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Business Process as a Service ( BPaaS ): What Can It Do for My Mid-Market Company?. July 31, 2012. Today’s Speakers.
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July 31, 2012
Saurabh Gupta leads Everest Group’s BPO research practice. His areas of expertise spans both horizontal BPO services (like F&A and procurement) as well as industry-specific BPO. Saurabh utilizes his strong analytical background and international research experience to create intellectual property and insights into outsourcing trends, implications and industry best practices. He is a published author in leading global services publications, and is a frequent speaker on the subject. He brings an all-rounded perspective on the BPO market leveraging his experience of working with all stakeholders in the global services market including end-clients, service providers, and other influencers like investors, industry associations, and technology providers.
Saurabh Gupta, VP
Everest GroupBPO Research
David is the Senior Vice President of Client Engagement for Sutherland’s Finance & Accounting Outsourcing Practice. With over 30 years of experience, David has worked as a Partner with Capgemini, and has served as General Manager of Worldwide Financial Services for Microsoft Corporation. During David’s 9 year tenure at Microsoft, his responsibilities were split between running two global businesses as Chief Credit Officer of Microsoft Corporation and President of Microsoft Capital Corporation. David and his team of 400 professionals managed a global asset of $8 billion in more than 180 countries.
David Kaminski, SVPSutherland Global ServicesF&A Services
xx%
Annual growth
Cumulative activity to date
Activity in current year
80+ new FAO contract signings in 2011
Number of contracts
FAO contract extensions in 2011 increased
Number of contracts
52%
13%
18%
369
692
76%
611
243
Active 2011 ACV increased by 12% to US$3.9 billion
US$ billion
Cumulative TCV in 2011 increased by 18% to US$32.1 billion
US$ billion
18%
12%
26%
18%
32.1
27.3
Sample size: 692 multi-process FAO contracts signed as of December 2011
The FAO market has been pioneered and dominated by large buyers
More recently, the mid-market and SMBs has started to emerge
SMBs accounted for 20% of the total contracts signed in 2011 compared to ~10% in previous years
FAO adoption in SMBs is starting to increaseFAO market adoption by buyer size over time
Number of contracts
100% =
341
252
70
SMB
(Revenue less than US$1 billion
Mid-market (Revenue between US$1-5 billion)
Large buyers (Revenue greater than US$5 billion)
Sample size: 672 multi-process FAO contracts signed as of December 2011
Typical F&A related challenges faced by SMBs
How FAO helps SMBs to overcome these challenges
Twin pressures of revenue growth and cost reduction
Flexible, scalable and low cost option
Stable F&A operational environment with structured pricing, contracted service levels, and KPIs
Unpredictable operational environment both in terms of costs and service quality
Low F&A maturity; fragmented and broken processes
Best practice F&A process with built-in productivity gains
Manual processes with lack of robust technology
Access to best-in-class F&A tools and technology with minimal upfront costs
Cash flow issues combined with low levels of data visibility and compliance resulting in unfavorable business outcomes (sub-optimal DSO, EPD, and closing of books)
Decision-making support leveraging the power of analytics. Potential to create positive business and cash flow impact
Resource constraints in both recruitment and retention. F&A leadership involved in operational F&A
Access to new talent pools and greater ability to focus on core area of business
Total number of organizations1 by size
Number of companies
Total number of FAO contracts by size
Number of contracts
100% = ~116,000
100% = 672
Large buyers2
SMB4
Mid-market3
Mid-market3
Large buyers2
SMB4
1 Companies with revenue greater than ~US$100 million, subsidiaries in other businesses and countries have been considered as separate companies
2 Revenue greater than US$5 billion
3 Revenue between US$1 billion and US$5 billion
4 Revenue less than US$1 billion
The right balance between savings and investments is a major challenge in mid market
Client acquisition and cost of sales for a service provider is also relatively high for SMBs as compared to large clients
SMBs often lack expertise and maturity required for successful transition and change management
Investments
Savings
Lack of scale economies is the single biggest reason behind low FAO adoption in SMBsFactors influencing savings1
Factors influencing costs
Costs
Centralization
Standardization
Productivity
Transition
Scale
Systems
1 Assumes no constraints on use of off-shore solutions
Faster payback period
Single throat to choke
Access to best practices
Flexibility
F&A BPaaSofferings hold a lot of potential especially for SMBsOwned by buyer and maintained by service provider
Responsibility is on service provider
Responsibility is on service provider
Responsibility is on service provider
Owned and maintained by service provider
Owned by buyer and maintained by service provider
Owned and maintained by buyer
Owned and maintained by service provider
Owned and maintained by buyer
BPaaS is fundamentally different from traditional FAO modelsTraditional FAO
IT+FAO
F&A BPaaS
BPaaS layers
Degree of standardization
Business processes
Application
Infrastructure
Low
High
Factors contributing to lower TCO in a BPaaS model versus traditional FAO
Access to technology that would otherwise be expensive to implement for SMBs
Minimizes ongoing support, maintenance, and software upgrade costs
Ability to leverage cloud economics
Greater leverage of shared resources across clients
Higher offshoring potential given greater standardization
BPaaS offers a 30-40% reduction in TCO over traditional FAO for SMBsTCO comparison between traditional vs. BPaaS model for SMBs
30-40%
Process services costs
Technology costs
Reduction in deployment time because of highly standardized solution
Consequently, SMBs start realizing benefits quickly – more relevant in the current economic scenario
Pay-as-you-drink allows SMBs
Scale up / down based on changing business needs
Minimize CAPEX and makes OPEX proportional to business volumes
Accommodate rapid growth and proactively downturns
Combines best-in-class process services with best-in-class technology solutions
Earlier difficult for SMBs to procure these services/solutions
Single hand-off with service provider reduces governance and integration effort
Perfect for SMBs that lack scale
Additionally, enables SMBs to redeploy their resources to more critical activities
Beyond TCO reduction, BPaaS offers additional benefitsFaster payback period
Flexibility
Access to best practices
Single throat to choke
Brief description
Build a TCO business case
Trade-off between TCO reduction and flexibility
Be ready for change and have realistic expectations
Holistic assessment of BPaaS provider
Key Concerns
Solutions
1
2
3
4
5
6
7
Cloud ERP
BPO Services
Cloud ERP
Regionaloutlets
Corporate center
Cloud ERP
BPO Services
Sutherland will contract to agreed business case savings
Established Partner
Guaranteed Solution
PCI
Impeccable Industry References
“After working with Sutherland for the past year I am extremely impressed with their ability to provide great talent and world class results. Sutherland has proven committed, reliable and greatly increased our efficiency.” Leading Global Software Solution provider
“As a CFO, it is easy to be drawn into the day to day back office activities when I really need to be focused on our core competencies to grow the business, and our partnership with Sutherland allows me to focus more on strategy.” Leading Real Estate Firm
David Kaminski—Moderator Senior Vice President, Client EngagementFinance & Accounting OutsourcingSutherland Global Servicesdavid.kaminiski@sutherlandglobal.com
Saurabh Gupta—Speaker
Vice President
BPO Research Practice
Everest Group