Global Services Digital Magazine October Issue 2

8/8/2019 Global Services Digital Magazine October Issue 2

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GSOctFINAL01:Layout 1 10/20/2010 1:21 PM Page 1


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GLOBAL SERVICES

An integrated media platform which connects thevarious constituents of the global technology and

business processing services industry ecosystem.

NEWSLETTER

A regular digest of key industry happenings.

DIGITAL MAGAZINE

The fortnightly digital magazine features researchreports, articles and experts views. Available on

www.globalservicesmedia.com

WEBINARS

Global Servicesweb-based seminars aim toimpart useful information related to outsourcingindustry in the form of presentations and dis-cussions by industry specialists.

RESEARCH

We deliver indepth analysis and research reportson sourcing subjects.

MICROSITES

Online resource center designed to providefocused content on special subjects to the out-sourcing community.

EVENTS

From multi-day, high-level, resort conferences tointimate breakfast discussions we offer a numberof opportunities that connects the outsourcingcommunity.

CUSTOM PROGRAM

Customized services rendered through differentmedia platforms.

OSOURCE BOOK

A directory of global outsourcing serviceproviders.

www.osourcebook.com

DIRECTORY OF SERVICES

E. Abraham MathewPresident

Ed NairEditor

[email protected]

Satish GuptaAssociate Vice [email protected]

Ashwin [email protected]

Pratibha Verma

[email protected]

Sruthi [email protected]

Niketa Chauhan

[email protected]

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October 2010 www.globalservicesmedia.com GlobalServices 3

A CYBERMEDIA PUBLICATION

LETTERS TO THE EDITOR

Send letters to [email protected], or toany of our writers. We reserve the right toedit all letters. Postings submitted to ourblogs and letters to the editor may be pub-lished in our digital magazine or Website.



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4 GlobalServices www.globalservicesmedia.com October 2010

October 201 0 V olum e 2 , I ssue 1

TRACKING THE OPD RECOVERY

By SruthiRamakrishnanThe formula for recovery is

old fashioned: hold on tight

to your existing customers,

over-deliver on your value

proposition, and be open to

looking at new engagement

models.

FEATURES

Hunger for growth isdriving M&A deals

Fueling the tide 12

Q&A with Aaron

Solganick 15

M&As by the

numbers 16

10

24

WHATCOGNIZANTTHINKS

By Ed NairQ&A with Malcolm Frank,Cognizant

25

8

INDUSTRY-SPECIFIC BPOWILL EVOLVE STRONGERTHAN HORIZONTAL BPO

by Sruthi RamakrishnanThe US Healthcare Reform bill is being seen as the biggest bonanzayet for the industry. While strong IT services vendors have beendeveloping BPO niches in specific verticals, newer BPO vendorentrants are entering through the industry-specific domains.

20

WHY EUROPEAN RPO STAYS WITHINEUROPE

By Pratibha VermaStringent data protection laws require employee information to bekept within the Union

17INDUSTRY- SPECIFIC PROCESSES

Digital Production An Opportunity for Providers Pg 17

By Vivek Shenoy

Is Insurance Analytics Outsourcing set to Surge? Pg 18By Reetika Joshi

M&As: TheRising Tide



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Releasing November 16thTo advertise or to participate

contact: Satish Guptaat [email protected]



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ED NAIREditor

EDITORS NOTE

[email protected]

Microtrends willbecome waves ofchange; systemic

shocks like therecession can reset the

economy and themarket.

hange is slow to be noticed. It is understood better, when things addup over time or when a large shift happens.

This issue of the digital magazine is all about change; how micro-trends will become waves of change or how systemic shocks like the reces-sion can reset the economy and the market.

For instance, the story on how the OPD market is recovering from therecession focuses on the impact of cloud computing on software product mod-els and the attractive mid-market opportunity. Mid-market software com-panies are treating their OPD vendors as extended R&D organizations, whileenterprise software vendors will use OPD vendors to handle entire familiesof products. Globalization of R&D is a far-reaching trend.

Similarly, the cover story on M&As spells out the need for companies tobuy their way into market share and the increasing willingness of small com-panies with service niches to sell out. These trends will endure for a few yearsto come. Reason: buying market share is the fastest way to accelerate growthand to get into new geographic market for services (India, China, Brazil, oth-ers).

Another interesting example of change is brought out by the story on RPOin Europe. Very strict data laws mandate that RPO work not be offshoredoutside the European Union. The laws are not aimed at curbing offshoring;they are aimed at strengthening data privacy. This is in stark contrast to theUS trying to enact laws that penalize offshoring with increased taxes, dis-criminating against Indian companies by hiking visa fees, or any other pro-tectionist measures.

Finally, the story about Cognizant drives home the point on how a com-pany can synthesize various signals that combine to form large forces of changeand make it a way of life both inside and outside the organization. The Cog-nizant way is a fantastic example of thought leadership. GS

C

Understanding the

Nature of Change



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Releasing November 30thCase Studies are invited from service providers. For more details

contact: Satish Guptaat [email protected] or visit:www.globalservicesmedia.com/live



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Product Development

By Sruthi Ramakrishnan

The formula for recovery is old fashioned: hold on tight to your existing

customers, over-deliver on your value proposition, and be open to looking at

new engagement models.

Tracking the

OPD Recovery

Post recession the outsourced product develop-ment (OPD) segment is coping with an emptydeal pipeline. "We were all faced with a bifur-cated market during the worst of the downturn.Most companies were on a spending 'lock

down', says Pallab Chatterjee, ex-CEO and presentlychairman on the board of Symphony Services." However,there was a sliver of the market that was willing to makethe bold R&D investments necessary to emerge strongerduring the recovery. The challenge for OPDs was to findand exploit those opportunities."

Jim Walsh, Chief Technology Officer, GlobalLogic agrees

with Chatterjee. "Companies less than $100 million inannual revenues tended to shrink, and some of the smallones went out of business. So we lost some business in thatsector. But in the $100 million category, people saw OPD asa cost saver. So we had more growth there. This growth off-set the shrinkage."

Market Sweet-spots

It is precisely to this category, that is, to companies in the$25 -500 million range, that OPD vendors are looking toto lift them out of the downturn. "Large ISVs still representexcellent growth opportunities as they are driving innova-tion across a number of areas, such as Cloud enablement,SaaS, PLM, etc. That said, the midsized market is extreme-ly compelling to us because this is where some of the mostexciting and current technology development (e.g., unifiedcommunications) is occurring. So we intend to continuetaking advantage of opportunities with larger ISVs whileexpanding our footprint to include the mid market," saysChatterjee.

The mid-market attraction, though, is not a new factor."Going to the mid-market is only logical--startups are not

enough for sustenance, and big companies are already suffi-ciently penetrated. So its basically a very safe strategy to fol-low, says Karthik Ananth, Director-Market Expansion,Zinnov Management Consulting. And its not somethingthat companies started doing last year, they have been doingthis for the past three years. They took a halt last year as theydid not know what would happen to the mid-size market,but now they are following the same strategy again.

Besides the mid-size market, OPDs are looking to exploitthe opportunities provided by companies wanting to refreshtheir product lines. Companies wanting to grow in newermarkets want to revitalize their product lines so that theycan be rapidly deployed and configured at a lower price

Pallab Chatterjee, Chairman on theboard of Symphony Services



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Product Development

point in the newer areas, says Walsh. There has been notalk of cost arbitrage in the last nine months. Instead, com-panies are looking at revenue generation activities, revitaliz-

ing their product lines and broadening their markets byleveraging new technologies.

Besides Asia, Europe is one of the geographies OPDs arelooking to expand in. Were continuing to invest sales andmarketing resources in China for clients who want to tap

Chinas huge and highly skilled workforce (while maintain-ing a toe hold in a region that represents a huge market forthem). And we are investing heavily in Europe for optimiz-ing the R&D functions of a number of ISVs, telcos/carriers,etc., says Chatterjee.

Challenges

Perhaps the biggest challenge for OPDs in the post-recession

period is to match up to the increased expectations from

them. As Jim puts it, The playing field is becoming more dif-ficult for companies, they need to be much better than they

were. The bar for software quality and presentation has gone

way up.As Ananth points out, the recovery story happened three

months back. Now its about finding out which are thegrowth areas and where are the new avenues of growth. Heopines that with the advent of cloud computing and SaaS,software moving to them will have significantly largeropportunities. GS

Third-party Partnerships:Future of Software R&D

l According to Zinnov's study on Software R&DGlobalization, only 5% of R&D budgets are cur-rently being spent on outsourced partnerships,which means about 95% of the R&D is conduct-ed by companies in-house (HQ, Captive models)

l For many of the large sized companies that par-ticipated in the Zinnov survey, mature/ existingproducts account for more than 75-80% oftheir total revenues. Hence they have to investheavily on maintaining and enhancing theseproducts to suit requirements.

l In keeping with their low spend strategy, compa-nies are now focusing on new products for both

the US market and the emerging markets to tapinto newer opportunities and newer customerrequirements.

l Amitava Roy, COO, Symphony Services,"Twomajor challenges to software product companiestoday - freeing up resources to work on newproducts and maintaining margins for legacyproducts,

lMajority of companies are increasing R&D spendin captive centers in emerging geographies suchas India and China

l Biggest captive center challenge- the tag andthe brand recognition to attract and retain

people

l 'Go-to-market' strategy: companies are asking-should we develop it on our own or should weget a partner who can not only develop it for mebut also help me in penetrating newer marketsand support me in expanding my existing mar-ket?

l Challenges faced by small and medium sizedones: higher total cost of ownership, high set upcost and lower productivity

l The new pricing models offered by vendors toclients: outcome based pricing, revenue sharepricing and risk reward pricing. Companies are

now looking to leverage the risk-reward partner-ship model, where the vendors are willing toabsorb a certain amount of business model risk,across the lifecycle of products

OPD VENDORS ARE LOOKINGAT COMPANIES IN THE

$25-500 MILLION RANGE TO

LIFT THEM OUT OFTHE DOWNTURN



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M&As: The Rising Tide Special Report

The Rising Tidefor M&As



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Fueling the tide 12

Q&A with Aaron Solganick, GenerationEquity Advisors 15

M&As by the Numbers 16



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THE ACQUISITION of Unisys InsuranceServices Limited (UISL) by TCS' UK sub-sidiary Diligenta has brought into focus aninteresting trend in M&As in the servicesindustry.

Recent deals show that instant growth in market share isincreasingly becoming a driver for M&As. The Unisysacquisition, for instance, was done primarily to increaseTCS's market share in the UK insurance space. SureshMenon, CEO, Diligenta had said at the time of closing thedeal, Diligenta will use its vast experience of life and pen-sions BPO and the existing expertise available at UISL tocontinue to build its UK operations and service UISLscustomers.

Buying Market ShareTCS has seen instant gains following the transfer of UISLsbusiness, with the former having become the second-largestinsurance BPO provider in the UK, after winning two deals

The hunger for revenue growth is driving M&A dealsin ITO and BPO

worth 250 million ($392.5 million) and business for thenext six years.

A similar trend can be seen in several M&As of recenttimes. Genpact's acquisition of Symphony MarketingSolutions, Capgemini's purchase of majority stake inBrazilian major CPM Braxis, IBM's purchase of Unica haveall had established vendors in niche sectors being acquiredby bigger players who offer a wider range of services. "Thelast two years saw businesses focusing more on managingcosts to take a conservative view during the global down-turn. Now we see them back like in pre-crisis growth modeand resuming investment both organic and inorganic,"says Sashi Reddi, Founder & Chairman, AppLabs. The software testing and quality management company acquired Value Minds, a developer of web-based testing tools lastmonth.

Symphony Services is another company that has beenactive on the acquisition front, with two recent acquisitions-CoreObjects and Proteans - adding to their expertise and

Fuelingthe Tide



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beyond their domestic market base and gain access to a larg-er clientele, besides granting association with a known name.

In such cases, target compa-

nies aim to, as DavidShpilberg, Vice Chairman ofthe Board of CPM Braxis saidin an interview withEuroBusiness Media, "create asolid, global-standard compa-ny that continues to grow atabove market rates".

Besides markets, compa-nies are also looking to acquireexpertise in services that seempotentially profitable. IBMseems to be leading the race in

this regard, with the companyspending more than $11 bil-lion in the past five years toshore up on higher-marginsoftware businesses likeOpenPages, Unica andCoremetrics. We will contin-ue to see action from activeacquirers such as IBM whoindulge in large to small sizetransactions throughout theyear, says Ratna Srivastava,Senior Analyst, Tholons.

Going OrganicM&As are like growth onsteroids. While they work asan instant growth booster, dothey have an adverse effect onin-house initiatives forgrowth? "Most of the buyers

have been chasing targets offering complementary servicesand hence not a threat to the in-house initiatives," says RatnaSrivastava. "However, a few large deals initiated in the pastcouple of months were primarily in line with acquirersmajor line of businesses, but has not been a threat becausethe objective was to gain access to a geography or a newclient segment."

Ultimately, internal growth will drive a company's suc-cess. Inorganic growth is fast and allows immediate utiliza-tion of acquired assets. But, if the firm grows only inorgani-cally then it would be difficult for it to maintain sustainablegrowth from within and is a strategy for failure. Hence, therehas to be a good balance between organic and inorganicgrowth," sums up Reddi. GS

client base. While the company has found the two acquisi-tions complementary "to the work we have historically done with ISVs", it has also benefited

by adding "Proteans established,international client base to ourglobal ISV client roster".

The company is not ruling outmore takeovers in the near future."We are always on the lookout forhighly specialized and differenti-atetd providers that will add toour core competencies; bringgreater value to our client base;and add strong engineering talentto our team. We have very aggres-sive growth goals for the next sev-

eral years, and we plan to reachthose goals through a combina-tion of organic and inorganicgrowth," says Sanjay Dhawan,CEO of Symphony Services.

The strong M&A wave is setto hold across company sizes andprice bands, as the industry strivesto return to its pre-recessionarygalloping growth rate and compa-nies keep all growth options open."We are actively seeking ERP test-ing companies in the $40-50 mil-

lion range to help us address thelarge enterprise market. Many ofour customers are demandinghighly specialized ERP testingskills and we would be open to anacquisition in that space," saysReddi.

Small Firms Willing to beAcquiredThis works well for mid-tier companies, several of whichwere facing closure during the recession. Unica had a loss of$22.5 million on revenue of $100.6 million in the fiscal yearended Sept. 30, 2009. Kale Consultants, a mid-size out-sourcing services firm, sold out to European back officeprovider, Accelya. Several others like HexawareTechnologies, Mastek, and Patni witnessed a tough year andshrank in revenue. For such companies, choosing to sell outto a bigger (and financially more stable) company may seema viable option.

But for profit-making enterprises like Brazil-based CPMBraxis, such M&As enable the target companies to reach out



The last two years saw busi-nesses focusing more on man-aging costs. Now we see themback like in pre-crisis growth

mode and resuming investment both organic and inorganic,

Shashi Reddy,Founder & Chairman, AppLabs



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Aaron Solganick, Founder President and Managing Director,Generation Equity Advisors, spoke with Ed Nair about theprevalent trends in M&A in the services industry. Aaron believesthat the tide is rising compared to the stillness that prevailed inthe past two years. Excerpts from the conversation:

We are seeing the continuation of

a two-year consolidation phase

GS: What are you seeing in terms ofthe climate for M&As in the servicesindustry for 2010?

AS: The overall climate for M&A forthe Software & IT Services industryfor 2010 is one of the most active interms of number of transactionsannounced in the U.S. and globally.We are seeing a continuation of a 2-year consolidation phase of majorsoftware and IT services firms. M&Ais steadily improving quarter-to-quar-

ter 2010 and has clearly gained signif-icant improvement since a dismal2009. M&A for 2010 is still at below-normal levels as compared to 2005-2007, but is steadily improving.

GS: What kind of deals are these?What are the drivers?AS: So far this year, the largest M&Adeals mostly involved BPO firms, while transactions with the highestmultiples spanned offshore outsourc-ing, government, specialty consultingand digital marketing services, show-ing that healthy valuations are not justtied to one area. Overall, companiesare acquiring to gain traction in aproduct or service offering or geo-graphic reach (India to US, Europe toUS, Latin America to US).

We see a consistent trend in larger

IT services and BPO firms acquiringsmall-to-mid market companies thatadd strategic value to their currentofferings. The mega-mergers over thepast 2 years have mainly been to takeadvantage of a lower valuation andsometimes a near fire-sale.

GS: But large deals seem to be miss-ing; the likes of HP-EDS, Dell-Perot, ACS-Xerox. How are the largecompanies doing?

AS: Even though deals of the type youmentioned have not happened, all ofthe major technology conglomeratessuch as IBM, HP, Accenture andCapgemini have been steadily activein acquiring companies in 2010.

Nippon Telegraph and TelephoneCorporation (NTT), one of thelargest global telecommunications ser-vice providers announced the acquisi-tion of Dimension Data Holdings Plc(Dimension Data), a global specialistIT services and solutions provider, for$3.2 Billion. PwC also recentlyannounced the acquisition ofDiamond Management &Technology Consultants, Inc. (DTPI)for $378 million, a move to improveits global management consulting andsystems integration offerings. AonCorporations acquisition of human

resources consulting and outsourcingsolution provider Hewitt Associatesfor $4.8 billion and 1.6x revenue wasa large deal in Q3. Add to this, Accenture-Ariba and CapGemini-CPM Braxis kind of deals.

GS: What about the Indian vendors?AS:As for the Indian companies suchas Wipro, Infosys and HCL, therehave been few M&A announcementsin 2010. We see Indian firms acquir-

ing small-to-medium sized BPO firmsin the U.S. and Europe, but not India-to-India firms. We also do not seeU.S. or European firms acquiring anyof the large Indian firms this year andpossibly the next due to large valua-tion gaps (1xs revenue for U.S. IT services firms versus 4xs revenues forIndian IT services firms). GS

Aaron Solganick, Founder President and

Managing Director, Generation Equity Advi-

sors, is an experienced technology investmentbanker. He has completed over $8.4 billion

in transactions to date including M&A,

private capital raises and IPOs. He has

worked at top-tier and middle-market M&A

firms and gained experience in complextransactions of most shapes and sizes.



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GLOBAL M&A DEALS

0

300

600

900

1200

1500

Q3 '10Q3 '09

TOTALVALUEIN

USD

(IN

BILLIONS)

QUARTER

1137.98

1420.20

0

2000

4000

6000

8000

10000

Q3 '10Q3 '09

GLOBAL M&A DEALS COUNT

TOTALNO.OFDEALS

QUARTER

6,864

8,010

0

100

200

300

400

500

600

Q1-Q3 2010Q1-Q3 2009

DEALS WITH OVER $500M VALUE

NO.OFDEALS

QUARTER

323

515

0

10

20

30

40

50

60

Q3 '10(for IT services only)

Q3 '10Q3 '09

AVERAGE M&A DEAL SIZE

USD

(IN

MILLIONS)

QUARTER

21.9527

58

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Q3 '10Q2 '10Q3 '09

DISCLOSED DEAL VALUE

USD(I

N

BILLIONS)

QUARTER

1.4

2.9

3.8

0

20

40

60

80

100

120

Q3 '10Q2 '10Q3 '09

VC-BACKED M&A DEALS

NO.OF

DEALS

QUARTER

69

97104

M&As by the Numbers

Sources: Thompson Reuters, Capital IQ, National Venture Capital Association, Dow Jones Venture Source,MergerMarket



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Industry-specific Processes

Vivek Shenoy, Analyst Publishing, ValueNotes Sourcing Practice

O

n the 19th of November 2007, Amazonreleased its first generation Kindle an eventthat shaped the digital market. Since then,large corporations such as Sony, Barnes andNoble, Google, and more recently Apple,

have been giving the digital content market significant atten-tion adding credibility and more so, validating the digitalmarket as a strong revenue source. Consumers have respond-ed well to digital content as evident by e-book sales in the US:The International Digital Publishing Forum (IDPF) reportssale of digital content/books in the US, for the first two quar-ters of 2010, in excess of $150 million a 200% growth sincethe same period last year.

Publishers, over the last few years, have faced significantcost and revenue challenges challenges that have shapedhow the industry is currently operating. For publishing com-panies undergoing cost and revenue pressures, the digital mar-ket presents a holistic solution one that opens a channel of

revenue with non-linear growth, while ensuring minimalcosts of production & sales. Whether it is opening a newchannel of revenue through digital sales or migrating to digi-tal only operations, the publishing industry worldwide is get-ting a digital facelift. However, creating digital offerings pre-sents its own sets of problems.

Optimal Production of Digital Content is a ChallengeTo better understand how publishers address the digital mar-ket the ValueNotes Sourcing Practice is conducting a survey onThe Current State of Digital Content. Initial responses fromour survey suggest that integrating a digital workflow in addi-tion to the existing print workflow is a challenge more thantwo-thirds of the respondents having indicated so. Most pub-lishers view the creation of digital content as two activities:nDigitisation of backlist/archivesnDigitisation of existing/future contentDigitisation presents its own set of challenges and is highly

dependent on the value of the content (particularly forSTM/Academic, reference and trade book publishers).Publishers with a large backlist have faced issues while organis-ing content, identifying source files (due to multiple versions),developing workflows in-house and most importantly organis-

ing the resources required while undertaking the digitisation.On the other hand, digitisation of existing/future content

is highly dependent on developing strong workflows thatincorporate multiple formats. The biggest challenge remainsin maintaining a uniform user reading experience across var-

ious e-readers and formats. To truly monetise the digital mar-ket, publishers need to not only develop the necessary tech-nology skills and infrastructure, but also develop the resourcesin-house a significant cost outlay.

Leveraging the Outsourcing ModelTraditionally, publishers have leveraged outsourced publishingservices providers to cut costs. However, with the onset of dig-ital content, publishers are going beyond cost as the primarycriteria for choosing a vendor. For example, a large educationpublisher we interviewed rated product expertise as the prima-ry driver for choosing a vendor. Varying formats, ensuring uni-formity of reading experience and integrating deliverables in

the buyers workflow all require capability and skill on part ofthe vendor.

Buyers have also indicated lack of in-house capability(technological expertise) and resources (scalability of opera-tions) as other important drivers of outsourcing. While buy-ers might consider outsourcing more, satisfaction levels are aconcern. Quality, timeliness and delivery processes remainareas where most buyers seek improvement.

Providers (pure-play publishing services and otherwise)now stand at the threshold of a significant opportunity thatof digital production. This opportunity includes volume dri-ven services such as conversions, XML, etc. to value addedservices such as workflow and process consultancy. However,to successfully address this opportunity; providers will need tomatch up to the buyers expectations of quality and delivery.

Publishers will soon need to find a lasting solution to qualityissues consumer expectations from digital content is increas-ing rapidly. As the market grows, the publishing industry willadopt digital content on a wide scale and as the market matures,there will be more opportunities to cross-sell content. Whetherpublishers outsource or not, the need of the hour is to digitisein a holistic manner one that will facilitate the digital pro-duction of existing/future content optimally. GS

For publishing companies undergoing cost and revenue pressures, the digitalmarket presents a holistic solution- one that opens a channel of revenue withnon-linear growth, while ensuring minimal costs of production & sales. However,creating digital offerings presents its own sets of problems.

The Digital Production Opportunity



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T

he last few years saw the deconstruction ofthe mighty Banking, Financial Services andInsurance (BFSI) segment, for the out-sourcing industry. With significantly dis-

similar business environments, processesand outsourcing needs, the distinct differences in thebanking and insurance sectors have become apparent.They are now treated as exclusive customer segments, andthe addressable market for each of them have provedextremely lucrative for outsourcing providers. Due to thisreason, providers are striving to gain critical industry expe-rience and evolve their banking, financial services andinsurance practices independently, with a keen eye onhigh-end services for the near future.

The insurance segment, worth US$4066 billion inglobal premiums (Swiss Re Sigma Study, 2009), is nostranger to outsourcing. Insurance, reinsurance and inter-mediary companies have relied on outsourcing applicationdevelopment and infrastructure management outsourcingfor many years, like the aggressively outsourced bankingsegment. With confidence established in the outsourcingconcept, in the last decade UK based insurers moved aheadto set up offshore captive centres and Third Party Administrator agreements for various low-end businessprocesses as well. Simultaneously, insurance companies inthe US engaged with BPO providers instead, and it is dueto their efforts that the intensity of insurance BPO out-sourcing has grown to todays volumes. Collectively, the

By Reetika Joshi, Analyst, ValueNotes Sourcing Practice

Providers are striving to gain critical industry experience and evolve

their banking, financial services and insurance practices indepen-

dently, with a keen eye on high-end services for the near future

Is Insurance Analytics

Outsourcing Set to Surge?



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North American insurance BPO market was valued atUS$2 billion in 2009 by Celent, a consulting firm. By2013, this figure is estimated to double, despite the sizing

relating to only core low-end BPO processes.Moving up the Enterprise Value Chain Through

Insurance AnalyticsProcesses outsourced today by insurers in the

US/Europe include a wide variety of volume-led transac-tions, in the fields of policy administration and servicing,claims administration, various marketing/ sales/new busi-ness outbound voice processes, and customer support.These back-office/voice processes have been easier forinsurers to outsource, as they are relatively less critical,offer greater savings potential, and are easier to migratedue to their high process maturity.

As the industry matures, several major BPO providers are

now transitioning to position themselves as high-value busi-ness partners, and are offering a range of knowledge inten-sive services, to move up the value chain. Of these KPO ser-vices, insurance analytics looks to be the strongest contenderin the coming years, due to the influence of several compet-itive forces in the insurance segment, elaborated below.

1. Legislative and regulatory compliance requirements:The US healthcare reform will bring in over 30 millionnew insured over the course of the next four years, intro-ducing complete new segments for US insurers to service. While this is a great opportunity for insurers, they willneed strong risk and price remodelling to aid their product

development. European insurers, meanwhile, are subjectto compliance requirements from the Solvency II regime,which will bring about a more effective risk managementframework for the EU. As a result, insurers have to set upextensive risk modelling to comply with the Solvency IIrequirements, including quantitative requirements (PillarI), governance, supervision and risk assessment (Pillar II),and disclosure of insurance operations (Pillar III).

2. Strong competitive pressures encouraging core out-sourcing: Insurers face a market with falling premiums andprofitability, compared to the pre-recession years. There issevere competition, coupled with newer customer and dis-

tribution channel dynamics. To be able to compete, insur-ers must achieve the highest degree of efficiency and lean-ness. Once unoutsourceable core processes are no longerviewed as such. Risk modelling, actuarial services and newproduct development were traditionally the most coreinsurance activities, directly linked with company perfor-mance and competitive differentiation. The entire gamutof these services was then retained in-house. However,with the paradigm shift, even high level research and ana-lytics work is being considered for outsourcing. This

includes services such as: Predictive analyticsClaims andprofitability analysisPersistency modelling andanalysisMortality/morbidity modelling and

analysisProduct profitability analysisNew product develop-ment pricing, valuationCommissions analysisActuarial /statutory reporting Actuarial dataInformation manage-ment

While initially more reporting and information man-agement services were outsourced within analytics,providers are now seeing a surge in actuarial and prof-itability/pricing analytics as well. Based on the industryredefinitions taking place, in the coming years only workthat is heavily governed by regulations and/or is incapableof being delivered through technology will remain as core,to be retained in-house.

3.Provider base gaining KPO domain expertise: Themajority of high-value insurance processes are complex,being knowledge and judgment intensive. Hence, theseKPO services will only be entrusted to established nicheproviders who have demonstrated domain expertise ininsurance. Towards this, BPO providers are rapidly vertical-izing in order to enhance insurance expertise. Existing out-sourcing relationships with IT/BPO insurance clients arebeing leveraged to cross-sell analytics services. The topinsurance BPO providers have a significant presence inIndia, and are benefiting from the countrys strong talentpool, with strong analytical/mathematical skills and Englishlanguage capabilities. With robust business delivery mod-

els, domain expertise and a large talent pool, providers arepositioned well to move up the insurance value chain.

When is the Shift?While the stage has been set for insurance analytics to

gain traction, it must be noted that the bulk of outsourced work still remains heavy back-office processing and cus-tomer support. What has changed for insurers is theincreased focus on risk modelling, due to changes in thecompetitive and regulatory environment. This might nottranslate into more business for BPO providers in the shortterm, save for existing accounts that have grown, givenhigher confidence in vendor capabilities. As providers

become more verticalized, and further develop their dedi-cated insurance practices, the shift towards higher valueanalytics services will accelerate in the next three years.Risk, marketing and operational analytics, coupled with aconsultative approach, will greatly help insurers gain com-petitive advantage in a challenging and complex competi-tive environment. Due to heightened demand and thestrong value proposition offered by the global vendor base,claims processing as the most outsourced activity may seesome competition in the years to come! GS



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BPO Trends


Vertical-specific BPO services present a largerand more diverse market opportunity ascompared to horizontal BPO services. TheUS Healthcare Reform bill has been thebiggest newsmaker in this regard, with many

already terming it the biggest bonanza yet for the indus-try. Service providers with expertise in the healthcare area,both from industry leaders like India, Philippines andnearshore locations like Canada, Mexico are queuing up tograb a share of the approximately $2.5 trillion US health-

care pie.Experts say that opportunities will be widespread

in those industry domains where BPO and IT servicescan be bundled together under a single vendor's provision.This will help to generate more efficient business outcomesand to secure future IT work with existing clients. Sothe providers who can bring in industry domainexpertise are set to emerge as significant players in thecoming year.

A trend which is indicative of this growth potential isthat newer vendor entrants are entering the BPO industrythrough the industry-specific (vertical) process domains.Most of the strong IT services vendors have also beendeveloping BPO niches in specific verticals where theyhave developed some strong process acumen and clientcredibility.

According to a survey by Horses for Sources, one-in-tenfinancial services firms, and one-in-five from life sciences,are looking to move into some form of domain-specificBPO this year for the first time. These are typically areaswhere there is some immediate labor arbitrage opportuni-ty, like trade settlement transactions and mortgage pro-

cessing in financial services, and data storage and manage-ment processes in life sciences.

Reasons for Evolution of This Sector

At the outset, process outsourcing had been primarily acost-control strategy driven mainly by labor arbitrage.Cost-control is still relevant. But in todays environment,especially keeping the slow economic recovery in view,organizations are searching for value--for ways to do thingsbetter, faster, and cheaper--and for the ability to truly

transform their businesses. To do that, they need BPO thatis based on industry-specific knowledge and that is drivento achieve measurable business outcomes.

On the buyer side, several industries- financial services,life sciences, healthcare, retail, manufacturing, media, etc.- are undergoing fundamental changes, right from theirinfrastructure to business model to customer expectations.In such a situation, outsourcing processes is no longer seenas abhorrent or unusual. Another reason is the success ofexisting domain-specific BPO engagements. Over half ofall the financial services and life sciences firms recently sur-veyed by Horses for Sources are looking to expand existingBPO engagements this year, and very few intend to pull work back onshore. However, this doesn't necessarilyentail massive increased spending overnight, but more agradual incremental increase in engagement scope.

Suppliers also find the marketplace increasingly crowd-ed, and industry-centric capabilities enable competitivedifferentiation. Moreover, the move to greater domain-specificity is intrinsically tied to the business utility modelof the future, where there are signs of the convergence ofSaaS, Cloud and BPO/ITO models within an engagement

The US Healthcare Reform bill is being seen as the biggest bonanza yet for the indus-

try. While strong IT services vendors have been developing BPO niches in specific verti-

cals, newer BPO vendor entrants are entering through the industry-specific domains.

Opportunities will be widespread where BPO and IT services can be bundled together.

Industry-specific BPO Will EvolveStronger Than Horizontal BPO



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BPO Trends

structure. The need for clients and vendors to define,

develop and implement holistic end-to-end process solu-tions is slowly coming to the forefront.

All these reasons have led an increasing number of indus-try verticals to explore new and radical means to improveproductivity, source new revenue opportunities and drive-out cost. Other benefits sought from providers includeenhanced customer service, greater competitive agility, andmeasurable long-term business value, to name a few.

Vertical-specific Potential

Healthcare outsourcing : The Healthcare Reform bill hasthe outsourcing industry abuzz with anticipation. ManyBPO firms, including several Indian ones, recentlyincreased or are in the process of increasing their onshorepresence in the US or seeking possible mergers and acqui-sitions with other companies so as to broaden their exper-tise and so gain more business from the on-the-brink-of-booming healthcare industry there.

But capturing the US healthcare market is easier saidthan done. So far only a few IT and BPO firms have madea headway into the US healthcare provider and payer mar-ket despite the huge potential for automation and out-

sourced services in areas such as revenue cycle management

and claims processing. Industry players and experts citeissues like lesser willingness to outsource as compared tothe financial services players, regulatory and privacy con-cerns related to patient records, compliance to specific Actssuch as HIPAA (Health Insurance Portability andAccountability Act), knowledge of medical procedures andcodes, and variations between states which make this mar-ket more challenging.

But with 32 million Americans slated to join the ranksof the newly-insured, many providers will soon be seekingassistance in the processing of not just the new enrollees,but their existing clients as well. Insurance providers who were previously hesitant about outsourcing services willalso now be forced to rethink, especially as competitionwill be tougher than ever in their industry. Of course withthat, competition to gain profit from healthcare serviceswill be tougher in the outsourcing industry as well.

Financial sector outsourcing: The financial services sec-tor has seldom faced a tougher set of business, market, andregulatory challenges. Many firms face threats from ongo-ing consolidations, more mature non-traditional competi-tors, and proliferating compliance demands. To meet these



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BPO Trends

challenges, BPO is increasingly being seen as a logical andproven tool for banks, card issuers, mortgage, insuranceand other financial services firms. Banks and other organi-

zations are using BPO to manage risk, to reduce costs, andto comply with increasingly rigorous regulatory demands.

Mortgage Process outsourcing: The major challengewhich service providers face while offering mortgage services is the integration of services like loan origination, vendor management, post-closing processing services,third party services until underwriting, modification ser-vices, technology services etc.

TCS (Tata Consultancy Services) shared with GlobalServices ('New Demands in Mortgage Processing BPO',September 28, 2009) that as mortgage rates dropped tounder 5% early last year, re-finance activity increased cre-ating a spike in demand for origination and loan closing

related services. This demand cooled as rates edged up.For default related services including MODs and realestate owned (REO) there wereearly demand spikes as servicersbegan to deal with the mort-gage crisis. An uncertain regu-latory environment and politi-cal pressures for moratoria onforeclosures late in 2008 con-tributed to a slowing in defaultoutsourcing. As moratoriaexpire and MOD programsbecome better defined, service

providers are facing a need torapidly add scale. Cycle timehas shortened dramatically. Forservice providers this translates into a need for excellencein manpower management, recruiting, and training. Anadditional critical element is deep domain expertise theability to work with the client to optimize processes, find ways to automate more fully and expand the scope ofpotentially outsourced business processes.

Life sciences outsourcing: The industry-wide drive forpharmaceutical and biotechnology companies to lowercosts, access specialized services and increase flexibilitythrough outsourcing work to Contract Service Providers(CSPs) was highlighted by BioCrossroads latest report onIndustry Developments in U.S. BiopharmaceuticalContract Services. The new report acknowledges thatwhile 2009 was slow for many CSPs, the underlying rea-sons for pharmaceutical and biotechnology companies tooutsource selected activities will continue for the foresee-able future. CSPs should continue to grow as the pharma-ceutical industry moves towards a more flexible businessmodel. Biomarker services and the need for larger clinical

trials will provide opportunities for additional growth infuture years.

Besides, with the consolidation of the pharmaceutical

industry and the continued trend of strategic partnershipsbetween CSPs and their clients, many companies in thesector will be drawn to find new revenue sources.

Besides India and Japan, China is emerging as a poten-tial industry leader in this vertical. According to a 2008report The Changing Dynamics of Pharma Outsourcingin Asia: Are You Readjusting Your Sights? byPriceWaterhouseCoopers, big pharmaceutical companiesrated China as the best location for outsourcing in Asia.The countrys large population represents enormous mar-ket potential for Western firms whose domestic profits arecoming to a standstill. Pharma companies are also drawnby Chinas low production costs. The Wall Street Journal

estimates that the total cost of a scientist in China is$30,000, compared to $250,000 in the U.S. Worldwide

pharmaceutical firms lookingto expand sales into emergingmarkets are contributingresources to China.

Supply Management out-sourcing: The market sur-passed a billion dollars inexpenditure for the first timelast year, with a 30% hike inexpenditure on new multi-scope BPO contracts, as

reported by the AMRResearch SupplierManagement BPO services

report of 2009. The main reason for this uptake is theincreased availability of low-cost offshore services for pro-cure-to-pay and strategic sourcing support, with 72 per-cent of services being delivered from India for largelyNorth American and European organizations. Butexperts say that this market will not sustain its growthtrajectory unless customers think beyond short-termlabor arbitrage, and service providers introduce signifi-cant process and technology enhancements to the earlyadopters to help them optimize their delivery.

Publishing outsourcing: The pressures that publishersfaced in the wake of economic recession stimulated the e-book market. In the US alone, trade wholesale electronicbook sales amounted to $167 million according to theInternational Digital Publishing Forum (IDPF). The e-book segment is growing and has witnessed seriousattempts by publishers to make it a strong revenuesource.

Outsourcing is being looked upon, besides to tackle

The move to greater domain-specificity is intrinsically tied tothe business utility model of thefuture, where there are signs ofthe convergence of SaaS, Cloudand BPO/ITO models within an

engagement structure



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BPO Trends

cost pressures, to deal with the challenges of adapting tonew technology, lack of in-house capability and addressingnew geographies.

According to a 2010 ValueNotes survey of publishingservice buyers, India was followed by the US in popularpublishing outsourcing destinations, while the Philippines was the second most preferred offshore destination afterIndia. ValueNotes estimates the Indian publishing out-sourcing industry to grow to a $1.2 billion annual marketby 2012 from $660 million in 2008. This growth isexpected to come from the rise in the number of publish-ing firms that will outsource their work.

Indian players are shifting focus from the matured aca-demic segment to the more lucrative segments in the pub-lishing market- educational, magazines, corporate, B2B,trade and e-books will be attractive segments over the next

three-four years, and Indian service providers can extendtheir current capabilities to service these upcoming oppor-tunities.

The industry still suffers from a serious piracy problem,caused largely by the high price of books, especially foreignbooks published under license, where currency exchangerates push up the prices. Besides, diversifying into newareas of business and providing value-addition within cur-rent offerings are areas where outsourcing is yet to be viewed as a complete solution, the ValueNotes surveyrevealed.

Media outsourcing: The global media and entertain-ment industry revenue is likely to increase by leaps and

bounds due to the proliferation of content in multiple for-mats across media platforms. The media process outsourc-ing opportunity is huge since most of the existing contentsworldwide are in the analogue form and need to be digi-tized for new platforms.

As advertising declines, the pace of onshore and off-shore outsourcing in the media industry appears to bepicking up. The Everest Group reported an increase inmedia-related outsourcing deals in the last year. Mergersamong media companies are driving some of those deals,but most of the push to outsourcing is due to pressures inthe ad market. Publishers see labor arbitrage and off-shoring as one of the easiest things they can do to cut costs.

Many companies today understand the importance ofmaintaining a good profile on the internet. Hence, theyseek social media services like SMO (SM optimization) fortheir websites from third party vendors to boost theironline business marketing while they focus full time ontheir core business development.

Other Verticals

Industry specific variations of horizontals continue to

remain unaddressed though a few areas such as RevenueAccounting (Travel) or Revenue Assurance (Telecom) aredrawing interest. Travel (airlines) is a sector where industry

specific services such as Pricing/Fare filing or YieldManagement or Load Management have seen demandthough "revenue accounting" has been leading in the sec-tor.

Insurance is a sector which has been waiting for a goodplatform solution for a few years now.

Firms looking at supply chain functions, such as man-agement of environmental compliance, distribution man-agement, sourcing etc. are also choosing to outsourcethem.

Other emerging verticals include technology, telecomand transportation.

Opportunities and RisksThe 2009 Everest report Industry-Centric BPOSolutions- Opportunity to Attain Distinctive MarketPositioning says that while verticalization of servicesimplies numerous opportunities for value creation, thereare also potential risks, and suppliers need to identify andadopt mitigation strategies for these risks.

Among opportunities, the report mentions that whilethe overall BPO market is highly competitive, the marketby industry is concentrated. Also, the industry specificityof services sets the stage for the introduction of higher-value pricing models. On the other hand, strategic invest-ments for capability building in vertical services will carry

larger risks.Experts also warn that while industry-specificity will

clearly be a major driver in outsourcing, the financial pres-sures on vendors to maintain their profit margins mayoverride its development. The capability to deliver genuinedomain-specific process acumen to clients is quicklybecoming a major differentiator in the market. However,investing in the talent to truly scale these capabilities isexpensive, and the margins aren't as appealing as those cur-rently being displayed by several vendors delivering theeasy, operational work. As a result, sector-specific skillshortages (specialized skill categories for vertical-specificprocesses such as actuaries for Insurance BPO) are likely toemerge, according to the Nasscom- Everest India BPOStudy (2008).

While some vendors are clearly content with a thin veneer of vertical capability, others are picking verticalswhere they feel they can gain an edge over the competi-tion. But it's a gradual development, and experts say thatit will take patience and attitude on the vendors side toinvest in the depth of talent they need, and less concernabout short-term profits and demands. GS



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Human Resource Outsourcing

By Pratibha Verma

T

he European recruitment process outsourc-ing (RPO) market is not amenable to off-shoring. Despite being a segment growing atannual rate of 10 percent, the RPO market

in Europe relies solely on a mix of onshoringand nearshoring. Cultural affinity and the nature of therecruitment process is only part of the reason. AlsbridgeSenior Manager Shaun Dunphy says, " Onshoring of RPOwith some nearshoring is emphatically practiced in Europebecause of data protection laws.

The Data ProtectionDirective (Directive 95/46/ECon the protection of individu-als with regard to the process-ing of personal data and on thefree movement of such data) isa European Union directive

that regulates the processing ofpersonal data within theEuropean Union. It is animportant component of EUprivacy and human rights law.

According to Information Commissioner's office, theData Protection Act says that personal data shall not betransferred to a country or territory outside the EuropeanEconomic Area (EEA) unless that country or territoryensures an adequate level of protection for the rights andfreedoms of data subjects in relation to the processing ofpersonal data.

This is the eighth data protection principle, but otherprinciples of the Act are also relevant to sending personaldata overseas. For example, the first principle (relating tofair and lawful processing) will in most cases require toinform individuals about disclosures of their personal datato third parties overseas.

Dunphy says that employee-data cannot be transfered toother countries without the employee's consent. So, if thedata is going to be stored in the other country, it becomesmandatory for the employee to sign an agreement beforejoining the company.

The seventh principle (concerning information security)is relevant to how the information is sent and the necessityto have contracts when using subcontractors abroad.

Dunphy says, "If data is going outside the EU you

would have to inform every candidate about it. These areconstraints. A lot of organizations worry that they don'twant to be the first one to have a legal case about holdingdata in India or any other offshore destination. For manyRPO companies it is easy to retain the data within the EU.The reason why RPO is not offshored is also because it can

run easily in the same conti-nent.

What do RPO buyers need?RPO buyers want streamlinedrecruitment processes from service providers, which meansthey want providers to reduce

the time it takes to hire goodcandidates, reduce the cost perrecruitment. They want to moveto fixed price per recruitmentcampaign and to lower the

recruitment cost from what they have in-house. It wouldhave been easier to reduce costs through offshoring but thelaws prevent it. GS

Stringent data protection laws require employee information to be kept within the Union

Why European RPO StaysWithin Europe

Recent RPO Deals in Europel SourceRight Solutions for Siemens (announced

August 9, 2010)

l Alexander Mann Solutions for Cobham Plc(announced July 14, 2010)

l Xchanging for BAE Systems (announced May 18,2010)

l Harvey Nash for Buying Solutions (announcedMarch 2, 2010)

l Alexander Mann Solutions for Atos Origin(announced October 21, 2009)

Source: Ovum IT Services Contracts Analytics

A lot of organizations worrythat they don't want to be thefirst one to have a legal caseabout holding data in India or

any other offshore destination.Shaun Dunphy,Alsbridge



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Q&A

M en and organizations do fundamentalrethinking when something is serious-ly broken. So, what happened atCognizant?MF: The recession. Companies in our sector, including us,

had grown at superlative rates for the past five to six years.

And then suddenly growth stalled. Institutions of the likes of

Bear Stearns and Lehman Brothers fell. It was scary.GS: Did you panic?

MF: Our CEO Franc DSouza did a very wise thing. Instead

of panicking, he gathered the senior managers at Cognizant

and charged them with coming up with a synthesized view ofwhat was happening. The top 20 managers locked themselves

up in a meeting all Friday, Saturday, and Sunday for many

weeks that followed. Instead of just providing our opinions on

what we thought went wrong, we looked at what was hap-

pening through the lens of our clients.We went client-by-client, half an hour each, in a rigorous

way. These meetings were not fun, but after the third one, the

pattern started to emerge.GS: What was that?

MF: Customers were recognizing that this was not a cyclicaldownturn; they recognized that this was a shift point. The

trigger for that might have been the mortgage crisis, but there

were some very large forces at work. It was not about tighten-

ing the belts or laying off a few people.Change is accelerating as the global recession gives birth to

a reset economy in which organizations in every industry are

reassessing their business models to overcome unpredictable

markets, greater margin pressures and a drought in invest-

ment capital.There was this feeling amongst many clients that some-

thing was seriously wrong at the basic level, that they need to

build a new curve, that they need to find new ways of orga-

nizing, new ways of delivering, and new ways of creating

value. That was the initial view into what we now call as

Future of Work.GS: Future of Work. Sounds eclectic. So those large forces of

change that you mentioned ...

MF:Yes. There are a few easy ones. One was certainly global-

ization. For us, in terms of what we do during the day, we are

too close to the trees to be able to see the forest clearly. Ourclients had globalized this one piece around IT but there were

many other portions of their business model that were not

Thoughts are things, as they say. Powerful thoughts have shaped institutions, orga-

nizations, nations, and civilizations. Malcolm Frank, SVP-Corporate Marketing and

Strategy, Cognizant, was asked by his CEO (Francisco DSouza) to synthesize the

signals from the market and come up with a strategy that would define what and

how the company did. In an exclusive phone-side chat with Ed Nair, Malcolm

explains the evolution of Cognizants thought, called as Future of Work and how

Cognizant applies it to the marketplace.

WHAT COGNIZANT THINKS

Malcolm Frank, SVP-CorporateMarketing and Strategy, Cognizant



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Q&A

globalized. Clients were closely looking at that. Work, of all

forms, is migrating to its right location worldwide, allowingcompanies to leverage expertise anywhere and everywhere it

resides.

Second is virtualization and I dont mean it only in the

techie sense. New virtualized platforms are enabling real-time

collaboration both within organizations and with outsidepartners, leading to new ways of working, managing and

innovating. Virtualized company, virtualized work experi-

ence.because of financial pressures companies were highly

motivated to try out these new things.GS: What about technology? Isnt that a force of change by

itself? There is so much talk about cloud computing, social

media

MF: Yes. Cloud computing, social networking, broadband

and mobility are enabling new business and technology mod-els that improve operational flexibility and knowledge shar-

ing. There was first-hand experience at this. The experience

they were having on Sunday nights very exciting and

engaging social computing experience using their iPad or to

Tweet or chat with friends on FaceBook. And then, onMonday morning and face the old world kind of

workthe difference is vast and things are not going to go

on this way for long.

This dissonance between the Sunday night and Mondaymorning experience was driving some real change not just

with the IT footprint but also overall with the organization. It

is being turbocharged by the millennial generation. This

brings us to the next major force of change- the millennialgeneration and their mindset.

GS: What about the generation of millennials?

MF: A major shift in the nature of work coincides with the

growing presence of the Millennial generation in the work-

force and the consumer marketplace. There are an estimated50 million Millennials, defined as persons ranging in age from

18 to 29, who were born after 1980 and have come of age in

the new millennium. Approximately 65% of this group is

now in the workforce on either a full-time or part-time basis.

(Pew Research Center, Millennials: A Portrait of GenerationNext, February 2010.)

GS: What do these ideas point toward? What did you do

about them?

MF: There were two perspectives: outside-in and inside-out.Outside-in, the answer was unambiguous. But this was the



27/28

general theme. How does this show up in the retail banking,

how in the life sciences industry, how in certain portions

of the manufacturing industry. We really understand that. It

was beneficial for us, but it was more important for the cus-tomers.

The second important thing was inside-out. Lot of cus-

tomers came back to Cognizant and said that, You seem to

embody these principles. That makes sense because if welook at what we do- we are by definition highly globalized and

they were particularly intrigued by the management team that

is virtual but works in a very cohesive way. We embrace the

virtual experience in a meaningful way. Third, we run the

company on social technology. It looks like FaceBook. Calledas Cognizant 2.0 or C2, it is the marriage between social com-

puting, cloud computing, and knowledge management.

Today, C2 provides a virtual town square for more than

89,000 Cognizant asso-ciates and some 54,000users have collaborated

on hundreds of projects

worldwide. About 90

percent of our employ-ees are millennials.

When customers look at

Cognizant, they say that

we already embody a lot

of the attributes ofFuture of Work.

GS: Is this a vision or a

value proposition or a

set of corporate guide-

lines..how does the

Future of Work play

out at Cognizant?

MF:We live by it. It is not a vision or value proposition to

attract clients or new recruits. It is a very pragmatic way ofdoing things, the way things are done at Cognizant. We

believe these are going to become operating norms for the

next generation. We talk about it internally a lot. The

opportunities that are created for our associates- how do you

manage teams that are globally distributed teams, virtualteams located in many different places, located across differ-

ent organizations in a very cohesive way. These are capabili-

ties that are going to serve them well for the next decade

or so.GS: All of these are concepts validated by whats happening

in the world. But in the end, Cognizant is an IT services and

BPO company. How do you apply this Future of Work

construct to your business?

MF: The Future of Work helps us understand and analyzethe future of every industry. Our great strength is the 2-in-a-

box model, we have got senior client partners onsite with cus-

tomers. It helped us get in front of the customer quickly, to

take these concepts, and really hone them across various

industries. Our broad findings were:1. Organizations need more scalable and flexible IT systems

and processes that allow knowledge to be captured and

applied by virtual teams inside and outside the conven-

tional organizational structure.

2. Powered by new (and often cloud-enabled) platforms ofcollaboration, new systems which rely heavily on social

computing and mobility solutions, are emerging to

replace or extend traditional systems of record to deliver

just-in-time insights, across disciplines.

3. The impact of this is unique. Knowledge is getting cre-ated, captured, and used differently. This is fueling high-

value, knowledge-based processes at forward-thinking

companies. These activi-ties range from clinicaltrials data management

in life sciences, to risk

management and under-

writing in insurance, to

mortgage loan-decision-ing in retail banking,

among others.

Cognizant delivers IT

and business capabilities

to its clients. We do it bycombining applications,

platforms, infrastructure,

knowledge processes,

and domain expertise inunique ways.

GS: Give me live examples.

MF:We helped a global life sciences company have access to

real-time reports from a fully outsourced sales and marketing

analytics solution. This solution was delivered as a businessprocess as a service (BPaaS) solution. While delivering more

accurate and timely cost data, the BPaaS solution is enabling

the company to flex its sales and marketing operations as busi-

ness conditions dictate.

Another top-five global life science company engaged us tohelp optimize and extend how it analyzes sales and marketing

data (e.g., segmentation, promotion response analysis, align-

ments, call planning, and incentive compensation). Using a

mix of next-generation solutions (hybrid and pure BPaaS), wehelped the company reduce its analytics spend by 33% in

2009 (compared with 2008), while reducing its OpEx across

sales and marketing operations to fund other ongoing busi-

ness transformation initiatives.Ed Nair

GS


Q&A

Change is accelerating as the globalrecession gives birth to a reset econ-omy in which organizations in every

industry are reassessing their businessmodels to overcome unpredictable

markets, greater margin pressures anda drought in investment capital.



28/28


Documents

Global Services Digital Magazine October Issue 2