NASSCOM BPO Summit 2012 Session6: Verticalization - Gaurav Gupta
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Transcript of NASSCOM BPO Summit 2012 Session6: Verticalization - Gaurav Gupta
Verticalization: Going beyond Organization Structure
Ajay Gupta – Principal, A.T. Kearney
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Large contribution of horizontal services in the rapid industry growth has driven current business model
Export revenue split of Indian BPOs (USD billion)
2.0
1.8
2008
9.9
0.4
2.1
4.3
1.7
1.4CustomerInteractionServices
6.7
Others (HR, PO etc.)
Finance andAccounting
KnowledgeServices
Core Operationprocesses
2012E
15.9
0.6
3.6
2.8
2.2
2010
12.4
0.5
2.7
5.4
Relatively Industry Specific
Relatively Industry Agnostic
Organizational focus on horizontal services
traditionally led to
• Inability to infuse industry specific thinking
• Limited impact on business outcomes
• Inefficient decision-making when dealing with diverse client stakeholders
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Vertical specific process are witnessing higher adoption, as “Proof of Concept” has been established
Outbound sales
Campaign Management
QRCBilling, Credit & Collection, Activation /
Provisioning
Customer data management
Payroll
Procurement, Logistics
Training & hiring
F&A
Pensions, Financial reporting, etc.
Market research
Marketing & Product Development
Sales
Customer Mgmt.
Support & Overhead Emerging Areas
Lead generation, analytics
Product lifecycle management
Pricing analytics and product design
Ho
rizo
nta
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erti
cal
High Adoption Level of outsourcing
LowAdoption
Case example – BPO activities in Telecom
More than one-third of the future market opportunity in Telecom will be dominated by industry specific requirements
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Indian BPOs Today
With the maturity of market, Indian BPO are progressing towards becoming transformation partners
Time
Str
ateg
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alL
evel
of
Cli
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Nee
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• Service offering for back-end operations
• Competitive pricing
• Vertical expertise in focus areas
• Customized solutions
• Outcome-based• Process
transformation• Integrate technology
with BPO offeringsImp
lica
tio
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for
BP
Os
Cli
ent
Nee
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Industry knowledge is key for BPOs to drive transformation for their clients
• Reduce cost of operations
• Outsource non-core functions
• Value added services• Need for client
specific solutions
• Strategic partnership• Innovative solutions
Transactional Scope Transformation PartnerCore Functions Support
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Enablers
Company Strategy
Service Offering
Organizational Capability
KPIs and Governance
Organizational Structure
BPOs have started verticalization to develop industry relevant value propositions
• Alignment with future customer needs• Articulation of horizontal and vertical strategy• Leadership development
• Defining market and services based on strategy
• Platform development
• Depth of verticalization in Sales, Solutioning, Delivery and Support
• Reporting relationships
• KPIs to enable change – defining accountabilities and control
• Managing behavioral change• Alignment of hiring, training with Strategy and Org. Structure• Talent management
• Skill sets, knowledge and competencies development
Verticalization by BPOs is defined as alignment of their strategy, offering and operating model to meet the needs of specific industry verticals
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CompanyStrategy
However, the approach to verticalization has been piece-meal
Enablers
CompanyStrategy
Service Offering
Organizational Capability
KPIs and Governance
OrganizationalStructure
State of Verticalization – Indian BPO players
Horizontally aligned model Vertically aligned model
Enablers
Service Offering
Organizational Capability
KPIs and Governance
OrganizationalStructure
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Indian BPOs need to take a comprehensive view to re-align the overall business model
Enablers
Service Offering
Organizational Capability
KPIs and Governance
OrganizationalStructure
CompanyStrategy
• Shift towards developing vertical specific capabilities
• Most BPOs have verticalized the only the sales function
Vertically aligned model
• KPIs and Governance have kept pace with organization structure
• Largely aligned to evolution in organization structure
• Only some players have vertical specific goals and investment targets
• Few are able to offer end-to-end industry solutions
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Verticalization efforts of Indian BPOs so far have largely been limited to Organization Structure
VerticalsV1 V2 V3
Sales
Solution
Delivery
SupportOrg
aniz
atio
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10-15%
Verticals
V1 V2 V3Sales
Solution
Delivery
SupportOrg
aniz
atio
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~15%
Verticals
V1 V2 V3Sales
Solution
Delivery
SupportOrg
aniz
atio
n
50-60%
Verticals
V1 V2 V3Sales
Solution
Delivery
SupportOrg
aniz
atio
n
10-15%
The depth of verticalization varies across BPOs; verticalization of Sales is a more secular trend now
Fully Horizontal Model
Fully Vertical Model
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Industry is at cross roads and BPOs need to make definitive strategic choices
Status Quo - Diffused vertical & horizontal offering
• 2-5% erosion in rates; reduced volume growth
• More easily replicable business model; greater competition
Imperatives and Implications
Develop Vertical Capability based Differentiation
• 5-8% higher top-line growth compared to market
Become a Horizontal Specialist
• Non-linear revenues• Need for scale and
efficiency
Strategic options
The industry is at a cross-road - Clear selection, articulation and implementation of a strategic path is necessary
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Horizontal players will need to differentiate based on service capabilities while balancing any vertical needs
• Differentiated capabilities based on tools, platforms, processes
• End-to-end horizontal capabilities
• Leverage learning from other industries to create customer value
• Vertical front-end to enable translation of client needs
• Embed vertical focus in solution design
• Develop strategy to address process-scope beyond horizontal
Develop vertical focused sales and solution-
design
Createincubation centers
for sub-scaleprocesses
Drive value through cross-
Industry learnings
Develop deep horizontal
capabilities and platforms
Key Action Themes
Action themes
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Develop industry specific capabilities and
platforms
To evolve to a sustainable verticalized structure, BPOs need to develop capabilities to deliver increased valueAction themes for Vertical Play
Virtuous circle of Successful Verticalization
Create value for customers
through industry insights
Create/ Enhance verticalized
operating model and enablers
Strategic alignment
toward higher verticalization
Align entire organization to
higher verticalization
Increasing Customer demand
by delivering higher value
BPOs will need to continuously innovate as increasing competition will negate differentiation even in vertical offerings