Why BPO is Broken and How BPaaS Could Be The Solution

Overall Most Innovative

Cloud Provider

7 patents in last year

Why BPO is Broken and

How BPaaS Could Be The Solution

Arijit Sengupta CEO, BeyondCore, Inc.

Chair, IAOP Cloud Computing Chapter

Co-Chair, IAOP Outsourcing Tools &Technology Innovation Chapter

Member, Cyber Security Advisory Group, India

©2011 BeyondCore, Inc. www.beyondcore.com

Eight patents related to Business Process Operations and BPaaS.

Previously worked at Oracle, Microsoft, Yankee Group and General Motors

Guest lectured at Stanford and other universities

Was written about in The World Is Flat release 3.0, the New York Times,

San Jose Mercury News, and other leading publications.

MBA with Distinction from the Harvard Business School

Bachelor degrees with Distinction in Computer Science and Economics

from Stanford University

Game changing solutions for

Business Process Operations


Patented SaaS Advanced Analytics solution that delivers in

6 hours the quality benefits that Six Sigma delivers in 6 months

Patented Privacy / Security solution addresses insider theft

10% of the Fortune 100 and six of the ten largest outsourcing

providers have used BeyondCore

Chairs the IAOP Cloud Computing Chapter. Co-chairs include:

“In a matter of days, BeyondCore's unique solution

identified easy to-implement opportunities for improving

our quality by 30%” – Niraj Patel, CIO GMACCM

“BeyondCore developed a software algorithm able to detect and

reduce errors in outsourced back-office work.” – Tom Friedman in

and The World Is Flat Release 3.0

Why is BPO Broken?


Choose Partners

Align Incentives

Measure Outcomes

Handle Change

Scale Solutions

Five Key Activities

Focus on Total Cost of Ownership

Direct Cost of

Operations (DCO)

Total Cost of Errors

(TCE)

Cost of Control (CoC)

Total Cost of

Ownership (TCO)

Stanford student research suggests that US firms drastically underestimate

their TCO because they misunderstand, underestimate, and / or ignore many of

the hidden costs associated with the TCO for their business process.

Current

focus

of most

firms

Often overlooked sources of

savings

See www.totalcostoferrors.com for details


http://www.totalcostoferrors.com/

Importance of TCE:

Which provider would you choose?

Provider 2 Provider 1

Price per transaction (DCO): $0.70 $1.00 30% lower

Simplified disguised example based on an US-based insurer:

10% increase in error rates wipes out a 30% DCO difference

% of transactions with errors: 1.0% 1.1% 10% higher

Downstream avg. cost per error: $300 $300

TCE per transaction: $3.00 $3.30

TCO/transaction (ignoring CoC): $4.00 $4.00

X

=

+

=


Are you paying per headcount?

Are you doing value-sharing

contracts?

Does you contract demand

innovation but doesn’t pay for it?

Do you really want to know bad

news about your BPO contract?

Are you Incentives Aligned?

Are you measuring the right things?:

TCE can easily overwhelm DCO Simplified anonymized TCE example based on Global 1000 bank data

DCO:

$1

Customer Support calls caused by data entry errors:$2

Average error rate

Average cost of error

0.5%

$400

Downstream impact on Credit Card issuing process: $1.50

Average error rate


2%

$75

Back-office Error Correction (Quality Control): $1

Average error rate


5%

$20

Credit Card Data Entry: $1

Processing Cost $1

TCE:

$4.50


Can you accurately measure quality?


Manual

Audits

Rules Based

Software

Quality before BeyondCore

At Data Entry 1.09%

After Manual Quality Control (QC) 0.83%

Error rate reported by QC 0.26%

Percent of errors caught by QC 23%

Errors in Claims

FTQ Final

Can you accurately measure quality?


In-house or outsourced process and

reported error rates (measured before quality control, *= measured after quality control)

Fortune 500 Financial Services firm 1-2% 26%

Fortune 500 Airline 3% 18%

S&P 500 Bank 2% 7%

Fortune 500 diverse conglomerate 4% 12%

Fortune 500 Consumer Products firm 4% 11%

Seven year old, top-quality process at leading Outsourcer * 1% 1.13%

Be

yon

dC

ore

an

alys

is

Pre

vio

usl

y R

ep

ort

ed

Humans catch between 25%-80% of errors. They also need to focus on a few

critical fields and may miss critical sources of errors that are not part of the SLA.

Rapid changes are a business reality

Process Flexibility

Competitive Advantage

Market Changes

Regulatory Changes

Process Inflexibility

Business Failure


Are your Business Processes flexible?


Process Inflexibility

Legacy Systems may not support

proposed changes

Six+ months required to

stabilize process changes (using manual methods like Six Sigma)

Operator training severely

constrains process changes


Is BPO scalable?

Process

“Lift & Shift’ Process Transfer

Factory-style Operational Control

Manual Process Improvement

Manual Reaction to Process Changes

People

Manual Hiring

Management Through Constraints

Manual Training

High Employee Churn

How BPaaS Could Be The Solution


BPaaS: Just replace VPN with SaaS

Top 10 BPO

We love BPaaS. Now we can work on the

client process much faster than over VPN.


BPaaS: Just add BPO to SaaS

Fortune 100

Software firm

We focus on SaaS/PaaS. We count on our

service partners to take care of BPaaS.


BPaaS: Shift from means to outcomes

BPaaS: the obvious next step

Servers Software Business

User

Technology

Expert

Hosting

Packaged Software

IT Outsourcing (ITO)

BP Outsourcing (BPO)

PaaS

SaaS

BPaaS

25-50% of BPO moving to BPaaS (Gartner, Saugatuck)



The challenges are similar, not same

BPaaS PaaS/SaaS

Security

Quality

Scalability

Risk

Protect the border

Regulatory Compliance

Regulatory Compliance

Operational Risk

Privacy

Protect the interior

Information theft

Employee fraud

Infrastructure quality

Output quality

Prevent errors

Monitor / audit

Scalable technology

Scalable process

Process platform

Process transfer

Security: people are the problem


“Technology professionals are getting cold feet about

moving more operations onto the cloud when poor

corporate security practices are exposing customers to

devastating identity theft and fraud.” – New York Times

“Nearly 90% of all security breaches at 13 small,

mid-sized and large IT/ITeS companies in 2009-10 was

an insider job” – PwC survey quoted in Times of India

Encryption and firewalls

can’t protect against insiders

If people don’t follow

security practices, existing

solutions can’t help

“Separating information to enable cloud-based processing has been around

for a while but having that process automated via a SaaS product is

fairly novel.” – BeyondCore Combines Compliance and the Cloud, 7/4/11

Technology like SplitSecure is the solution

splitsecure.mp4

BeyondCore’s ProcessFlexibility™ Vision

Operator specific

Process impact driven

Highly cost effective

6X faster training

enabled by BeyondCore

Rapid cycles of

focused improvement

Automated, accurate

root cause detection

10-30% improvement in weeks

enabled by BeyondCore

Flexible UI

Flexible Workflow

Flexible data storage


Process Flexibility

Flexible Systems

Rapid Process

Stabilization

Highly Effective Training


ProcessFlexibility™ + BPaaS:

Optimized outcomes


BPaaS done right vs. five key activities

Choose Partners

Align Incentives

Measure Outcomes

Handle Change

Scale Solutions

Copyright © 2009 IAOP. All Rights Reserved. Copyright © 2010 IAOP. All Rights Reserved.

A Business Perspective on Cloud Computing

Execution as a Service

Mantra: Consolidate systems,

eliminate borders

Coordination as a Service

Mantra: Seek a global optimum

rather than local optima

Innovation as a Service

Mantra: The world of ideas always beats your best ideas

Technology as a Service

Mantra: Standardize my mess and run for less

Business

Process

as a Service

Work Product of the IAOP Cloud Computing Chapter


In Search of Business Value

• Gartner frameworks for Cloud Services layers1

• Opportunities for Business Value2

– Process Redesign

– Business Innovation

Source 1: Mark P. McDonald, “Technology Goes Public and what it means for IT” (Gartner 6/3/2010).

Source 2: Cassio Dreyfuss, “Cloud-Computing Service Trends: Business Value Opportunities and Management Challenges, Part 2” (Gartner 2/23/2010 ID: G00173680)

Private

Public


System Infrastructure Services

Business Services

Information Services

Application Services

App. Infrastructure Services

Cloud

Enablers M

gm

t. a

nd S

ecurity


System Infrastructure Services

Business Services

Information Services

Application Services

App. Infrastructure Services

Cloud Enablers Mgm

t. a

nd S

ecurity

Mapping Perspectives

Gartner frameworks for Cloud Services layers

Coordination

as a Service

Execution as

a Service

Technology

as a Service

Innovation as

a Service



Execution as a Service: Case Study

•EIPP achieved 20% reduction in invoices

and associated costs of processing

•Self Service reduced operational costs by

20% and call centre volume by 35%

•Reduced DSO and accelerated cash flow

• Improved dispute handling

•Significant reduction in errors compared to

manual processing

• SaaS solution using Genpact’s Electronic

Invoice Presentation and Payment platform

• Consolidate all legacy billing systems

• Enable customer self service

• Allow customers to dispute part of a bill and

pay the rest

Implement a solution that removes the

inefficiencies of multiple legacy systems, enables

customer self service and allows part fulfillment

Leasing division of major office supplier looking for reducing operating costs in their Order-to-Cash process

ABOUT THE CUSTOMER

DELIVERED IMPACT BUSINESS CHALLENGE

GENPACT SOLUTION

Electronic invoicing for major office supplier



SpeechCycle: EaaS & CaaS Case Study

Coordination as a Service • Complex business processes

• Span call center & ERP/CRM

• Flexible: modifiable & extendable

Execution as a Service • Routes to operator when needed

• Executes call center business process

• Operators interact with single system

wherever possible



Innovation as a Service: Case Study

Before •2 data entry

screens

•Redundant,

duplicate

fields

•Operator

confusion

Single consistent

interface in Azure

Backend

systems

On the Cloud

Flexible

integration

BeyondCore Insight

automated error

root cause analytics

XML data


Innovation as a Service

Process:

Invoice Data Entry

Customer:

powered by Innovation by

Invoice data

in Azure

XML data

Analysis report

via Office Live

XML report



Infosys POC: Putting it all together

XML

report

XML

data

Advanced algorithms for error root cause

analysis, identification and elimination

Raw data

to report in

minutes

Flexible

process or

UI changes

Operator

specific

training

Field name Incorrect Correct

Address 8557 Park Rd 8857 PARK RD

First Name Lindsey LINDSAY

SSN xxxxx1364 XXXXX1634

Age 36 35

Effective 1/12/2007 1/2/2007

Automated

Error

Detection

Data Entry

(UI on Azure)

Innovation as a Service Technology as a Service


Policy data

in Azure™

Analysis report

via Office Live

Error Rate,

Pattern and Root

Cause Reports


Pattern Example: Just three

out of 30 fields counted for

37% of overall errors


The future of BPaaS



Let’s build true BPaaS (not marketing balderdash)

Questions/comments: [email protected]

Why BPO is Broken and How BPaaS Could Be The Solution

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