“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!)
© ExlService Holdings, Inc. 2006-2011 Confidential 3
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
© ExlService Holdings, Inc. 2006-2011 Confidential 4
…Clear trend of declining savings
Source: Duke University/ The Conference Board Offshoring Research Network 2009 Survey
© ExlService Holdings, Inc. 2006-2011 Confidential 5
…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
© ExlService Holdings, Inc. 2006-2011 Confidential 6
…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
© ExlService Holdings, Inc. 2006-2011 Confidential 7
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
© ExlService Holdings, Inc. 2006-2011 Confidential 8
…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
© ExlService Holdings, Inc. 2006-2011 Confidential 9
…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
© ExlService Holdings, Inc. 2006-2011 Confidential 10
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
© ExlService Holdings, Inc. 2006-2011 Confidential 11
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
© ExlService Holdings, Inc. 2006-2011 Confidential 12
$ 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
© ExlService Holdings, Inc. 2006-2011 Confidential 13
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
© ExlService Holdings, Inc. 2006-2011 Confidential 14
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
© ExlService Holdings, Inc. 2006-2011 Confidential 15
…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 Holdings, Inc. 2006-2011 Confidential 16
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+
© ExlService Holdings, Inc. 2006-2011 Confidential 17
Thank You
Krishna Nacha
Chief Sales & Marketing Officer
+1 917 520 0056
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