hesitated to outsource to a third partyvendor. The lawyers in offshore destinations primarily sup-plement their in-house law departments. In a majority ofcases, there may not be a separate LPO operation, but just ahandful of people/lawyers operating out of a larger Indiansubsidiary. However, small to medium-sized companies havepreferred sending work to third-party providers.

The multiservice providers lack high-end service focus,and hence bill comparatively lower average rates. The mul-tiservice providers will continue to focus on a model thatis scalable and yet not easily replicable by cash-strappedsmaller providers. On the other hand, some niche playerswill seek to move up the value chain and become more spe-cialized. Several providers in this group such as Pangea3,QuisLex, Mindcrest and LawScribe have grown rapidly interms of depth and breadth over the last two years. “Focuson execution, acquiring scalable clients and a presence inthe U.K./U.S. are critical for a company to be able toemerge as a winner in the long run,” says David Perla, Co-CEO, Pangea3.

Emerging Niches within Legal Services Document review, eDiscovery and niche areas in IP and

contract services are the emerging segments with tremen-dous growth potential.

“The e-discovery market is huge and has been around fora while; there are several established U.S. players who pro-vide some useful technology. But it is by combining thistechnology with a scalable team of offshore attorneys (forrelevance and privilege review) that a player can really setthemselves apart from the rest of the market,” says MatthewBanks, SVP, Legal Services, Integreon. Though dramaticgrowth is envisaged in eDiscovery, currently there are veryfew Indian providers with requisite capabilities or focus.

Law Firms and Corporates Offshoring Services


Group Names

Law firms Allen & Overy, Baker & McKenzie, Hammonds Direct, Chadbourne, Bickel & Brewer, Eversheds, Stites & Harbison, Orrick Herrington & Sutcliffe, Clifford Chance, Venable, Arnold & Porter, Lee & Kelley

Legal departments GE, Dupont, Cisco, Microsoft, American Express, Morgan Stanley, Liberty Tax Services, of companies TelaDoc, DirectoryM, Allstate Insurance, Andrew Corp, Roamware Inc, Trico Marine

Services, Harpar Holdings, P&G, United Technologies, Oracle, Bayer

Comparative Positioning of Providers

Em

plo

yee

str

en

gth

Hig

h

Nature of work done — complexityLow High

Third party (Multiservice)

Third party(Pure play)

Captives


Evalueserve,Integreon, OfficeTiger

Pangea3, QuisLex, Mindcrest,LawScribe, SDD Global

General Electric, Cisco,Sun, Oracle, Dell




While corporate due diligence, patent related services arehigher value services, there are certain services such as docu-ment review, word processing and litigation-support serviceswhere several generic, multiservice players with the capabil-ity to scale are competing and getting work in abundance.“Conveyancing is a high-volume job, parts of which can beoffshored. Litigation support and Document production areexamples of other services that can be offshored,” saysAmanda Burton, Director, Global Business Services,Clifford Chance.

Move Toward Longer-term Contracts With law firms getting more comfortable with the

idea of offshoring, larger and longer-term contracts, aswell as several encompassing multiple services are becom-ing increasingly common.

“The lifecycle of commoditized legal cases and trans-actions both for U.S. and U.K. Law firms and organiza-tions can be processed from start to finish from an off-shore destination. Currently, elements are being off-shored. However, we will gradually witness the offshoringof the entire process,” says Mark Ross, Director, BusinessDevelopment, LawScribe.

Today, larger and longer-term contracts, as well as sev-eral encompassing multiple services are becomingincreasingly common. Some of the larger deals includeClifford Chance-Integreon, Allen & Overy-OfficeTiger,to name a few. Moreover, the work being outsourced is amix of legal work such as legal-research and support ser-vices. This is benefiting larger providers with multipleservice offerings.

Patent Services: The Next Big Segment withinLegal Services

Patent-services offshoring is the next big opportunitywithin LPO services. Revenues from offshored patent ser-vices to India were estimated to be $46 million in 2007.

However, the addressable market for Indian providers is esti-mated at $2.2 billion, which is around 50 times larger.

India revenues are expected to grow at 35 percent perannum for the next five years. We expect the industry toachieve revenues of $206 million by end 2012. The prima-ry growth drivers are: Growth in worldwide patent market,increased offshoring of R&D activity, lack of manpower andthe impact of the U.S. Patent Reform Act of 2007.

Imperative to Have On-site Entity There is a strong preference among customers to out-

source to U.S. law firms or legal-services providers with aU.S. presence. While an on-site entity is essential for mostof the segments/verticals within BPO, it is an imperative forthe legal services. This is primarily because confidentiality isstill a big issue with regards to patent-related work and onebig advantage with hiring a local law firm is that they havethe legal obligation to maintain confidentiality of their cus-tomer’s information. There are several advantages in work-ing with a firm that has an onshore location. Apart fromproximity and the advantage of face-to-face contact, one sig-nificant and very important benefit is the customer’s abilityto seek legal recourse, if necessary.

The Way Forward … Corporates as well as law firms are offshoring greater

volumes and more complex work. Further, the customerconcerns are shifting from “is it secure to offshore andwill the service providers be able to do a good job” to“whether the service provider will be able to handlegreater volumes of work.”

So far, Indian outsourcing rode the value proposition ofsignificant labor cost savings. High returns for industry pio-neers has led to an explosion of service providers and thoseready to provide funds to them. The LPO segment will continue to remain in a high-growth phase till the end ofthis decade. GS

Offshoring Maturity


Phase IRelatively

smaller contracts

Phase II Increase in thesize and scope

of contracts

Phase III Move toward

larger andlonger-term

contracts

Current IndianLPO position

Revenue Estimates for Patent Services


Revenues ($ million)

Growth (%)

Dec. 2006 Dec. 2010

206

46

35



our outsourcing strategy isdefined, set and producingcost-saving results. After yearsof planning and testing, crit-

ical business functions including IT,HR, call-center services and accountspayable are working together as a welloiled machine. The question is now,what more can be done.

Consider customer communications.While this may be a newer service tooutsource, it can be an effective way forcompanies to deliver world-class com-munications to their customers. In addi-tion, it can also provide a streamlined

method for each department withinyour organization to easily produceeffective communications materials thatmaintain a consistent brand messageacross the organization.

Not surprisingly, customers expectcompanies to be responsive and com-municate with them in meaningfulways. Yet shrinking budgets and mount-ing pressure to produce more with lesscan take a toll on the way companies ser-vice and communicate with customers.To help companies complete and deliv-er the personalized, effective communi-cations that they need to keep cus-

tomers happy, many are outsourcing thisbusiness critical function.

SSIIXX WWAAYYSS TTOO CCRREEAATTEEOOUUTTSSOOUURRCCIINNGG SSUUCCCCEESSSS

As with any partnership, there arebest practices that should be followed toensure a successful program is establishedwith a customer communications com-pany — one that benefits both externalcustomers and company employees.Specific steps include:Step one: As with any outsourcing part-ner, it is critical to set measurable goalswith your customer communications

Y

Beyond the basic business process and IT offshoring practices, the nextwave of outsourcing revolves around newer functions such as customercommunications that can facilitate your both sides of the profit equation— cost savings and revenue growth. In addition, it can also boost thesatisfaction among your employees

Outsourcing Strategy Set? Don’tForget Customer Communications


By Bryan Baker, Thought Leader and Enterprise Consultant, Xerox Global Services

Experts

experts lead_Final.qxp 8/21/2008 11:11 PM

company in order to produce a rela-tionship that will continually growstronger and not go stale. The firstquestion to ask is “what problems are wetrying to solve, or what opportunity arewe trying to capture?”

Beyond volume, timeline and unitcost goals, a good customer communi-cations outsourcing relationship will setgoals for:

l Optimizing the communicationsinfrastructure for employees company-wide

l Improving customer retentionthrough improved communications

l Reducing call center costsl Complying with laws and regula-

tionsl Maintaining consistent brand

messaging.The risks of poorly planned customer

communications can be enormous. Latemailings, compliance violations from“double stuffs,” where one customerreceives another customer’s confidentialmail and incorrect letterhead or logoscan all lead to expensive call centerinquiries and unhappy customers. Step two: Before your partner can helptake your customer communications tothe next level, both parties must firsthave understanding of the current stateby performing a rigorous assessment.

During this step, a blueprint for asuccessful future relationship is built.All technical considerations, culturalimpacts including how employees willreact and if there is a current resistanceto change, financial analyses, alongwith external factors should be dis-cussed. There is often a tendency to

accelerate, collapse or cut short thisassessment due to time constraints, butprojects where the due diligence effortsare cut short and assumptions made areprone to fail. Step three: Any time an outsourcing ini-tiative is implemented within a compa-ny, a change-management strategy isessential for obtaining employee buy-in.These new procedures typically crossmultiple lines of business and variouspopulations. It is important for all sidesto understand the additional or differentsupport requirements — especially inthe first few months. These may includetechnical and end-user support, either inthe form of on-site staff or hotlines.

Due to the complexity of outsourc-ing customer-communications services,change management often focuses pri-marily on the tangible deliverables in thecontract. For example, at any point inthe relationship a provider may installnew technology, workflow or hire newstaff. These efforts are normally on theradar for scope creep and go through thechange-management process whenchanges occur.

However, if the organization’s ITdepartment decides to make significantchanges to the applications that gener-ate or impact customer communica-tions, the changes could have a dramat-ic impact on the process that createsdocuments. Understanding upstreamchanges that can impact the scope ofwork being outsourced is crucial.Step four: Like any other corporate ini-tiative, the success rate for outsourcingcustomer communications dramatical-ly increases when the plan is backed by

high-level executives. The relationshipmust be sponsored by an influentialchampion to see the opportunities thata high-value partner can capture. Step five: While cost will always be aconsideration when selecting a partner tooutsource such a vital aspect of yourorganization as customer communica-tions, basing a decision on cost alone willfail to produce optimal results. If thedecision is based solely on identifying thelowest bidder, you pose the threat ofmissing out on the innovative thinkingthat providers may be hesitant to includegiven cost pressures. A balance betweenshort-term cost reductions and investingin innovation to drive long term businessresults define strategic partnerships. Thisapproach enables companies to get morevalue from an outsourcing relationshipthrough the life of the partnership. Step six: After goals are set, the tenden-cy is to track top-line milestones such asdeadlines being met and unit costs,while the work of collecting and ana-lyzing the data falls short. The right met-rics and regular reporting build confi-dence and trust while helping to sustainthe relationship.

For example, in a strategic cus-tomer-communications outsourcingrelationship, the focus needs to be onthe business outcome of the commu-nications. Are calls to the call centerbeing reduced? Are customer respons-es increasing? How are employeesreacting to the new system? Withoutfacts to guide future decisions, refine-ments and improvements are impos-sible. Even worse is when a relation-ship is measured using a bad metric.




TTHHEE SSCCIIEENNCCEE OOFF CCOOMMMMUUNNIICCAATTIIOONNEENNGGIINNEEEERRIINNGG

In addition to avoiding some of thecommon pitfalls that exist when search-ing for a customer-communicationsfirm to partner with, there is an evolv-ing science of communication engi-neering to consider when planning acommunications overhaul.

One of the most powerful ways toimprove customer communications is toreengineer them. It is not enough to sim-ply redesign documents to achieve afresh look. Re-engineering can take cus-tomer communication to a new, morefocused level with behavioral sciencemodeling. This technique has tradi-tionally been used by clinical psycholo-gists who have known for decades thatstructuring a conversation with a personin a specific way, makes it easier for themto absorb and act on complex informa-tion. It turns out these structures applyto all communication.

Specifically, the structure of the doc-ument is used as an active agent to elic-it a more beneficial response from thereader, not to trick or manipulate, but toclearly drive more effective businessbehavior.

One of the modeling tools developedby psychotherapist Stephen Lankton iscalled the “Anatomy of an Interface.” Itis built upon the premise that there areeight key elements in every effectivecommunication. These eight elementsinvolved in every effective communica-tion that move people from perceptionto decisions and action include:

l Syntaxl Framing cues

l Information chunk sizel Multiple channel informationl Focal informationl Punctuationl Feedbackl Protocol.When these elements are strategical-

ly considered in communications, doc-ument effectiveness is maximized andchanging the document structure altersthe experience; thereby impact results.

CCAASSEE IINN PPOOIINNTT:: OOWWEENNSS CCOORRNNIINNGGBuilding materials manufacturer

Owens Corning had a dilemma. Thecompany’s sales force did not have accessto effective marketing materials. It tooktoo long to fulfill a salesperson’s requestfor materials, leaving individuals withinadequate supplies to close deals. Thisalso resulted in the hoarding of materi-als, requiring the company to producefar more materials than necessary andultimately waste money.

Owens Corning had two immediateissues to solve: First, the need for effec-tive communications to their customersand second, a happy sales force.

The company decided to outsourceits customer communications to Xerox.The partnership began by forming ateam made up of representatives fromboth companies who completed anextensive assessment using Six Sigmamethodologies. This methodology is arigorous, data-driven approach toprocess improvement. The current oper-ation was analyzed, including looking atthe entire document supply chain fromend-to-end to determine all of the inef-ficiencies that existed.

After the assessment, the team tooka look at how to use communicationengineering to improve the actual doc-uments and make them more effective.Digital Print-On-Demand (POD) wasadded to produce high-quality, cost-effective documents in much smallerquantities — meeting the needs of indi-vidual salespersons. Implementation ofPOD was so successful that OwensCorning now produces all of its materi-als with this method. Fulfillment successrate is now at 98 percent, with an ordercycle time reduced from 30 days to two.The need for warehouse space hasreduced, obsolescence and waste aredramatically lowered and “documenthoarding” is virtually non-existent. Allstakeholders are confident that the doc-uments they want will be in stock anddelivered in a timely fashion.

GGAAIINN CCOOMMPPEETTIITTIIVVEE AADDVVAANNTTAAGGEEOutsourcing customer communica-

tions can be an effective way to bringworld-class capabilities to your organi-zation that impact both cost savings andrevenue growth. Aside from this, perhapsyour biggest benefit will be the satisfac-tion of your own employees who willend up happier as a result of havingmore accurate and accessible documentsthrough a streamline customer com-munication solution. GS

Bryan brings 17 years of production and out-sourcing experience to his role as enterprise con-sultant for Xerox Global Services. Baker and histeam provide customers with solution design,implementation and project management ofadvanced document solutions.


xperts

While summarizing the key points of Dataquest’s annualresearch for Global Services’ readers, I had to convert Indianrupees into American dollars. The conversion, it turned out,was more than simple arithmetic. In fact, it presented a newchallenge that of changing realities of global economics

The Paradox of Currency-adjusted Growth

nce a year, in July-Augustevery year, we at Dataque-st, analyze the perfor-mance of Indian ITindustry. I thought of

sharing the major findings of theresearch, especially the export of IT ser-vices from India.

On the face of it, it is a fairly simplething to do — get all the numbers andanalyses straight from the research mycolleagues have painstakingly conduct-ed and presented in Dataquest, andsummarize them for you.

I just had to do a little arithmetic —convert all the figures from IndianRupees (INR), the currency that we useto present all our data, to U.S. Dollars(USD). That is when I realized that theseemingly simple exercise was anythingbut simple. Let me explain.

Take Indian IT-services exports.Between Apr. ’07 to Mar. ’08, the Indi-an FY08, in rupee terms, IT-servicesexports from India was Rs. 1,884,480million, up from Rs. 1,478,810 million

the previous year — that is a growth of28 percent, compared to the growth inFY07, which was 35 percent.

Now, convert that to USD in theprevailing average exchange rates of cor-responding periods. In FY08, Indian IT-services exports stood at $46.6 billion, ascompared to $33.6 billion in the sameperiod the previous year. Now, that is agrowth of 40 percent, as compared to33.5 percent in FY07.

You do not have to be a great math-ematician or an economist to figure outthat INR appreciated significantlyagainst USD between Apr. ’07 to Mar.’08, whereas it depreciated a bit betweenthe corresponding period a year back.

My dilemma: I have told all my read-ers of Dataquest that the growth sloweddown from 35 percent in the previousyear to 28 percent last year, with all theexplanations of why it happened. So,how do I explain you why the growthaccelerated from 33.5 percent to 40 per-cent? Did Indian IT-services exportsactually slow down or accelerate? Did

Infosys had a better growth this year orlast year? Did IBM’s India revenue growbetter this year or last year?

I do not know the answers, despitehaving all the numbers and storiesbehind them.

With increasing globalization butmultiple currencies, this is an issue wewill increasingly face. If we do not havea solution, all these number crunchingwill have little meaning. Companieslisted in both U.S. and India will haveto tell their investors completely differ-ent stories. American companies havingmore and more business in emergingmarkets will have to explain to theirinvestors, for example, why despite hav-ing a better outlook for Mexico, theRussian business grew far faster —thanks to the currency-adjusted growthplaying the mischief.

Does anyone have a reasonably simple answer? GS

O


Shyamanuja is Editor, Dataquest, CyberMedia.

By Shyamanuja Das

expert-shyamanauja.qxp 8/21/2008 11:40 PM

Handshakes, EyeballsReaders & Viewers

Empowering the Knowledge Nation

ad_strip_1.qxp 7/15/2008 4:08 PM Page 20

B

www.osourcebook.com

The OSourceBook 2008 Web edition is now live. Search for global outsourcing providers by name, location, industry, services, and more at your fingertips.

Third-party advisers’ assistance might be one of the reasonsbehind the increased level of satisfaction between you and youroutsourcing partners. However, these advisers can be a pain, ifnot chosen carefully. Here’s what you should look for beforeengaging in a pact with these intermediaries

xperts

The Parameters of Evaluating SourcingAdvisory Firms

any executives can benaïve and fail to under-stand the complexity ofoutsourcing contracts.Pressured to get the deal

done, too many executives focus on priceterms, but neglect most of the rest of thedeal. Outsourcing providers, on theother hand, negotiate outsourcing agree-ments for a living, and their standardcontracts (the ones they hand to you tostart a relationship) are seldom writtenin the spirit of partnership. Provider salesexecutives are well-trained experts in cre-ating negotiation leverage. Good salesteams actually mathematically predictthe probability of winning a deal, that’show experienced providers really are.And in today’s rampant market forenterprises exploring their outsourcingopportunities, outsourcing providers arebeing increasingly selective about wherethey are investing their pursuit costs.Executives’ procurement and legal teamsare often inexperienced with complexcontract negotiations. This means youneed to ensure you get expert help andadvice with negotiating your outsourc-ing contract.

There has never been as great a needfor outsourcing advice as there is today,and there has never been such a pletho-ra of advisers competing to give theiradvice. And whether you are a highlysophisticated enterprise with outsourc-ing experience, or a complete novice inthis domain, you will most likely have to

engage a third party at some stage dur-ing the outsourcing lifecycle, whether it’ssimply to administer and negotiate acomplex contract, or to hold your handthrough the entire evaluation process,contract signing and beyond.

There are several key stages throughwhich to progress, when you evaluateoutsourcing, if you are going to moveinto an engagement.

BBEE WWAARRYY OOFF AADDVVIISSEERRSSCCOOMMPPEETTIINNGG FFOORR YYOOUURR BBUUSSIINNEESSSS

When dealing with third party advis-ers, you usually get what you pay for.However, be warned as we have seen sit-uations where enterprises have paid top-dollar for third-rate advice, and otherswhere customers received great servicefrom one of the smaller, cheaper firms.We are currently receiving inquiriesalmost daily from enterprises askinghow and whom they should approachwhen selecting a third-party adviser. It’sbecoming almost as important as towhich provider to select for some enter-

prises. We will be covering the marketfor third-party outsourcing advisers in anupcoming research article — AMRResearch addresses critical business chal-lenges with its expanded coverage of ITand Business Process Outsourcing(BPO) services — as part of our expand-ed outsourcing research coverage.

Many enterprises are also gettingsmarter and better-educated with out-sourcing issues, and we are increasinglyseeing more executives (mainly For-tune 500) trying to do more them-selves and relying less on advisers.This is a natural control mechanismwhen companies take themselvesthrough such sensitive change.

WWHHAATT SSHHOOUULLDD YYOOUU LLOOOOKK FFOORR IINNAA TTHHIIRRDD--PPAARRTTYY AADDVVIISSEERR??

An advisory firm’s competencies, in our experience, must include the following:

l The ability to share intellectualproperty internally to create benefits forcustomer engagements. The advisermay boast impressive logos of its previ-ous customers, but if it hasn’t been ableto take benchmarks, best practices fromthese engagements, then you’re relyingpurely on the experience of the individ-ual people assigned to you.

l The depth of experience of itsadvisers within the firm. HarvardMBAs are a nice-to-have, but this islargely deep operational work conduct-ed at a level below the ivory tower.

M


By Phil Fersht

Ensure you engage anadviser with experi-ence in those areas,which will give youvalue for money.

experts_phil fersht_Final.qxp 8/22/2008 12:23 AM

Ensure you have detailed knowledge ofthe backgrounds and experience of theadvisers assigned to you. Ask to inter-view them individually prior to agreeingto sign on to their services.

l The advisory firm’s mix of expe-rience. This should include talent thathas come from operational backgroundsand has experienced outsourcing on thecustomer side, not simply staff with out-sourcing provider and previous sourcingadvisory experience.

l The firm’s ability to “advise” andnot just “consult.” You want an advis-er who is going to give you advice fromtheir experiences, allow you to talk withtheir senior practitioners and add valueover-and-above data-collection tasks.

l True independence in achievingthe optimum outcome for its cus-tomers. They must be focused onYOUR best interests, and not theirs’.Investigate other business divisions andservice lines within the advisory firm toensure where their interests lie. Alsoprod them about their relationshipswith outsourcing providers to makesure you’re getting an independent viewof the market.

l A deep focus on intellectualproperty, benchmarking data andresearch — both their own and fromreputable research firms. An advisoryteam of three or four people will neverknow everything — they need addi-tional knowledge and support. Inaddition, if you have access to unbi-ased third-party research, this willgive you an important validation pointas you make difficult decisions.

l The operational business focusand experience of its advisers beyondsimply negotiating contracts. If youonly want an adviser to come in andnegotiate a contract, then that is all youneed to focus on with them. However,some advisers can offer services that canhelp you all the way through the out-sourcing lifecycle and beyond, for exam-ple post-transaction support, retainedorganization design, change manage-ment and provider governance support.In many instances, we have seen enter-prises gain more value from their advis-er than simple contractual services;sometimes, simply having an indepen-dent third-party at hand can help youbuild consensus and support in complexand sensitive situations.

l A sensible, proven and flexiblemethodology for business-case evalua-tion and provider selection. The advis-er needs to have a proven approach thathas been deployed on multiple previousoccasions for taking enterprises throughthe outsourcing lifecycle. Ask them spe-cific questions on how they applied it inprevious customer cases and how theywould work with you during each stageof the cycle. You will learn a lot abouthow much they have thought throughyour issues when asked about how theywill apply their methodology to yourspecific situation.

l Having the respect of outsourcingproviders. Outsourcing providers willwork well with advisers when theyknow they will get a fair crack of thewhip. The last thing you want is anadviser who can’t rally the right

providers to propose on your business.Don’t be afraid to ask your providers’opinion on the advisers to work with,keeping in mind of course that you’rerelying on the adviser to have an inde-pendent point of view. (See point “Trueindependence in achieving the opti-mum outcome for its customers.”)

l Multiple customer references withwhom you can talk directly and dis-creetly. Your ultimate proof of capabil-ity will be talking with your peers inother companies who have engagedadvisers. Ask for specific customer ref-erences and ask to speak to them pri-vately, if possible. Moreover, referencesfrom enterprises not put forward by theadviser are even more valuable. Try net-working with peers on other companieswho have experience of working withoutsourcing advisers.

All-in-all, you should know bestwhat help you need. So ensure youengage an adviser with experience in those areas, which will give youvalue for money. If your enterprise has been through complex outsourcingin the recent past, chances are you will need a lighter-touch approach.However, if this is a first-time experi-ence, our advice is to seek an expert tohelp you throughout the entire out-sourcing lifecycle. GS


Phil is Research Director, Global Services and Outsourcing, for leading industry analyst AMR Research, Inc. He also authors the popular blog “Horses forSources” which can be accessed at http://www.fersht.typepad.com

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Outsourcing works with talent; it’s a reality. But how does oneensure that customers’ talent-management systems andprocesses in outsourcing are properly administered andeffectively supported to increase employee and businessproductivity and performance?

lobal talent pools arestretched thin. From Bei-jing to Boston, no organi-zation is safe to assume thatit will be able to attract all

the talent it needs — at least for the nextseveral decades. Once that realization isaccepted, it becomes clear that the onlyremedy is higher productivity among thetalent an organization already claims.The only question is how to achieve it.

From March to August, the HumanCapital Institute and IBM Global Busi-ness Services partnered in a researchstudy to examine the progress and char-acteristics of talent management in orga-nizations. We surveyed 1,900 individu-als and conducted in-depth interviewswith 49 leaders from more than 1,000public- and private-sector organizationsworldwide. The respondents varied byposition and included people involvedwith HR and non-HR functions.

One of the critical findings thatstood out was the correlation betweenthe employee engagement and organi-zational performance. We learned that asorganizations seek to overcome the chal-lenges associated with globalization,changing workforce demographics andthe emergence of new business models,they are looking at employees as the crit-ical source of differentiation in the mar-ket. However, the search for guidanceregarding the value of investing in talentmanagement and where organizationsshould place such investments is unsat-

isfactory. The study shows that amongthe greatest emphasis organizationsshould make, one is in driving employ-ee engagement, particularly by rethink-ing the role of employee development.

The study also revealed that many, ifnot most, organizations recognize theimportance of “integrated” talent man-agement. Eighty four percent of respon-dents said that senior managers recognizethe value of workforce effectiveness indelivering business results.

However, our research identifies keygaps between establishing and then exe-cuting an integrated talent-managementstrategy. These gaps hinder the effectivealignment of talent-management andorganizational performance. Of partic-ular importance is the engagement andperformance gap created when compa-nies diminish employee engagement byfailing to invest in the training anddevelopment of their talent.

The study demonstrates the con-nection between employee engagementand financial performance. As above,motivating and developing employeesare the talent-management practicesthat most differentiate financial outper-formers from low performers. However,our interviewees told us that develop-ment and engagement are areas that pre-sent most organizations with sizeablechallenges. Only one-half of organiza-tions say they understand and addressworkforce attitudes and engagement.“How” they are doing that is unclear,

since only 42 percent believe that theirmanagers are devoting enough time todevelopment and other performance-management activities. Further, only38 percent of respondents agree thatemployee development needs are beingmet in a timely and effective manner.

Improving talent managementrequires rethinking the role of employ-ee development in the organization. Inboth these studies, and in the IBM“Global Human Capital Study 2008,” wesee a significant concern in organizations’ability to rapidly build skills to meet thechanging business needs.

As the lifespan of relevant skills con-tinues to shrink, leading organizationsare focusing on blending classroomtraining with electronic learning tools. Atthe same time, organizations are com-bining formal instruction with informallearning opportunities.

This study and many others havedrawn links between employee devel-opment, employee engagement and bet-ter financial returns. To be sure, otherfactors influence engagement and thelink between engagement and profits isnever a straight line. Nevertheless, in anera of talent shortages, organizations sim-ply must drive better performance fromemployees. Investing in the right talentdevelopment is a key ingredient. GS

xperts

The Powerful Link Between TalentManagement & Biz Performance

G


Allan is President and Executive Director,Human Capital Institute. Mail to [email protected] for full report.

By Allan Schweyer

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