HP Business-process Outsourcing (BPO) global delivery infrastructure

Overview............................................................................................................................................ 2 Overcoming business challenges by outsourcing to a global service provider.......................................... 2 HP’s global delivery infrastructure ...................................................................................................... 3 India .............................................................................................................................................. 9 Singapore ..................................................................................................................................... 11 Guadalajara ................................................................................................................................. 13 Costa Rica .................................................................................................................................... 15 Barcelona ..................................................................................................................................... 17 Dalian, China................................................................................................................................ 18 Conclusion .................................................................................................................................... 18

For more information.......................................................................................................................... 19 HP Global Business Centers............................................................................................................. 19

Overview Globalization, a deep and broad integration of the world economy, has gathered significant pace over the last half century. Already having swept the manufacturing field, it is now transforming the services sector in a big way. Decentralization of information-intensive services for global markets, coupled with the worldwide integration of labor markets via the Internet, has been responsible for moving labor-intensive work across national borders to countries where it can be done efficiently and effectively.

However, the rate of change imposed by globalization has recently multiplied ten-fold, and companies are increasingly facing rapid and complex cross-market changes that affect the way they do business. To meet these and other challenges, organizations face mounting pressures to grow more flexible, to define themselves as best-in-class, and to benefit from the latest technologies and the most competent and cost-effective resources. Business-process outsourcing (BPO) has emerged as one of the key solutions to meeting these and other challenges.

Worldwide BPO Forecast for Horizontal Business Functions, 2004–2009, US$M

“Worldwide spending on horizontal business process outsourcing (BPO) services totaled approximately $382B in 2004, a growth of about 11% over 2003. IDC projects that this market, comprising eight business functions of human resources, procurement, finance and accounting, customer care, logistics, product engineering, sales and marketing, and training will increase to $642B in 2009 at a five-year compound annual growth rate (CAGR) of 10.9%.” Source: IDC, July 20051

Overcoming business challenges by outsourcing to a global service provider Increasingly, companies that are looking to outsource are focusing on vendors that can not only provide cost savings, but also deliver lasting value to their business. An AMR Research survey of 220 companies using outsourcing services shows that companies get significantly better value when they base their relationship with service providers on long-term process improvements rather than on one-time cost savings.2 They get not only cost savings as high as 80% in some cases but also additional benefits, such as:

• Improved service levels and higher-quality work • Greater strategic value from their internal resources • More time for management to focus on critical issues

To meet the long-term objectives of organizations that want to outsource, a movement has begun among established outsourcing service providers (OSPs) to radically restructure their operations in order to be sure of delivering ongoing process improvements and cost savings to their client organizations. However, transition to such an outsourcing model requires large investments on a global scale—which can be achieved effectively by only a few OSP players.

1 Worldwide and U.S. Business Process Outsourcing (BPO) 2005–2009 Forecast: Market Opportunities by Horizontal Business Functions,

July 2005 2 www.amrresearch.com/Content/View.asp?pmillid=17259&logBH=yes&onyxid=378237

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One key component of this new outsourcing model is innovative service delivery, including:

• An integrated global delivery model—It is not enough for a service provider to have globally distributed resources. Those resources must also have the flexibility to move between the customer’s facility and offshore locations based on current project conditions.

• Quality- and process-centric delivery models—The service delivery model must be based on a commitment to process and quality. OSPs should adopt formal processes that allow work to move transparently among distributed resources. However, the effort should not be limited to implementing strong processes; OSPs should also use quality techniques, such as Six Sigma, to find and create process improvements.

• Innovative business models—The OSP must offer business models such as fixed price for a fixed service, time and materials, and pay per use that are tailored to the individual needs of its clients. In addition, the OSP must be willing to base service levels and performance metrics on both agreed-upon contractual obligations and year-on-year business benefits.

HP’s global delivery infrastructure HP has been a truly global company since its early beginnings. Its 145,000 employees work in 178 countries around the world. HP was also one of the first companies to consolidate its back-office operations in strategically positioned global business centers. This not only drove out costs and improved quality of service, but it also freed up resources that HP could then use to provide strategic direction to its business units.

HP BPO offers:

• A large-scale global delivery model—Through its global business centers (GBCs), HP services the Americas, EMEA, and Asia Pacific markets with an appropriate combination of near-shore and off-shore delivery, along with adequate planning for business eventualities. With global business centers in India, China, Singapore, Mexico, Costa Rica, and Spain and with more than 5,000 process experts worldwide, HP can cost-effectively and reliably provide services wherever the customer needs them.

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Figure 1. Footprint of HP BPO operations

• Depth of finance and administrative (F&A) services—HP BPO’s portfolio of F&A services accentuates

the experience and depth of our BPO capabilities—another crucial differentiator that made us ideally suited to partner with companies like Procter and Gamble (P&G) and Thyssen Krupp. The table below lists our F&A services, all of which are supported in numerous languages and in multiple offshore centers for 24x5 (or 24x7 based on the client’s needs) business operations worldwide.

Table 1. Finance and administration services

Finance processes Administrative processes

Accounts payable Payroll

Accounts receivable Rebates

Treasury accounting Contract administration

Tax accounting Channel replenishment

General ledger Vendor data management

Fixed asset management Customer response center

Travel and expense administration

Intra-company accounting

Inventory and revenue accounting

Master data maintenance

Global close and consolidation

Financial reporting

Project accounting

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• Superior process solutions and tools—Undoubtedly, with its technology prowess, HP is committed to bringing the best-in-class processes, tools, and technology to its customers. HP has provisioned for a robust infrastructure with sufficient built-in capacities and redundancies to support client needs.

Figure 2. Technology, infrastructure at work for HP

HP has been consistently adept at handling the challenges of a global operation, such as managing risk in a remote environment, managing physical documents in a global environment, managing knowledge despite the changes faced on the employee front, and managing overall service while grappling with a multitude of ERP and legacy systems. To meet these challenges, HP has made and continues to make significant investments in workflow and imaging tools, knowledge management, and platform consolidation, consistently surpassing world-class industry benchmarks in process efficiency.

• Worry-free reliability—HP has the highest standards for its own operations, which translates into a strong emphasis on business continuity, security, privacy and compliance with regulations (e.g., Sarbanes-Oxley) and capital market expectations. All of HP BPO’s delivery centers are ISO 9001:2000 certified. Strong business controls and secure service delivery maintain financial and operational excellence across all HP’s processes. This translates into worry-free reliability for our customers.

• Smooth transition and implementation—HP’s team of program managers has the experience of managing complex process transitions. The transition team at HP BPO has migrated more than 5,000 finance and administrative jobs, to its delivery centers across the world. A proven, systematic, four-phased transition methodology has been developed to promote the successful implementation of new processes and organizational structures. However, the client’s degree of readiness for outsourcing is always evaluated before the HP transition methodology is put into practice.

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From transitioning disparate and decentralized finance and administrative processes to migrating processes after mergers and acquisitions, HP’s transition team has had a wide range of experience. The team has also successfully migrated P&G’s transaction accounts payable processes worldwide into HP’s delivery centers on time and at the estimated budget.

Figure 3. The HP transition methodology

• Quality—The combined benefits of service-delivery and organizational effectiveness are achieved

at HP BPO through a unique quality-management methodology. HP defines quality in a BPO environment as a self-sustaining business result area that is powered by this methodology. HP’s quality-management methodology differentiates itself by being centered on proactive process improvement (preventive, scalable, and flexible), as opposed to reactive, short-term quality assurance that plugs only highly visible process gaps and systemic errors.

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Figure 4. Institutionalizing the quality discipline

This unique methodology is embedded in our process-improvement strategies and is aligned to meeting our customers’ key performance indicators (KPIs). Meeting our customers’ KPI expectations enables HP to establish more aggressive targets and it also allows our customers to showcase their own positive results. HP has seamlessly integrated two of the industry’s leading quality-management practices, ISO and Six Sigma, and then customized and modified them to suit the unique requirements of a BPO environment. With this approach, the company delivers BPO services not only at a low cost, but also at unmatched levels of quality.

• Business continuity—HP BPO provides continuity to the customer’s operations with a global spread of operations and a robust business-continuity plan (BCP) and disaster-recovery (DR) program, upholding the revenues and reputation of the customer’s organization and assuring the customer of satisfaction at every stage of the process. HP has a dedicated BCP team that focuses on the development and implementation of business-continuity standards, strategies, and plans conforming to HP’s risk-management requirements and aligning with the shared services business model. The goal of the BCP solution is to reduce disruptions to operations in order to: – Sustain continuity of operations with an ability to deliver at acceptable levels, even in the event of

disaster – Lessen any negative impact on customer revenues or reputation – Maintain customer satisfaction at the levels defined for a crisis – Avoid any defaults in legal, regulatory, or shareholder commitments HP BPO’s BCP approach employs a 7-step process arranged in 3 phases: strategy development (steps 1 through 3); plan creation and implementation (steps 4 through 6); and exercising, monitoring, and improving (step 7).

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Figure 5. HP BPO’s 7-step BCP process

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India Over the last few years, India has emerged as one of the most preferred destinations for multinationals wanting to set up their back-office operations. The benefits accruing to companies setting up operations in India are immense, ranging from abundant skilled and low-cost manpower, to unique geographic positioning (ability to cater to multiple time zones), to strong government support. HP BPO has been in India since 2000 and, today, has over 4000 employees across its two centers in Bangalore and Chennai. Both centers perform finance and administrative processes with a global scope covering the Americas, EMEA, and Asia Pacific regions.

Figure 6. Hiring prowess

Figure 7. Employee profile

Language proficiencies: English, French, German, Spanish, Korean, Portuguese, Japanese, Mandarin

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Table 2. Process capabilities—India

Process towers Activities

Order-to-cash

Customer administration Order processing Credit analysis and approvals Billing and invoicing Revenue Dispute resolution Cash application Reconciliation reporting

Procure-to-pay procurement cycle

Requisition creation Purchasing administration Supplier data management PO processing P-card administration Error correction

Procure-to-pay payment cycle

Invoice processing and approval Goods and services PO matching Payments administration (inventory and non-inventory) GL accounts settlement

Acquire-to-retire

Capital budgeting Leasing Fixed assets Physical inventory Project accounting

Record-to-report

General ledger Bank operations Treasury accounting Consolidation Inter-company accounting and oversight Management reporting

Administrative processes

Customer response center support for all F&A processes Rebates processing Channel replenishment Contract administration Warranty claims processing Vendor data management Master data maintenance

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Singapore Singapore is most global companies’ location of choice for their Asian headquarters, as it is in the middle of a Southeast Asian market of 500 million people—and an Asian market of 2.8 billion people. Its world-class telecommunications infrastructure, good patent protection, strong capabilities in multiple languages, and good time-zone placement all make Singapore a compelling business proposition. (Singapore is the third most wired nation in the world, and the most wired in Asia.)

The HP BPO Global Business Center (GBC) is located in Singapore at HP’s Asia Pacific headquarters, which also houses the HP telecommunications infrastructure hub. The facility boasts an excellent infrastructure and has been adequately built to accommodate the HP BPO organization’s future business plans. The Singapore GBC has a mix of 92 employees from the following nations: Indonesia, Korea, Japan, Malaysia, Philippines, Singapore, and Thailand. HP has chosen to deploy both employees and contractors, as appropriate, to provide services under the BPO umbrella, allowing for both effective utilization of resources and a resulting cost optimization.

Figure 8. Employee profile

Language proficiencies: English and Asian languages such as Bahasa Malaysia, Bahasa Indonesia, Japanese, Korean, Thai, Tagalog, Tamil, Chinese, and various Chinese dialects, including Cantonese, Shanghainese, and Hokkien.

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Table 3. Process capabilities—Singapore

Process towers Activities

Procure-to-pay procurement cycle Supplier data management Purchasing administration

Procure-to-pay payment cycle

Invoice processing and approval Goods and services PO matching Payments administration (inventory and non-inventory) GL accounts settlement

Record-to-report General ledger Consolidation

Employee services Travel and expense reimbursements

Payroll

WW payroll project and initiatives Payroll e-initiatives and automation Process optimization and HR special programs PeopleSoft payroll process support and training

Support processes/Non-finance processes Customer response center- support vendor payables and employee reimbursement queries for Asia Pacific

Due to its excellent language capabilities, the Singapore GBC provides a strategic advantage for clients who are geographically spread across the Asia Pacific region. The center supports vendors in China, Hong Kong, Taiwan, and Thailand, and employees across all countries in the Asia Pacific region. Thus it has a strong role to play in maintaining service levels, particularly for the Asia Pacific region, and in providing expertise on country-specific legal and financial regulations.

Given the experience of its staff and robust infrastructure, this center also plays a key role in the larger BCP for HP BPO.

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Guadalajara The Guadalajara Business Center is an ideal location of choice for U.S. companies, given its close proximity and an attractive wage structure that allows it to provide low-cost regional transaction processing for the Americas. Mexico has close commercial and cultural ties, including the NAFTA agreement, with the U.S. and Canada, making it more compatible than most other countries. In terms of IT infrastructure, the overall quality and availability at Guadalajara are on a par with U.S. cities.

The HP BPO center in Guadalajara has 388 employees and offers uniformity of transactions and processes, which is critical to combining information from multiple business entities throughout the region. Not only does Guadalajara share processing responsibilities with the other global business centers, but it also acts as a disaster recovery and backup site. The center has the in-built flexibility to take on emergency or unplanned transitions and integrate platforms with minor to no disruption to countries.

Employee profile: 95% of the employees possess college degrees, 3% have master’s degrees, and 2% have other degrees. The center has a skill set blend of 22% finance, 46% accounting, 17% administration and international business, and 4% engineers. The remaining 11% have a variety of other skills.

Figure 9. Employee profile

Language proficiency: Spanish, English, Portuguese, French, German, Italian, Japanese, and Dutch, with 83% of employees fluent in at least 2 languages.

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Table 4. Process capabilities—Guadalajara

Process towers Activities

Order-to-cash Receivables management—cash application Global service accounting operations—revenue

Record-to-report Consolidations Bank operations

Employee services Travel and expense reimbursements

Payroll Payroll (all of U.S., Canada, and Mexico)

Support processes Customer response center Sales compensation Claims and rebates

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Costa Rica Among its various strategic locations for delivering financial and administrative processes, HP opened its sixth global center in San Jose, Costa Rica in August 2004—thus further expanding its ability to provide a meaningful global delivery model to clients.

Costa Rica is one of the safest and most attractive destinations in Latin America for multinational companies. The World Bank has given Costa Rica an excellent bill of overall political and economic health. In addition, the Costa Rican government is placing a strong emphasis on building a world-class infrastructure and on developing and making available an educated, computer-literate, and disciplined workforce. Many U.S. companies have chosen Costa Rica to set up their call-center and shared-services operations.

HP BPO’s global business center in Costa Rica commenced operations primarily to serve the Procter and Gamble account’s transactional accounts payable needs in the Americas, Spain, Italy, and Portugal. A key competency that lies in this center is the ability to aptly fulfill the needs of the Spanish-speaking population in these regions, especially for phone queries. HP currently employs over 350 staff in Costa Rica and is gearing up to accommodate further expansion plans in the coming year. Required skill profiles and infrastructure are already being put in place to support this effort.

The service delivery of Costa Rica GBC ranks among the best in the Latin American region, with end-user customer satisfaction ranking at 88% (compared with an industry standard of 72%) and quality ranking at 99%. The Costa Rica center also acts as the hub for receipt, scanning, and filing of invoices for P&G’s North America operations. It processes payments for more than 50,000 suppliers in the American continent across 18 countries and 12 different currencies. The 1.4 million invoices processed at this center form 68% of the global volume for P&G’s TAP operations.

Employee profile: The center hosts a team of extremely skilled and energetic young professionals, with 86% of the workforce under the age of 30. Costa Rica also boasts the lowest attrition rates among all GBCs of HP—less than 3% annually. The workforce at Costa Rica is also one of the most cost-effective in comparison to the rest of the Americas.

Figure 10. Employee profile

Language proficiency: The current capabilities of the center include providing transaction processing and call-center services in English, Spanish, Italian, and Portuguese.

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Table 5. Process capabilities—Costa Rica

Process towers Activities

Procure-to-pay procurement cycle Purchasing administration

Procure-to-pay payment cycle

Invoice processing and approval Goods and services PO matching Payments administration (inventory and non-inventory) GL accounts settlement

Support processes Customer response center

As one of the newest centers for HP, Costa Rica GBC is now implementing the best practices followed at the other HP delivery centers, including attaining an ISO certification for the coming year and building robust support functions to ensure delivery at six sigma levels.

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Barcelona Barcelona is one of the most attractive locations for business in Europe due to its geographical position, the availability of labor, and the dynamism of its economy. With more than 80% of employment being generated out of the services sector, there is a strong focus within the government and educational institutions on supporting businesses in this sector.

A multilingual and skilled labor force, competitive prime office space, a strategic location in the EMEA region, favorable tax conditions, an excellent communications network, and high quality of life—these are some of the things that encourage companies with a focus on shared services to establish operations in Barcelona, where more than 3,000 multinationals have already located to grow their projects.

HP’s global business center in Barcelona employs 247 people. The Barcelona center is the global backup for purchase administration and payables processing (Bangalore).

Employee profile: 90% of the employees possess university degrees. The Barcelona global business center employs people of 14 different nationalities, and serves customers from 20 European countries in 17 languages.

Language proficiency: 20 European languages, including Finnish, Swedish, German, Italian, Czech, Dutch, Danish, Spanish, Norwegian, Portuguese, and French, along with less common languages such as Greek, Turkish, Polish, Hungarian, and Russian

Table 6. Process capabilities—Barcelona

Process towers Activities

Procure-to-pay procurement cycle Purchasing administration

Procure-to-pay payment cycle Invoice processing and approval Goods and services PO matching GL accounts settlement

Record-to-report VAT reporting

Support processes Travel and expense reimbursements Customer response center

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Dalian, China Leveraging the image of being a cost-effective manufacturing hub, China is now also emerging as a forerunner in delivery of outsourced processes. This is due to an accelerated liberalization of its economy with strong government support, its low-cost and highly skilled labor, and an intense focus on the development of its infrastructure. In addition, China is also uniquely positioned to serve some of the major markets for global companies—such as Japan and Korea—for reasons such as common culture and similar languages. Significant investments are also being made, especially on the education front, to build the English language as a skill.

In August 2004, HP BPO inaugurated its seventh global business center at Dalian, a premier commercial hub for China with good infrastructure and pro-business local government.

Language proficiency: Chinese (Mandarin), Japanese, Korean, and English, thus proving to be a location of choice for catering to the regions in and around Asia Pacific, including Japan, Korea, Taiwan, Hong Kong, and China

Process capabilities: The most recent addition to the HP BPO fold, the Dalian center is gearing up to provide support to both finance and administrative processes. It has already begun to play a critical role, along with the Chennai center, in the delivery of HP Services customer operations. Dalian is currently being positioned to handle all processing for Northern Asia and Japan, with Chennai handling all other areas within the region. Thus, the center would also serve as a critical business-continuity site for the Chennai delivery center. The current administrative processes that have already been transitioned to Dalian are repair order processing, migrations, amendments, upfront renewal, and new business quotes.

Conclusion HP—a truly global company with 145,000 employees in 178 countries around the world—understands large-scale global delivery. HP was also one of the first companies to consolidate its back-office operations in strategically positioned global business centers. For companies looking to build or expand a BPO infrastructure. HP can cost-effectively and reliably provide services wherever they are needed.

As BPO

HP solutions for BPO provide these key benefits:

• A large-scale delivery model • Depth of finance and administrative (F&A) services • Smooth transition methodology, implementation, and quality control • Business continuity

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For more information For more information about HP’s BPO global delivery infrastructure, please visit www.hp.com/hps/process or send an e-mail message to our heads of Sales, Steve Stubitz (steve.stubitz@hp.com) or Les Mara (les.mara@hp.com)

HP Global Business Centers To find out more about the two HP Global Business India Centers, contact:

• Vivek Nagarkatti vivek.nagarkatti@hp.com +91 80 2504 5012 • Amit Soni amit.soni@hp.com +91 80 2507 2102

To find out more about HP Global Business Singapore Center, contact:

• Basil Tan basil.tan@hp.com +65 6313 1105

To find out more about HP Global Business Guadalajara Center, contact:

• Bob Carroll bob.carroll@hp.com +1 404 648 6486 • Luis Zetter luis.zetter@hp.com +52 33 3678 9810

To find out more about HP Global Business Costa Rica Center, you may contact:

• Evan Owen evan.owen@hp.com +011 506 204 1639

To find out more about HP Global Business Barcelona Center, contact:

• Konstantin Mudrack konstantin.mudrack@hp.com +34 93 582 4957

To find out more about HP Global Business Dalian Center, contact:

• Basil Tan basil.tan@hp.com +65 6824 2420

© 2005 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.

4AA0-0305ENW, 07/2005