Global Services Digital Magazine - January Issue

Global ServiceS A CYBERMEDIA PuBlICAtIon
An integrated media platform which connects the
various constituents of the global technology and Pradeep Gupta
Chairman & Managing Director
business processing services industry ecosystem.
Cyber Media (India) Ltd.
E. Abraham Mathew
Directory of ServiceS President
Ed nair
NewSletter
Editor
A regular digest of key industry happenings. ed@cybermedia.co.in
Satish Gupta
DiGital MaGaziNe Associate Vice President
The fortnightly digital magazine features research satishg@cybermedia.co.in
reports, articles and experts’ views. Available on Smriti Sharma
www.globalservicesmedia.com smritis@cybermedia.co.in
Sruthi Ramakrishnan
webiNarS sruthir@cybermedia.co.in
Global Services’ web-based seminars aim to impart niketa Chauhan
useful information related to outsourcing indus- niketac@cybermedia.co.in
try in the form of presentations and discussions Virendra Kumar
by industry specialists. virendrap@cybermedia.co.in

reSearch
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3 GlobalServices www.globalservicesmedia.com January 2011

January 2011 volume 2, issue 2

featUreS

10
UTILITy COMPUTING:
THE REALITy CHECk
by Ed Nair
Virtualization and cloud computing has
brought utility back into the discussion
though neither of them are a precondition
for a utility-based model of IT delivery

8 18 xperts
EMERGING FROM THE EyE OF THE ENGINEERING SERVICES - AN
STORM, WAkING UP TO CHANGED OUTSOURCING EVOLUTION
RULES
by runa Mookerjee, analyst, ValueNotes Sourcing
by Sruthi ramakrishnan Practice
The main challenge the MPO (mortgage process outsourcing) An increasingly competitive market for engineering services has
industry faces today is the changed environment it finds itself in made outsourcing indispensable to the industry, more so follow-
ing the downturn

16 20
THE NExT STAGE a NEW rolE For BENchMarkS
IN MANAGED PRINT by Max Staines, President of North america,
SERVICES IS HERE compass Management consultingn
by Sruthi ramakrishnan Traditionally a bargaining tool for clients to set pricing targets for
Managed print services and IT- BPO proc- service providers, outsourcing benchmarks are increasingly being
esses traditionally stood at different ends of used to collaboratively drive transformational initiatives.
the services spectrum. Not anymore.

22 GloBAl SERVICES lIVE!

FiNaNcE aNd accouNtiNG SolutioNS 23 MESSaGE MiGratioN aNd MaNaGEMENt 25
client: coca-cola Enterprises Provider: capgemini client: a Fortune 100 company Provider: Microland limited

‘liFt & ShiFt’ MiGratioN 24 StrEaMliNiNG oPEratioNal WorkFloW 26
client: owens & Minor Provider: dell Services client: Metlife Provider: ci&t


Global Services LIVE!
Q1, 2011 EDITION

Releasing March 2011
Case studies are invited from service providers.
For more details click here or contact Satish Gupta at satishg@cybermedia.co.in

Editor’S NotE
Dawn of a
New Decade
F irst things first, let me point towards two articles in this issue that deal
with significant shifts in IT and BPO.

Utility computing used to be one of those buzzwords thrown around
in the IT circles a few years ago. It was supposed to be a game changer
on the IT infrastructure delivery side (which it is), but the IT world got
swayed by other developments like service-oriented architecture, virtuali-
zation, and business process management. years later we are once again at
a point where virtualization, SaaS, IT standards, managed services model,
and cloud have come together to change the way IT infrastructure serv-
ices are delivered. This has renewed the interest in standards-based utility
model where the pricing is based on consumption of services.

Ed Nair In this issue, we take a reality check on where utility computing stands
today. One key message is that it is not about technology or the sourcing
Editor
model; rather it is about the behavioral changes needed (on the client
ed@cybermedia.co.in
side) and the realization that revenue per client would decrease but mar-
gins would increase (on the provider side).

As we look back Another exciting trend we examine in this issue is about the evolution
to the decade and convergence of MPS (managed print services) into broader IT serv-
ices and BPO markets. This has implications for many document-driven
that went by, the industries like mortgage, insurance, healthcare, and others. The article
outsourcing industry traces the antecedents of this trend, explains the realignment of service
or the global services providers, and presents the possible dynamics of this convergence and its
impact on the industry.
industry had many
momentous shifts As we look back to the decade that went by, the outsourcing industry
or the global services industry had many momentous shifts. The transi-
tion from the previous decade was marked by the culmination of a fren-
zied programming effort called y2k, the shift into developing e-business
applications, and the boom in call centers in India and the Philippines.

We are once again at the start of a new decade.

The transition this time is marked by mature global delivery, the
promise of the cloud, the convergence of IT and BPO, the quest for
transformation, and the clear recognition of global sourcing as a strategic
lever.

Wish everyone a great and rocking year 2011! GS


industry- specific Processes

Emerging from the Eye
of the Storm, Waking Up
to Changed Rules
The main challenge the MPO (mortgage process outsourcing)
industry faces today is the changed environment it finds itself in

by Sruthi ramakrishnan

M
ortgage processing was one of the verticals
directly affected by the economic collapse
in the US. Now that the economy seems to
be on the path of recovery, this industry too
is attempting to find its feet.
But the main challenge faced by the industry is the
changed environment it finds itself in -- one of increased
regulation and caution, not to mention the general para-
noia that the economy might slip into recession again. As
Taylor Woods, president and CEO, Genpact Mortgage
Services, puts it, “ The post- recession period saw a bit of
overreaction to the type of lending that was seen, and that
created a very difficult environment for people to borrow,
versus what we’d seen in the run-up where everybody
could get loans. As a result of the fewer eligible people in
that space, it resulted in lower (origination) volume.” Taylor Woods
Changes Wrought by the Crisis President and CEO, Genpact
keshav R. Murugesh, Group CEO, WNS Global Services, Mortgage Services
sees two major changes in mortgage processing since reces-
sion began. One, changes in the appraisal process that was
much abused in the pre- recession time, and second, the value caused significant pricing stress that quickly began to
rigor around verifying earnings, debt ratio calculations affect the entire market,” he says.
and sub-prime mortgages. “Historically household income “Much stricter rules have been brought into play to
reported on mortgage applications were checked with a prevent a reoccurrence. To correct the inflationary apprais-
reasonable amount of rigor. But in the early 2000s, with al scam, strict regulations have now been enforced on how
the value of real estate climbing steadily, the rigor was often a house can be appraised and also many strict guide-
loosened in favor of faster processing. This lack of rigor led lines and review processes have been put in place. The
to many families taking on too much debt backed by hous- increase in processing rigor has had an effect on the MPO
ing that dropped in value once the bubble burst. With a market, requiring better training of processors, significant
number of families overextended, a small drop in housing increase in quality reviews, and financial penalties if proper
controls and reviews are ignored.”


industry- specific Processes

Back in Business about for now. “Due to the recession and the number of
A MarketsandMarkets report ‘Post Crisis Changes in mortgage companies that closed down entirely, I think the
Mortgage Lending in U.S. - Forecast & Analysis 2010- amount of work being offshored went down dramatically,”
2015 ‘ says that currently, conventional fixed rates are says Woods. “But the pressure around costs is very critical.
at their lowest in decades, with pricing of 30-year and More work is starting to be offshored and we are seeing a
15-year fixed-rate mortgage at its lowest. Such low rates are recovery now.”
generating significant refinance activity in the housing sec-
tor. Refinance in 2009 increased by approximately 78% to Strong Opportunities, New Investments
$1,364 B, indicating that borrowers have been responding Companies are looking at the new opportunities presented
to low mortgage rates. by the changed industry scenario. “Firstly, there continues
Genpact saw its business pick up the same year. “In to be strong opportunity for mortgage origination and
2009, the market sort of stabilized in volume and activity within that, the strongest components seem to be areas like
started increasing,” says Woods. “Those outsourcing part- underwriting, processing and even sales. The loan officer or
ners who were able to survive during the downturn for the origination activity- these are the highly skilled elements
last couple of years were able to pick up business”. of the origination process that are in really high demand,”
The various mortgage modification programmes says Woods. “Number two, there is very significant pres-
(Countrywide, Making Home Affordable Program con- sure on existing portfolio, existing investments in real
sisting of HAMP and HARP) estate. The demand comes from
— started to help borrowers pay the number of people strug-
back their mortgages through There have been two major gling to make their mortgage
loan modification, provided payments.”
they met certain criteria— have changes in mortgage process-
also, to some extent, helped ing since recession began- one, Genpact expects its invest-
third party providers garner ments in technology over the
business. “The government is in the appraisal process which past couple of years to pay off
running its programmes pri- was much abused in the pre- now. “We invested in two major
marily through Fanny Mae and ways. First, we have a propri-
Freddie Mac. Through these recession time, and second, in etary platform within our origi-
two entities there’s tremendous
work that is being outsourced
the rigor around verifying earn- nation offering. In our platform
we have tremendous amount
primarily through components ings, debt ratio calculations of pipeline management, work-
serving individual companies to flow management and automat-
provide very specific services,
and sub-prime mortgages. ed communication. Secondly,
much of which have been along we made an investment early in
loan modification and mortgage 2010 for automation of proc-
origination,” says Woods. esses that takes the processing time down. Our investment
allowed us to gain a very strong additional market activity
Not a Cakewalk and also loan origination that we are taking into the next
But such programmes have also run into rough weather, decade,” says Woods.
with allegations, among others, of mistakes in the review WNS looks to grow by utilizing its “collective knowl-
process of foreclosures. This had led some accusing fingers edge that is transferrable across WNS clients” and “pro-
to point at third party servicers, but the latter are unper- viding cost margins that can only be realized by using an
turbed. “Those who are negative on outsourcing may experienced and trusted MPO provider” which would
attempt to blame an MPO for the issues that have been help offset the pricing and margin pressures that occur in
encountered in the processing of mortgage origination a down market.
documents. In reality MPOs like ours carefully follow So while the third- party MP servicers are hoping for
regulatory and client policies and procedures. It is always some sunshine after the recession storm, how they will fare
possible for a human error to occur, but that is true of any in the coming year is linked to the fate of the mortgage
process, business or industry,” says Murugesh. industry. GS
The US government’s anti-outsourcing stance,
which could potentially affect offshore servicers, is also
something they are not choosing to worry too much


Special report Utility computing: the reality check


utility computing:
the reality check
Max Staines, in a chat with
Ed Nair makes the case for
utility computing


Utility Computing:
The Reality Check
The concept of utility computing is not new. In the first phase, it failed to become
mainstream. Virtualization and cloud computing has brought utility back into the
discussion though neither of them are a precondition for a utility-based model
of IT delivery. On the other side, from the sourcing world, managed services of
various types rose to maturity and popularity and it contained some flavors of utility
computing. But we learn here that utility computing is sourcing agnostic.
Regardless, by whatever name you call it, IT delivery is increasingly moving towards
a multi-tenant, consumption-based, standardized services model. Like a utility. So let’s
once again call it utility computing.
Max Staines, President-North America, Compass Management Consulting (recently
acquired by ISG which also owns sourcing advisory company, TPI) advises leading
organizations on performance management and benchmarking of service providers
and brings in unique insights into the value creation process in service delivery. Here,
in a chat with Ed Nair, Max Staines makes the case for utility computing and reveals
the nature of its evolving dynamics.

G
S: What’s the case now for utility comput- its requirements as follows: access to desktop resources
ing? for 10,000 users, from between 9:00 a.m. and 5:00 p.m.
MS: Traditional improvement initiatives drive Eastern. Under this approach, importantly, the client pays
incremental efficiency gains within the exist- only for those resources that are actually used. Managing
ing operational environment, typically resulting in savings the infrastructure to deliver those resources is left to the
of between 10 percent and 20 percent. A transformational internal or external IT service provider.
approach to improvement establishes a new, optimized IT
delivery model that fully leverages the benefits of stand- GS: What’s your best argument about utility
ardization and utility computing, often yielding overall computing?
cost savings of up to 40 percent. MS: It is my opinion that the largest component of a prop-
Regardless of your business, 90 percent of your IT is erly structured utility-based compute model of standard
standard and common. Once an organization recognizes service offerings is that technology capabilities are not the
that most of its IT requirements can be addressed through only drivers in making the dreams of utility consumption
standard services, it can develop and implement appropri- based computing services come true. Rather it is the abil-
ately tensioned pricing mechanisms that create incentives ity for IT provisioner (in-house or outsourced does not
to drive standardization and increased efficiency. matter) to have a very pragmatic conversation with their
For the rest of 10 percent, by identifying the cost of customers about behavior, about proper demand manage-
specialization, the business can make value-based decisions ment, about educated demand management. These discus-
and support comprehensive demand management. sions are based on clear and well- articulated understand-
The important point here is the recognition by ing of what is cost and what value is derived from various
business that defining IT requirements in consump- kinds of service delivery.
tion-based, utilitarian terms yields a critical competitive As such, utility computing is less a technical innova-
advantage. tion than it is a reflection of a maturing marketplace that
For example, rather than managing the TCO of produces more effective commercial agreements for the
10,000 desktops, a client organization can now define delivery of services.



GS: How far does the buyer community or could easily consider it to be ‘commodity’.
the provider community understand this? The rest need special attention.
How much of the former’s understanding This generic, one-size-fits-all approach
is colored by the latter’s tall promises? to service delivery is becoming increas-
MS: It is like once bitten twice shy. Service ingly viable, thanks to growing business
vendors need to know and accept that rev- acceptance of the proposition that up to
enue per client is likely to go down. But, 90 percent of the IT requirements of most
what they get in return is margin control organizations can be addressed through
and they are willing to take less revenue if it standardized services. In other words,
means they can control margin. They’re will- while a bank’s activities are obviously very
ing to do so for a number of reasons. One different from the activities of a retail
of which is that they believe that if they can manufacturer, the basic IT functional-
start to get people to standardize, and yes, ity that each business requires to support
charge less for it, then they can attract more critical processes and systems is largely
clients on to that virtualized state of IT identical.
infrastructure. That’s a key point in the There is bound to be a real paradigm
outsourcing view of this. “As standardized shift; you will have historic premiums.
When it comes to the internal view,
the most progressive IT operations - the
service deliv- There will be initially a barrier to get
to a truly standard utility based model.
ones who already have a better than ery continues to As time goes, those historic hurdles will
average relationship with their business be out. The mind set shift will start to
customers - are the ones who are going to
grow, key sourc- take hold. At a conference in October
have an easier time taking it further. ing decisions will , a group of vendors were talking about
Clients who have implemented a well their ability to deliver their services on a
defined catalog of services are going to be be around how consumption model and they were even
able to take the next step of removing the best to drive willing, in right commercial circum-
constraints. There needs to be a discus- stances, to have virtually no contract—
sion about demarcating who does what or standardization which means pay-as-you-play and opt-
who is responsible for what (between the and utility-based in and opt-out as you wish. If they are
vendor and the client). It is going to be going to do that kind of a model, then
a tough decision in some cases, because consumption of IT they are going to have to have an eco-
some business units through the hard as extensively as nomic base of a very large estate where
knocks that they have gone through with they can leverage enough. So, invest-
their IT provisioners (even internal), are possible.” ments are being made in setting up that
used to having a quite a bit of say. kind of estate to let people come in,
Now, if you can have a discussion that plug in, plug out. That’s another shift
says are you sure you need that or are you Max Staines happening, another enabler.
sure you can’t let us do that for you or
make those decisions for you, so that we
President-North GS: When you approach an organiza-
can standardize across the much broader America, Compass tion with this idea of utility-based
set of IT assets – application infrastruc-
ture so on- to get the cost of producing it
Management computing services, how do they gen-
erally respond? How does one prepare
down. If you can make that business case, Consulting to start with utility computing?
that’s the decision those CIOs and CFOs MS: The very first thing you need to
want to happen, that’s for sure. do is to understand how ready you
are. That gives you an indication how
GS: What are some of those sub-trends far you need to travel. Also, that gives
that are making utility computing a real possibility? you an indication of what kind of investment it’s going to
MS: Governance tools are making it possible, as well ana- take and if you can also model what the future could look
lytical agents are making it possible to properly understand like, then you can start to lay out proper business case for
consumption in a meaningful way. There is a new mindset change. So, you need to take a very well structured look at
that 90% of what is accomplished in the IT shop, you how you deliver currently. Ask questions such as what’s in



the IT group, what are the activities and what are the costs, to drive standardization and utility-based consumption of
what’s the value contribution to the business, and such. IT as extensively as possible. In some cases, outsourcing
The other thing you need to do is to take a model will be preferable. In others, where, for example, in-house
of standard IT services, take a well functioning model of incident management capabilities are more mature than
IT services and you start to lay the groundwork of what the service provider’s, or if assets are already owned by the
the future could look like so, you actually lay out a sce- client organization, a retained approach will prevail.
nario or two of what if we did the following standardiza-
tion or utility type activities to get us to a future state. GS: normally, in any kind of standardization you lose
What could that future state look like? Interrogate that some flexibility. What do you have to say in this case?
model, analyze the assumptions and you make a very well What would the organization end up losing? flexibility
thought through future state assessment. Now, you also has a bearing on agility.
have a current and future and you make a roadmap to MS: Agility is one thing, standardization is another. you
getting there. you do all that in paper before you unplug do not have to be bespoke in everything you do in order to
a server. be agile. Look at any standardized service for example- dial
tone, I can make a call any time I want, I can disconnect
GS: How dependent is all this on your sourcing model- any time, I can do call forwarding and it is standard. I have
in-house, offshore, outsourced…..? the same dial tone as you have. you may not need any of
MS: you need to look at not where it comes from, but those fancy services. That is the difference. But how you
what’s delivered. As long as the organization can provide deliver has to be standard. you will lose some control as the
as efficiently as a professional sourcing arm would. Then, client, but that is part of the bargain. you have to be par-
that’s no reason to look elsewhere. What matters is how its ticipatory with IT provider. This is not a one way stream.
delivered, where it comes from is secondary. That’s where, I go back to the point about modeling out
As standardized service delivery continues to grow, key what the future would like and knowing what is going to
sourcing decisions will no longer be around outsourcing, change not only on cost side but also on the behavioral
offshoring, or repatriation, but rather, around how best side. GS

emerging trends

The Next Stage in Managed
Print Services is Here
Managed print services and it- BPo processes traditionally stood at
different ends of the services spectrum. Not anymore.

by Sruthi Ramakrishnan

M
anaged print services (MPS) have tradition-
ally been associated with document print-
ing, faxing, scanning— basically managing
the document- related functions and infra-
structure of an organization. Handled mostly by imaging
firms, these services were not something that could be, or
were outsourced to traditional IT/ BPO service providers.
But the past 2-3 years have seen developments which
promise to change this. HP’s acquisition of EDS (Electronic
Data Systems) in May 2008, xerox’s strategic alliance with
HCL and its more recent acquisition of ACS, Canon’s
2010 collaboration with Accenture- all these clearly mark
the growing convergence of the hitherto completely
distinct MPS and IT/ BPO markets. “There is a huge
opportunity at the intersection of document management
and business process outsourcing, much of which centers
around paper intensive tasks. This creates a real demand
from enterprises and governments for the services we
can deliver, including MPS, on a global scale,” says Russ
Buchanan, vice president of Worldwide Alliances (a divi-
sion of xerox’s Global Services unit).

Not Unexpected
“The (Xerox- ACS) deal gives
This convergence was not entirely unanticipated. Print/ Xerox the scale to attack the
document output has come to be viewed, as James Joyce,
senior vice president, xerox Enterprise Print Services’ put $150B BPO market through a
it, “the last unmanaged frontier when it comes to opti- combination of services, tech-
mizing IT infrastructure” (‘Managed Print Services Drive
Value for Businesses’, Global Services Media, July 02, nology and innovation,”
2010). But the maturing of managed services as a whole
has been greatly responsible for this. “As we start getting
into Stage 3 and 4 (of the evolution of managed print serv- Russ Buchanan
ices), there is an awful lot of IT integration potential with
document management systems,” says Edward Crowley,
VP of Worldwide Alliances (a division
CEO, Photizo Group. “So it’s clearly becoming a focus of Xerox’s Global Services unit)
area for the IT organizations. And in fact we see that in


emerging trends

nearly 70 percent of MPS engagements, it is driven by IT Geographical expansion has also motivated some of
organizations, they are the ones actually managing that”. these partnerships, like in Canon’s case. Growth in Europe
How has this integration come about? “Customers are was one of the key reasons for its collaboration with
looking for companies that can help them do two things: Accenture last year, besides that of expanding its services
one,solve the big, complex problems they face in today’s fast line. As Gary Horsfall, Head of Consultancy Services,
moving and highly competitive marketplace and two, focus Canon Europe had commented at the time, “One of the
on core business areas where they can create differentiation biggest challenges faced by European organisations today
for their products and services. An outsourcing partner that is the management of their information, imaging and
can help them do both is very attractive,” says Buchanan. media assets. Through our collaboration with Accenture,
“Imaging or document technology and document man- we will create a series of propositions delivering custom-
agement companies have great expertise in a particular area, ised solutions for large European organisations to manage
but the scope of their expertise isn’t always sufficient to solve this challenge. The launch of Consultancy Services is fur-
the customer’s real business problems.” This is where IT/ ther evidence of Canon’s transition towards a service-led
BPO companies come in. “By acquiring or partnering with organisation, which is a key strategy in supporting our
ITO/BPO companies, these companies can address a much continued growth in Europe.”
bigger set of customer problems in a more comprehensive
way, significantly expanding their addressable market oppor- The More,The Merrier
tunity.” The results are there to see from xerox’s acquisition The prospects are not lost on smaller players. With MPS
of ACS. “The deal tripled xerox’s services business to more burgeoning with opportunities ranging from software, IT
than $10B. And, it gives xerox the scale to attack the $150B services and hardware manufacturing and management,
BPO market through a combination of services, technology this space is set to be crowded by many more providers
and innovation,” he says. than could be imagined less than a decade ago. “While the
traditional OEMs have recognized the opportunity and
The Next Big Opportunity necessity for developing services, this is not their strength.
Robert T Sethre, senior consultant, Photizo Group sees New market entrants who excel in the software, IT and
this growing integration as the next profit opportunity process management and consulting space will discover
for both groups. “Imaging OEMs (Original Equipment and start to leverage these opportunities. Interestingly,
Manufacturers) and vendors recognize the need to develop these non-traditional players can also add hardware prod-
and support services, at first “close to home” with a strong ucts and service offerings through partnerships without
document management component, then later promoting being forced to develop a complete hardware portfolio on
IT services independent of the document space. IT serv- their own,” says Sethre.
ices and BPO consultants may have been disinterested in The USP factor here would be the range of services a
document management, or possibly simply overlooked the provider offers. This is what the big players are trying to
potential, as it has been traditionally “messy” both from the build on, in a bid to grab the biggest slice of the MPS mar-
technical support as well as from the financing and admin- ket pie. “One of the core premises of MPS is that nobody
istration standpoint. But they will address the topic as well. has a lock on all of the necessary skills or product offerings.
MPS provides a framework where both groups, emerging As a result, we see new players entering the market as they
from their core business base, will discover the profit oppor- start to address that new opportunity. The usual group of
tunities— MPS is in this sense a true facilitator,” he says. players may be surprized and even threatened by new ven-
HP was the first to recognize this opportunity. The EDS dors. Some respond through partnerships and acquisitions
acquisition was done keeping in mind the company’s Phase (xerox/ACS, HP/EDS, Canon/Accenture). The newcom-
2 goal- ‘to develop a layer of leading software applications, ers will bring a unique set of skills that the established
with a particular emphasis on management automation, to players cannot offer,” he says.
optimize the performance of HP’s hardware and differentiate The net result will be a great benefit for the market and
it in the marketplace. Phase Three has addressed the services respective users, but the process, he predicts, will be messy
side with a goal of bringing the business into the forefront as different vendors jostle for attention and position. The
of global providers’. xerox and Canon followed suit, each winners, as Buchanan puts it, will be “the ones that go
collaborating with or acquiring IT and BPO heavyweights beyond traditional MPS to address production print and
to provide more fully integrated end-to-end services, thus virtual/mobile print needs, and offer complementary capa-
creating “a new class of solution provider,” according to bilities in BPO and ITO to deliver innovative solutions for
Ursula M. Burns, xerox chief executive officer. a broader range of client business needs.” GS


aDviSory

xperts by Runa Mookerjee

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An increase demand for engineer- industrial growth some of these Asian involves a substantial portion of the
��
ing services is leading to a correspond- countries form the client base as well as actual design activity. This has come as
ing increase for outsourced services. provide outsourcing services. a result of buyers realising that to have
�
Current spending on engineering serv-
$�%�� "��
ices of $750B is expected to increase
#�� !�
to $1.1T by 2020. Industry sources !� ��
��
expect India to play a large part in the "��#��
outsourced engineering services sector. �
��
��

Growth drivers include ��
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Changing demographics among
western countries - as a ‘dominant ��
engineering service employed’ baby ��
boomer generation reaches retirement, ��
the availability of skilled engineering � ��
workforce is on the decline in the ��
west.
��
��
Outsourcing helps clients concen-
trate on core services – the avail-
��
ability of specialised talent that can ��
deliver regular processes helps the firm ��
to focus on its core competencies or
development of newer technologies. &��'�(��)��*
&��'�(��)��*

aDviSory

design process for its high selling
Prius model. Toyota’s is a case where
open innovation and crowd sourc-
ing merge- adopting a best practice
method that invites all the best minds
(albeit at large!) to participate in its
collective effort to cut back costs and
come up with a better design for its
product.

Boeing: Testing the model
Boeing also made optimal use of open
innovation technologies to stress test
the hydraulics of the 787 Dreamliner,
combining the inputs of companies
in the US, Uk, Japan, China. Boeing
allowed over a 1,00,000 entries in its
World Design Team, an Internet based
global forum encouraging participa-
tion and feedback from various stake-
holder groups during final states of
development. Their ideas and inputs
were then collected through online
surveys, in turn providing updates as
the design of the plane’s exterior and
interior evolved. This novel innova-
tion method allowed Boeing to build
a prototype using inputs from several
thousand engineers and run tests as
a competitive edge, they need to realise an ‘open and usually interactive plat- the design emerged.
the full value of outsourcing rather than form’. The tasks outsourced could be Though the use of open source tech-
just cost savings. Subsequently, service as simple as generating competitive nologies is a debatable issue, its use in
providers have evolved into providers or cost cutting ideas or as complex generating ideas for products is more of
of specialised services with a better as the designing of an entire product a win-win situation for engineering
understanding of their customer prod- range or a completely new product. In firms. Even if the design comes out
uct lines. They have also had to build a multi polar global space the knowl- eventually flawed, the firm then has a
new competencies, such as knowledge edge process outsourcing industry has prototype which is a test of ‘what can
based engineering, life cycle manage- grown beyond conventional outsourc- go wrong’. On broader level, it is clear
ment, technical publication - to adapt ing. Apart from using third party serv- that outsourcing engineering services is
to changing customer needs that allow ices for regular engineering services, here to stay and go even further in the
them to support complete product increasingly, engineering service pro- coming years. GS
development. viders are turning to outsourced inno- (ValueNotes conducted a survey
Some companies are successfully vation to contribute to the ‘product across the engineering services indus-
turning to technology to further their design’ itself. try to gauge sentiment for outsourcing
engineering services needs, effectively Let us take a look at some examples among buyers and service providers.
using Web 2.0 technologies to an out- that showcase just this – A subsequent report gives in depth
sourcing advantage. These companies insights to these trends.)
take the help of means such as ‘open Toyota: Outsourced
innovation’ and crowd sourcing - i.e. innovation
outsourcing of tasks which are tradi- The Japanese auto maker’s ‘value inno- Runa Mookerjee is Analyst, ValueNotes
tionally performed by an employee vation’ strategy involves its suppliers Sourcing Practice
or contractor to a large (undefined) beyond cost cuts and lower prices
group, community (a crowd), through for supplies – engaging them in the


aDviSory

xperts by Max Staines

A New Role for Benchmarks
Traditionally a bargaining tool for clients to set pricing targets for
service providers, outsourcing benchmarks are increasingly being used to
collaboratively drive transformational initiatives. The result: an enhanced
partnership and significant performance improvement.

B
enchmark analyses of computing models. In this context, IT delivery model and utility com-
outsourcing contracts are benchmarking is the first step in a puting, often produces overall cost
a longstanding and com- mutually agreed program of client/ savings of 40 percent or more.
monly applied manage- provider transformative change. In other words, rather than tighten-
ment tool to gauge the competitive- ing the screws on the way things have
ness of service delivery in the context The Optimization always been done, IT leaders are estab-
of competitive market standards. Opportunity lishing a new and significantly better
Traditional benchmarks are often While the utility concept of a model way of doing things – a clean slate that
used to set a target price for service has been around for years, implemen- fully leverages the benefits of stand-
providers. In justifying an aggressive tation capabilities have been lacking. ardization and utility computing.
number, clients will argue that top Now, thanks to a combination of The improvement reflects both
performance should be the goal and better measurement tools and more increased delivery efficiency from
standard that service providers aim for. mature pricing mechanisms, busi- the supply side, as well as improved
Service providers, meanwhile, typically nesses are increasingly looking to reap commercial management from the
counter that top-performance targets the benefits of usage-based standard demand side.
defined by the benchmark are arbitrary, service delivery. Growing interest in optimized
inaccurate, or based on cherry-picked Compass data shows that tradi- service delivery is raising the bar for
numbers from myriad environments, tional improvement initiatives drive the comparative benchmark standard.
not necessarily reflective of the unique, incremental efficiency gains within The question is no longer, “How does
customized, and often constraining the existing operational environment, performance compare to the what is
reality of the individual client. and typically produce annual savings of existing performance (either aver-
In this context, the process often of 10 percent to 20 percent. A trans- age or top quartile)?”, but rather,
becomes contentious, and the bench- formational approach to improve- “How does performance compare to
mark’s role is limited to that of a club ment, characterized by an optimized an optimal what could be state?” In
to wield during the negotiation proc-
ess. The task of finding efficiencies Total Monthly Cost
and savings rests, moreover, largely
with the service provider. As a result,
the lower the price target, the lower Cost delta due to
imposed constraints
the vendor’s profit margin.
These traditional rules of the
game are fundamentally changing.
Increasingly, benchmarks are being
used to define and implement broad- Current Cost Optimized Cost Constrained Cost in Unconstrained
Environment Environment
er transformational change programs
characterized by demand manage- AMS Desktop Network Hosting
ment, standard service delivery, and SIAM Retained Constraints
usage-based “pay by the drink” utility


aDviSory

the could be state, client organizations
effectively manage demand and serv-
ice providers to drive efficiency and
leverage economies of scale. Here,
the target is no longer the best that
can be achieved in the existing envi-
ronment; rather, it becomes the best
that can be achieved in a transformed
environment.

Squeezing Out Constraints
Following a benchmark analysis defin-
ing the “size of the prize” of standard
service delivery, usage-based pricing
models can be applied to gain trans-
parency into the business drivers of IT
spend as well as the cost implications
of business decisions regarding how
IT is used.
A business can then apply this
transparency to create “tensions”
between the demand for and supply
of IT services. Ideally, the tensions
produce incentives for the business to
cost-efficiently manage consumption improvement redefines the roles and into new initiatives, which can be new
and for the service provider to cost- responsibilities of client and service opportunities for the service provider
efficiently manage delivery. provider. Rather than place the onus to generate revenue and strengthen
Pricing tensions can also be applied solely on the service provider, the the relationship.
to assess the operational constraints process is becoming collaborative; spe- That said, it’s certainly true that
identified by the benchmark analy- cifically, clients are assuming increas- approaches to sourcing negotiations
sis and to determine whether their ing responsibility for looking inward and contracts will have to adjust, as
cost is justified in terms of value to to identify the historical behaviors and account managers are typically com-
the business. These constraints typi- operational constraints that lead to pensated by revenue or size of the deal.
cally come in two forms, either “con- inefficiency and high costs. By allowing Moreover, while the concepts of
tracted” – whereby the client dictates the service provider to leverage econo- utility computing and usage-based
a particular custom requirement, or mies of scale and, potentially increase pricing mechanisms are gaining
“non-contracted,” whereby lack of profit margins, this approach makes increasing credibility, much work
clarity surrounding processes, roles, the aggressive cost reduction target remains to be done in terms of refin-
and responsibilities drives duplication more palatable to the outsourcer. ing these mechanisms and establish-
of effort and inefficiency. Indeed, many vendors are embracing effective metrics to measure and
Realistically, not all of these con- ing the concept of usage-based pricing manage IT delivery and consumption
straints and premiums can or should and standard service delivery, because in a utility-based environment. That
be eliminated. But a benchmark anal- it provides them with greater control work is underway among service pro-
ysis, coupled with tensioned pric- to leverage economies of scale and viders and advisors who have proac-
ing, identifies and quantifies the con- their expertise at efficiently deliver- tively recognized the opportunity, as
straints, allowing the business to more ing IT services. Coupled with the well as by others who are being pushed
effectively apply value-based decisions increased incentive to drive efficiency, by competitive pressure to meet the
to its IT investment. this creates a significant opportunity reality of changing business require-
to grow profit margins. ments. GS
Embracing the Concept In addition, the savings generated
A focus on transformational opti- through a utility exercise are likely to be Max Staines is President of North America for
mization rather than incremental re-invested by the client organization Compass Management Consulting.


Platinum Sponsors


CONSUMER PACKAGED GOODS COCA-COLA ENTERPRISES

Finance and Accounting
Solutions
Capgemini enabled Coca-Cola Enterprises to achieve
major cost savings through a finance optimization project
The Client: million per annum in CCE’s transac-
Coca-Cola Enterprises is the world’s tion work, through a finance opti- At A Glance
CLIENT
largest marketer, producer and dis- mization project.
Coca-Cola Enterprises
tributor of Coca-Cola products. SERVICE PROVIDER
Operating in 46 U.S. states and Solution: Capgemini
Canada, CCE is the exclusive Coca- CCE chose Capgemini to implement INDUSTRY
Cola bottler for all of Belgium, con- comprehensive finance and account- Consumer Packaged Goods
tinental France, Great Britain, ing (F&A) solutions throughout SERVICE PROVIDED
Luxembourg, Monaco and the CCE’s global business to create an effi- Finance and accounting solutions
Netherlands. Sales represent 16% of cient process in a cost-effective envi- SOLUTION
The Coca-Cola Company’s world- ronment for order-to-cash services, A unique order-to-cash approach
wide volume. purchase-to-pay accounting, and to the transformation project
record-to-report activities, as well as a
Situational Analysis: comprehensive document manage- SUCCESS METRICS
In early 2007, Coca-Cola Enterprises ment solution. The transformation The contract with CCE will run for
(CCE) conducted a benchmarking project focuses primarily on a joint seven years from July 2008, and the
exercise to see how the organization’s CCE-Capgemini unique order-to-cash total contract value amounts to approx-
effectiveness and efficiency stacked approach, utilizing a best-of-breed imately $137 million. The partnership
up against the competition. With credit toolset designed to increase the will realize the following benefits for
this study they identified that to effectiveness and efficiency of credit their business:
become more efficient, CCE would and collection departments. In addi- � Accelerate the transformation and
need to conduct as much of its trans- tion, the automated credit module help achieve near world-class perfor-
action processing as possible in a low enables CCE to apply a single set of mance through standardizing and
streamlining operations.
cost country, either with a third party approved rules and procedures to every
� Deploy a global unified solution
outsourcer or a captive shared ser- credit decision, improving the efficien-
across all CCE business units to sup-
vices center. The economic goals cy and consistency of the decisionmak- port the business that includes stan-

“
were to achieve cost savings of $20 ing process. dardization and process improve-
ment while maintaining high stan-
We are on track to achieve the targeted dards of control and compliance.
� Achieve a minimum savings target
savings at the tail end of the transition with of 25%
Capgemini. Our internal benchmarks have gotten � Mitigate risks while transitioning

better, and through good people management, the work and implementing new
tools, systems and technologies.
we have reduced severance costs. The concept of
Capgemini’s Rightshore solution is a definite plus
®

on their side of the ledger.” For more information on Capgemini, write to
Claude Hartridge, Vice President, Executive Sales
JOE HEINRICH, VICE PRESIDENT, FINANCE GLOBAL INITIATIVES, CCE at Claude.hartridge@capgemini.com

19 GlobalServices www.globalservicesmedia.com December 2010

OWENS & MINOR HEALTHCARE

‘Lift & Shift’ Migration
Dell Services used a “lift and shift” migration to modernize
a heavily customized ERP platform
The Client: changes to current systems during
Owens & Minor, Inc., a Fortune 500 the migration period At A Glance
company, is a leading national distrib- � Sustaining adequate performance CLIENT
utor of name-brand medical and surgi- of applications in the Windows Owens & Minor
SERVICE PROVIDER
cal supplies and a healthcare supply- environment
Dell Services
chain management company. � Ensuring that the project stayed INDUSTRY
within the approved budget Healthcare
Situational Analysis: SERVICE PROVIDED
The company needed to modernize its Solution: Mainframe Migration
systems to provide for future enhance- Dell Services used a “lift and shift” SOLUTION
ments and growth, while improving migration to Windows to modernize Used a “lift and shift” migration to
performance. Owens & Minor’s heavily customized Windows
The decision to migrate all mainframe ERP platform. The first aim of the lift
processing of its mission-critical enter- and shift migration was to achieve a SUCCESS METRICS
prise resource planning (ERP) system “like-for-like” system by running
to a framework based on Microsoft® extensive testing. The implementa- � Cost savings. The project is expect-
Windows® was also governed by the tion of a relational database manage- ed to yield substantial annual sav-
need to preserve the company’s 20 ment system reduced risk by introduc- ings while improving efficiencies
years of IP-based data, systems, and ing minimal change to applications, for supply chain management.
unique business logic. while providing for data tier modern- � Planning for the Future. The
Specific project goals included: ization. migration ensured that the compa-
� Achieving timely or early project The key steps followed by Dell ny’s core IP remained intact and
completion to allowing termina- Services in the migration exercise were: achieved greater optimization.
tion of mainframe services � “Lift and shift” Cobol from � Higher performance. The new IT
� Preventing disruption to ongoing Mainframe to Wintel infrastructure delivers greater per-
business operations � Configure Database I/O routines formance capabilities.
� Delivering defect-free software in in Wintel Environment � Enhanced customer service. The
the Windows environment � Retrofit user interface modernization will
� Implementing change control � Test and Fix deliver better online tools for

“
processes to allow business-critical � Implementation Owens & Minor customer service
representatives.
This was a complex and mission-critical � Increased staff productivity and
project, and we are proud of the benefits efficiency. Simplified business
this successful collaboration brings to Owens & processes.

Minor. The migration establishes a powerful and
flexible computing platform to drive future
growth and innovation.” For more information on how Dell can help
your organization, please contact
Sujata_Rakhra@Dell.com or
CHUCK LYLES, PRESIDENT OF DELL SERVICES PUBLIC SERVICES Savitha_Lakshman@Dell.com. Please also visit
SECTOR dell.com/services for more information on their
capabilities.

26 GlobalServices
24 www.globalservicesmedia.com
www.globalservicesmedia.com December 2010
January 2011

DIVERSIFIED A FORTUNE 100 COMPANY

Message Migration
and Management
Microland ensures Six Sigma class email At A Glance
CLIENT
availability and zero error migrations for A Fortune 100 company
SERVICE PROVIDER
the world’s largest Microsoft Exchange Microland Limited
INDUSTRY
Diversified
installation SERVICE PROVIDED
Messaging Management &
Migration
The Client: Solution: SOLUTION
The client is a Fortune 100 diversified Microland started this engagement in Leveraged Six Sigma and FMEA
company with a strong set of global 1999 and continues to manage the methodologies
businesses in infrastructure, finance messaging infrastructure for the client.
and media. The client operates across At that time, the infrastructure consist-
multiple segments including aircraft ed primarily of Exchange 5.5 servers. SUCCESS METRICS
engines, power generation, medical Over the years, in addition to manag- � TCO Reduction: Vendor management
imaging, television programming and ing the messaging ecosystem, costs reduced by 30%; Data center con-
consumer goods.The client is listed in Microland also undertook platform solidation and virtualization reduced
the NYSE and is a constituent of the migration from Exchange 5.5 to server footprint by 30%; Delivered year-
Dow Jones Industrial Average (DJIA). Exchange 2000 and later to Exchange on-year reduction in cost per mailbox
2003. � High Performance: Maintained email
Situational Analysis: The salient points of the Microland service availability at 99.9X%; Ensured
defect free-migration and deployment,
The client houses the largest enter- solution are
and zero end user impact on migration
prise Microsoft Exchange setup in � A total ecosystem based approach
� IT – Business Alignment: End to end
the world today, with over 400,000 for managing the messaging and service delivered to client’s shared ser-
mailboxes. The messaging infrastruc- the associated infrastructure viz. vices group offering them ease of man-
ture is spread across 19 data centers instant messaging, security, mobil- agement and chargeback; New
with over 500 servers around the ity, storage, backup etc site/cluster deployment time reduced
world. In addition to this, the infra- � Consolidation of the exchange from 32 to 9 days, thus increasing the
structure also caters to about 50,000 environment and a single SLA IT’s teams’ responsiveness to business
mobility users. The client needed a driven ITIL based messaging needs; Enabled automatic retrieval
partner who could: management model across the and download of warranty and contract
� Manage the messaging infrastruc- organization details and triggered automatic alerts
30/60/90 days before warranty expira-
ture and the user accounts from a � Extensive leverage of Six Sigma
tion, thus streamlining and internal
centralized offshore location while and FMEA (Failure Mode Effect
business process for the client’s IT team
ensuring continuous availability to Analysis) methodologies to ensure
the business continuous process efficiencies
� Lower the operational costs & � Proactive monitoring and man-
implement a shared services model agement of incidents using
across the organization automation frameworks
� Migrate mailboxes to newer � High visibility and control of For more information on Microland Limited,
write to TransformIT@microland.com or visit
Microsoft Exchange platforms operations to the client through a www.microland.com
when needed customized CIO Dashboard

25
23 GlobalServices www.globalservicesmedia.com
www.globalservicesmedia.com January 2011
December 2010

METLIFE BANKING, FINANCIAL SERVICES & INSURANCE

Streamlining
Operational Workflow
Situational Analysis: sulting, application outsourcing and
MetLife was looking for a solution to digital marketing services to its cus- At A Glance
CLIENT
streamline its operational flow, tomers – with its innovation, exper-
MetLife
reducing the amount of manual tise and skill set. Through the part-
SERVICE PROVIDER
processes and consolidating proposal nership, MetLife was able to work Ci&T
information into a single database with Ci&T’s experts to streamline INDUSTRY
while continuing to meet the compa- life insurance issuing process, creat- BFSI
ny’s high quality standards. In order ing a state-of-the-art automated sys- SERVICE PROVIDED
to do this, MetLife needed a reliable tem named Morpheus. This allowed Mainframe Migration
partner to provide: MetLife to achieve higher workforce SOLUTION
productivity and better databank Created a New Automated
� A new, automated operational control management, vital in accom- System
flow for life insurance issuing plish its goal of increasing clients to
process 100 million worldwide by 2010.
� High-quality IT applications, Ci&T was able to meet every pre-
process controls and business established milestone and the project
rules. was completed within five months.
� Project deliverables in a timely � MetLife has achieved a reduction SUCCESS METRICS
and well-scoped manner. in the time required for issuing Ci&T was able to meet every pre-estab-
life insurance policies from 10 lished milestone and the project was com-
Solution: days to less than 24 hours. pleted within five months.
MetLife chose one of the top applica- � MetLife’s Brazilian unit reduced � MetLife has achieved a reduction in the
time required for issuing life insurance
tion development companies in the the insurance proposals approval policies from 10 days to less than 24
world, Ci&T. Ci&T delivers con- time by 90 percent. hours
� MetLife’s Brazilian unit reduced the

“
insurance proposals approval time by
90 percent
“When we invested in the implementation
of a new application by Ci&T, MetLife sought
an innovative tool that would allow the issuance
of policies with significantly greater efficiency.
Once successfully in use for our individual and
SMB customers, we decided that our corporate
clients would benefit from the tool as well. What
For more information on this service from Ci&T,
began as an isolated support tool is now critical write to leonardo@ciandt.com or visit their office
to the daily operation of our business.” at Ci&T, 640 Freedom Business Center, Suite
210, King of Prussia, PA 19406.
Phone: +1 610 482 4810 Fax: +1 267 775 3347
BRENO GOMES, CHIEF INFORMATION OFFICER, METLIFE BRAZIL

26GlobalServices
8 GlobalServices www.globalservicesmedia.com
www.globalservicesmedia.com December 2011
January 2010

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