Shared Services Model to Transformational CoE

“Value Add 2.0”

Shared Service Model ��

Transformational CoE

Krishna Nacha, CSMO, EXL ServiceMarch 3, 2011

© ExlService Holdings, Inc. 2006-2011 Confidential 2

What Will We Talk About

Not another pocket guide

A few TLAs – easy ones though

Need to break the linearity of SSCs

Define the Value Add 2.0 state

The Staple for the 2.0 state: Transformation + Shared Services

Neat $$$ upside %

A couple of relevant examples

(Note: I did not exclude an EXL sales pitch!)


Has the current Shared Services Model run its course?

Economies of Costs

Economies of Processes, Systems

Economies of Expertise

Economies of Effort

Economies of Scale


…Clear trend of declining savings

Source: Duke University/ The Conference Board Offshoring Research Network 2009 Survey


…and a move away from owning SSCs

Recent Captive spinoff

Date Seller Acquired Unit

April 8, 2008 Unilever Financial shared service center in Chile and Brazil

April 10, 2008 RSM McGladney Indian accounting unit

July 10, 2008 Aviva Indian outsourcing units {customer service and BPO}

October 7, 2008 Lehman Brothers Operational support {BPO and IT} in India

October 8, 2008 Citigroup Citigroup global services in India

November 3, 2008 Compass Bank A data center based in Texas

November 13, 2008 Citigroup Information systems division in Poland

November 17, 2008 Motorola Malaysian software development unit

December 23, 2008 Citigroup Citi technology services

July 7, 2009 Schneider National Schneider logistics

October 1, 2009American International Group

AIG systems solutions {ITO} in India

October 13, 2009 UBS UBS India Service Center

March 1, 2010 American Express American Express’s Global Travel Service Center


…and of course the Economy: The New Normal

Organizations experienced financial uncertainty

Slowdown in shared services and outsourcing decisions

Cut back on discretionary spending

Organizations experienced financial uncertainty

Slowdown in shared services and outsourcing decisions

Cut back on discretionary spending

Environment in

2008 - 09

Environment in

2008 - 09

Higher pressure to reduce costs

Stricter regulations

Higher cost of compliance

Return of discretionary spends

Urgent need to step up

Higher pressure to reduce costs

Stricter regulations

Higher cost of compliance

Return of discretionary spends

Urgent need to step up

Critical DevelopmentsCritical Developments

Financial stability

Business investment

Board involvement in outsourcing decisions

Political rhetoric

Pace of strategic decision making

Employment levels

Financial stability

Business investment

Board involvement in outsourcing decisions

Political rhetoric

Pace of strategic decision making

Employment levels

2010 - 11: Recovering…2010 - 11: Recovering…

…however some challenges

still remain

…however some challenges

still remain


Urgent need to break the linearity of an SSCV

alu

e C

reation

1

2

Current Evolve Transform

3

Phase 3 : Breaking Linearity

Phase 2 : Operations Redesign

Phase 1 : Operational Efficiency

Phase 1 : Operational Efficiency

Manpower efficiency

Shift utilization

Infrastructure optimization

Phase 2 : Operations Redesign

Restructuring

Knowledge initiatives

New aggregation models

Benchmarking & business intelligence

Phase 3 : Breaking Linearity

Output α (Cost)n

Led by greater value capture

Transaction / outcome based pricing

Transformation integrated solutions

Technology embedded solutions

Leveraging partnerships


…and move to the Value Add 2.0 State…

Engagement Engagement

Value DriversValue Drivers

ExecutionExecution

Core business transformation

Output / effectiveness

Competitive advantage

Greater cost flexibility & ops. scalability

Better compliance and decision making

Release capital in non-core functions

Input / efficiency

Cost benefit / headcount

Ease of doing business

Increased productivity and efficiency

Value Add 2.0Value Add 2.0Value Add 1.0Value Add 1.0

Low risk offshore of simple processes

Focus on operational KPIs

Six-Sigma led continuous improvement

Lift and shift based offshoring

Legacy technology

Source more complex processes

Focus on business value / impact

Transformation led quantum shift

Skill based multi-shoring

Platform solutions / tech. wrappers

Tactical

Task giver and deliverer relationship

Risk control

Strategic

Partnership / co-innovation

Risk sharing


…by creating CoEs

Excellence in providing high quality services regardless of geography

New “products”, localized features,

GTM innovation

Strong revenue and cost upsides

Superior Financial and operating performance

Sourcing skill-sets matched

to business requirements

and processes

A Center of Excellence is a delivery

model which is part of a global network

that delivers performance and

innovation with specialized skills and

enables disproportionate revenue and

cost upsides


Five Lever CoE Model – The Staple: Integrating Transformation into the Economies model

Embedded Analytics

Deploy analytics to enhance process effectiveness

Design and implement decision models to improve business outcomes Identify and eliminate causes for exception

Utilize Six Sigma and LEAN to

improve processes and

eliminate redundant or non-

value add workConsolidate and redesign

processes to improve efficiencyDevelop value streams to

identify and eliminate wasted effort and redundancies

Leverage technology to streamline operationsImplement proprietary tools for selected

processesIdentify and implement other platform

enhancements and automation

Design organization structure with optimal spans and layers of expertise that can

Ensure compliance Better manage Risk across Operations,

finance, and marketing

Leverage wage arbitrage to

drive productivity and reduce cost

Significantly lower costsIncreased productive hours“Risk free” migration


Integrated Benefits Driven

Transformation Levers {Typical Opportunity - Percentage of Total Baseline}

Revenue Enhancements

Cost Save/Efficiency

Reduction due to Overlaps

2-3 %2-3 %

8-10%5-10 %

10+ 55%+

25-30%

35-40%

~5%

10%+

Eliminate Improve & Standardize

Automate Consolidate Outsource & Offshore

Revenue Enhancement

Total Impact

Migrate non-core

activities to offshore

locations for optimal

cost leverage

Improved loyalty and

retention, enhanced

targeting, incentives,

increased cross/ up-

sell

Use sophisticated

quality tools such as

LEAN, Six Sigma,

DMAIC to unlock

process efficiencies

Re-engineer

processes and

eliminate work-steps

that translate into

workforce reduction

Develop hubs

through tech-

optimization and

consolidation of fragmented units


$ 4M arbitrage on new migrations

Additional $ 0.8M on transitioned employees

Case 1: Breaking the Linearity for a Travel Services Company

Cost Reduction Talent Retention Better Service Value Addition New Opportunities

55% on global processes

100% retention of senior leadership

90% retention of front line and mid level management

Allows for risk mitigated ramp-

up

98% metrics met or exceeded timeliness and accuracy

Benefitsdelivered:

$120K lower write-offs

$1MM reduction in operations cost

Timely Billing

Faster queue clearance

5%

$ 1M elimination of revenue leakage

$1.25 M of revenue leakage plugged

+ Contributionto strategic projects

+ Flexibility to resource up/down based on business requirement

11%

Strong pipeline of opportunities for 2011 and beyond:

$5M in migrations

$2M in value adds

Future Blueprint


Mid Office & Back Office: Value Beyond ArbitrageRevenues

Decision Analytics & Consulting

Client and Product Profitability Reporting & Analytics

Pricing Model, Customer Segmentation

Capacity Planning

Reduce Revenue Loss / Leakage

Timely & Complete Billing & Collection

Contract Compliance (Fees, Passbacks, DOE)

Revenue Leakage identification and Recovery

AR Days Reduction

Enhance Service Capability

Scalable & Flexible

Consistent Service to Global Clients

Expenses, Working Capital & Capital Exp

Operating Cost Reduction

Low Cost Servicing Location

Higher Productivity

COPQ Reduction

Write-Off Reduction

Data Integrity

Standardization & Process Improvement

Six Sigma, Lean

Access to Best in Class practices

Measurements & Dashboard

RevenueRevenue

ExpenseExpense


Finance & Accounting Outsourcing and Transformation Solutions

Case 2: EXL’s F&A COE – Integrated Ops, DA, GRC

EXLCapabilities

EXL Enablers

Domain Knowledge Integrated Solutions

Qualified People Knowledge Ecosystems

Compliant Processes Tools & Technology

EXL Finance and Accounting Center of Excellence

Decision Analytics

Process Excellence

Finance & Accounting

Risk Advisory

Finance

Operations

Dec

isio

n

Sup

port

Governance, Risk &

Compliance

ServiceDomains

CoE Capabilities

2,300+ professionals, including 200+ Big 4 trained accountants

KPMG: FAO knowledge partner

ISO, SOX and SAS70 compliant

Proprietary point solutions and ERP, BI capabilities


…Value Recovery for a Utilities Player

Absolute Recovery

Process & Control Improvement

Ongoing Monitoring & Decisioning Insight

Strategic Importance1

2

3

Identification of value recovery (revenue & spend)……by leveraging data analytics

Manual & automated recovery……by leveraging accounting, reconciliation resources

Root cause elimination, and effective control……by process redesign and better controls via enhanced checks, audit trail & fraud controls

Exception management, business insights, account health check monitoring and ongoing reporting ……through decision analytics and MIS reporting

Detection & Reporting

Recovery Process & Controls

OptimizationMonitoring & Decisioning

Insight

Objective

Utilities Experience

0.4% of Gross Spend 1-2% Margin Upside1% of Gross Spend

58 million GBP recovery across clients through ~350 experienced resources

20 million GBP recovery ,40% theft

identification

40% of run rate reduction in

recovery opportunities

Account Payables Experience

Benefits Delivered to Clients

Value Creation


EXLService : Integrated Operations & Transformation

Name ExlService Holdings Inc. (a Delaware “C” Corporation)

Established April 1999

Ownership Publicly listed at NASDAQ ticker as “EXLS” (www.exlservice.com)

Business

Business Process Outsourcing

Insurance , FAO, Utilities, Transportation, Banking, Travel

Transformation Services

Decision Analytics (Marketing, Operations, Risk, Finance Analytics)

Risk & Financial Management (Compliance, Internal Audit, IT Controls)

Operations & Process Excellence (Process Improvement, Strategic Cost Management)

Credentials

47th in Forbes Best Small Companies List

ISO 9001:2000 certified for Operational Excellence

ISO 27001 certified for Information Security

OHSAS 18001 certified for Employee Health And Safety

Infrastructure 16 Service delivery centers across India, Philippines, Czech Republic and Romania

Revenues2010: USD 252 MM

Zero debt, over USD 110 MM of cash

Workforce 12,700+


Thank You

Krishna Nacha

Chief Sales & Marketing Officer

[email protected]

+1 917 520 0056

Shared Services Model to Transformational CoE

Business

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