maximizing business impact from outsourcing · •offshore projects begun in all...

Maximizing Business Impact From Outsourcing

Transformation Case Studies using offshore

Businesses today are demanding competitive advantage from globalsourcing. HCL will illustrate how leading organizations are sourcing through innovative partnerships to enhance value

Stuart Drew

22nd March 2007

Agenda

Transformation Case Studies

HCL in a nutshellSection 1

Section 2

Snapshot

Global IT Services, Infrastructure, BPO & Product

Engineering company

Hardware & System Integration company focused

on the Indian Market

Operations spanning 17 countries

USA, UK, Malaysia, China, Poland

Singapore and India

Offices in 170 cities & over 300 service centers

Total Revenues ----- $3.5 BMarket Cap------------ $5 B

HCL Technologies Financials HCL Infosystems

Global Presence Delivery Facilities India Presence

Employees43,000

Clients500

HCL Technologies began its operations in 1998, retooled its service portfolio in 2001 to include applications, infrastructure and BPO and is today at a FY05-06 run rate of $ 1 Billion+

Global Operations – HCL Technologies

Mexico City

Chicago

Sunnyvale

Stamford

ColumbiaIrvine

Germany

France

U.K.

Sweden

Switzerland

Belgium

Netherlands

Hong Kong

Japan

Melbourne

Sydney

Auckland

Wellington

New Jersey

Field Operations Offshore Development CentersCorporate Headquarters

India

Gurgaon

Delhi

Chennai

Bangalore

Los Angeles

Fairfax

Dallas

Noida

Canada

Kolkata

Mumbai

Ireland

Singapore

Malaysia

Italy

Utah

Perth

Poland

Agenda

Case Studies

HCL in a nutshellSection 1

Section 2

Evolution of Offshore Outsourcing

Service Maturity

1998 - 2000 2002 - 20042000 - 2002 2004 & Beyond

Y2K Remediation

Application Management

B P O

Package Implementation

Infrastructure Management

Consulting

ADMBPO,

InfrastructureConsulting

Managed Services

Timeline

An Indian Perspective

Adaptation from “The Innovators’ Dilemma” by Clayton M Christensen

Critical Mass

Maximizing Business Impact From Offshoring

1. Client wanted 4 strategic partners for IT systems development towork in a consortium to reduce time to market, reduce cost and introduce flexible resourcing. Global Top 10 insurer

2. Client needed to reduce cost, while investing in new systems capability to retain market leadership through partial integratedoffshoring of ITO, BPO and Infrastructure. Global Bank

3. Client seeking to create value through integrated offshoring of all ITO, BPO and Infrastructure Management. European Top 10 Insurer

Case Studies

Capital Squeeze – The Common Factor

IT CostReduction

New ITCapabilities

NewBusiness

Capabilities

Funds

Enables

Enables

Funds

Linked imperatives

Start

£

Cost Reduction to Invest in Strategic Initiatives

Time0

Step 2.Cost ReductionInitiatives

ILLUSTRATIVE

Strategic Initiatives

Year 1 Year 2 Year 3

Step 1

BAU Budget

Step 3

New Budget





Case Studies

Transformation through Strategic Partner Consortium: Case Study 1

x

x

x

x

O

O

O

OA

A

A

A

A = Expertise in Insurance & Client specific products, systems & MO

O = Expertise, breadth & depth in off-shore insurance delivery

Best of the Best

CLIENT

HCL

Local Partner

Consortium

Illustrative

Functional Design

Functional Design

DevelopmentBusiness NeedBusiness Need1.

Client Current Local Partner

Knowledge

Transfer

Functional

Design

Functional

Design

Business NeedBusiness Need2.

HCL

Applications – Consortium in Action

Implementation

Implementation

Functional

Design

Functional

Design

Business NeedBusiness Need

HCL

3.

Development Implementation

� Speed up Time-to-market

� Cost reduction

� Increase in productivity

� Increase in

professionalism

� Increase in discipline

� Increase in quality

�The Insurance Co also needs to improve skills in Functional Design and Governance

Client skill enhancement

Functional

Design

Functional

Design


• Results

• First 5 releases, first time was first time ever, defect free

• Cost saving of offshore 3m Euro in 12 months

• Re-invested in Single Customer View

• Offshore Projects begun in all BU’s,Life,Pensions,GI, Investments

• Dutch language not an issue!!

•– BPO offshore pilot begun Jan 07

Case Study 1





Case Studies

Partnership With Global Bank - Case Study 2

Business Need: .

• Need to reduce Operational cost, increase Return on Equity and reduce operational risk

• Need to reduce ‘Time to Market’ new products and services

• Need to Reduce delivery risk and improve business focus

HCL Solution:

• A truly integrated service offering – Technology, Operations & Infrastructure

• Service includes high end processing in areas of credit default swaps and financial modeling

• Over 3000+ HCL staff serving the client

• Robust and well tested transition methodologies to reduce transition risk and increase ‘time to market’

• Robust Governance Model to manage the large engagement

Integrated Services - The Economics

Piecemeal approach

to offshoring

Business Processes

Onshore Offshore

3734

IT Applications

Onshore Offshore

6.2 3.1

IT Infrastructure

Onshore Offshore

7.36.5

Operating Profit

Onshore Offshore

6.9%

Source: Nasscom Mckinsey Report – 2005

Example: Life Insurance Company

Operating Profit

Onshore Offshore

11.2%

7.3

6.2

37

6.5

3.1

29.2

50.5

38.8

Integrated

services

Transformational Outcomes: Case Study 2

Source The Client




3. Client seeking to create value through integrated offshoring of all ITO, and Infrastructure Management. European Top 10 Insurer. $200m deal over 5 years.

Case Studies

The Skandia UK View - $200m contract

� Skandia UK will outsource application development, maintenance and support (across all platforms) and remote infrastructure management to HCL.

� HCL will enable and accelerate Skandia UK’s move to a Service Orientated Architecture (SOA) to make Skandia UK’s IT landscape a world class and agile

� Nick Poyntz-Wright, CEO, Skandia UK:

“The deal with HCL will enable us to have the scalable IT required to grow our business, develop our products and support the key services provided by our customer support team in the UK. We looked very carefully at a range of options and HCL offered the capability and flexible capacity forour business going forward.”

8%

30%

37%

41%44%

45%47% 48% 49% 50%

-Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9Year 10

0%

10%

20%

30%

40%

50%

Cumulative % Savings to Client

Client Costs HCL Pricing Cum % Savings

Customer Profile & Challenges

� A very successful company. Winner of 5 star service awards

� ’If we do not change in 3 years we may have a problem’

� Desire to move from IT ‘Tangled Web’ to SOA architecture codename Darwin

� Focus on product innovation and distribution excellence, reduce time-to-market, and

reduce cost

HCL Solution

• Outsourcing offshore deal for all of Applications Development & Maintenance and Infrastructure management

• Operations: Consolidate as-is processes before BPR

• Notable challenges

• Take over of Skandia!

• Incumbent competitor

• Global Majors on shortlist of 3

• Flexibility and Client Chemistry

• Skandia willingness to accept cultural difference

Transformation Through Output Based Pricing: Case Study 3, Skandia UK

Illustrative

Place Your Bets - Results

Transformation Board Priorities

Step Change in cost reduction

39%

Deliver Darwin Benefits

20%

Maintain 5 star Service

20%

Improve Time to Market

21%

Development and Dependence on Hero CultureOutput

People and Process

Past FuturePresent

Process Culture Hero Culture

IT Enabled Process

Dependent - Onsite

& Offshore

ProcessDependent

PeopleDependent

TransformationalCulture

Operations Preparation - HCL

717 Processes – 7 Companies, 6 Geographies

Consolidated into 42 Procedures

�� Co. 2 -

Co. 2 -

Co. 2 -

Co. 2 -

Co. 2

Co. 2 -

Co. 2 -

Geo1

Geo2

Geo3

Geo4

CST

G1RST

G2RST

G4RST

G3RST

Help

dBro

ke

Co. 5

Co. 1

Co. 3

Co. 4

RSTs

U/W

Core

Bro

ke

PPIP

GPD

PST

PPCS

EP

RS RS RS RS RS RS RS SI SI SI SI SI SI SI SI SI SI SI SI SL SL SL SL SL SL SL SL SL SL SL SL

Company 2 Deal with changes to information provided 3 Assignments b b

Company 1/3/4 Deal with changes to information provided 3 Assignments b b b

Company 5 Deal with changes to information provided 3 Assignments b b b b b b b b

Company 2 Deal with changes to information provided 3 Bankruptcy b b

Company 1/3/4 Deal with changes to information provided 3 Bankruptcy b b b b b

Company 5 Deal with changes to information provided 3 Bankruptcy b b b b b b

Company 2 Change Management 3 Business analysis b b b b b b b

Company 1/3/4 Change Management 3 Business analysis b b b b

Company 5 Change Management 3 Business analysis

Company 2 Process new business 3 CFI Restart b b

Company 1/3/4 Deal with changes to information provided 3 CFI Restart b b b b b b b

Company 5 Deal with changes to information provided 3 CFI Restart b b b b b b b b b

Company 2 Deal with changes to information provided 3 Change of Address b b

Company 1/3/4 Deal with changes to information provided 3 Change of Address b b b b b b b

Company 5 Deal with changes to information provided 3 Change of Address b b b b b b b b b

Company 2 Distributor Registration 3 Change of FA name b

Company 1/3/4 FA Registration 3 Change of FA name b b b b

Company 5 Distributor Registration 3 Change of FA name b b b b b

Company 2 Deal with changes to information provided 3 Change of life assured b

Company 1/3/4 Deal with changes to information provided 3 Change of life assured b b

Company 5 Deal with changes to information provided 3 Change of life assured

Company 2 Deal with changes to information provided 3 Change of name b

Examples of process and controls

which make up this serviceCo. ServiceCompany 1/3/4 Deal with changes to information provided 2 Amending income payments

Company 1/3/4 Deal with changes to information provided 2 Amending income payments

Company 5 Deal with changes to information provided 2 Amending income payments

Company 1/3/4 Production of MI 2 App 1/2/3 Forms

Company 5 Production of MI 2 App 1/2/3 Forms

Company 1/3/4 Pay Commission 2 Approve Payments

Company 5 Pay Commission 2 Approve Payments

Company 1/3/4 Process new business 2 Area specific queries

Company 1/3/4 FA Registration 2 Area specific queries

Company 1/3/4 Pay Commission 2 Area specific queries

Company 5 Deal with requests for information 2 Area specific queries

Company 5 Distributor Registration 2 Area specific queries

Company 5 Pay Commission 2 Area specific queries

Company 1/3/4 FA Registration 2 Authorisation details

Company 5 Distributor Registration 2 Authorisation details

Company 1/3/4 Deal with changes to information provided 2 Back Office fixes

Company 5 Deal with changes to information provided 2 Back Office fixes

Company 2 Process new business 2 Bank StatementServ

icContr

Pro

ce

Depen

Inputs

Outp

uOrigin

Refe

rHyper

E C

om

T &

Cs

Custo

FA/d

isFA

HMRC

GP

Sale

s Regio

Chie

f Privat

Collec

Reass

Comp

Co. 5

Co. 6

PPI

Suppli

Couri

Mark

eIn

vest

Legal

compl

Pro

du

Invest

Accou

Legal

IT Accou

actu

ar

Core

unit

RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS RS

SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI SI

SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL

� b

b b b

b b b b b b

� b b b

b b b b b b b b b

b b b b

b

b

b b b b b

b b b b b b b

b b b b b

b b b b b b b

b b b b b b

b b b b

b b b

b b b

Key

Supporting SLAC, RSLAL, PLAC, SLID, SMFL & SLIL

CashIssue

New CM

Old Front End

Matchin

g

EOQ

Pipeline

Underwriting

Top Ups

Increments

Reviews Arrears

Payments

Claim

s

Offs

Enquiry Options Reporting

Quotes

Cash Match

Broker

RPG/SYNON

BASIC

VB/Client server

3rd Party Solns

Quasar

JDE

FerrariFerrari

KFDsKFDs

ImageImage

Workflow

BACsBACs

Extranet

Services

Extranet

Services

Web

NTSNTS

SigmaSigma

IntranetIntranet

PXPX

Asset

UnitsLiability

Units

The Tangled Web

Web Portals,NatWest,HSBC,IFA,Trust Company

,Extel,Bank of New York,Broker

Client

JDBC JDBC

WebServer

(Cluster)

JSP

1st TierPresentation Layer

HTTPS

Web Services

Java API

Application Server

Java/J2EE

MQ

Integrator

FTP

Server

2nd TierApplication

Integation Layer

RPGIV programs

Database Integration Layer

Dataware House

Database

DB2

for iSeries

3rd TierDatabase Layer

HTTPS

SOAP over

HTTPS MQS FTP

SOAP over

HTTPS

HTTPS

JDBC

JDBC

Web Browser

HTTPS

JDBC

JDBC

Service Oriented Architecture

Target Architecture - Darwin

HCL ‘APO’ to Facilitate the Journey0 2.5 5 7.5

10

Functional Quality

0 2.5 5 7.5 10

Technical Quality

AdminShell

Matching

AU Broker

Commissions

Cash

Arrears

eComm

Ferrari

Magnum

Old FE

PipelineIWF

LU

Increment

Top-UpKFD

PAS

Letter/ Cosworth

GroupView

PassatQuote

New Quote

Wave –1 apps

Wave –2 apps

Wave –3 apps

RTP

Qk-Basic Quote

Wave –4 apps

Year 1Year 2-3

Year 4

Year 5-6


• There are innovative engagement models to optimise offshore for business benefit

• All require cooperative governance

• Make sure benefits are measurable & seek Risk-Reward partners

• Staff augmentation models only reduce cost they do not add value

• Clients need to understand that they need to change – ‘The Retained Company’ and governance is paramount

• The India thing is now proven and competition for major transformations should now include so called ‘India players’

• Clients are prepared to be bold to achieve true transformation

• ‘Lets go back to the Museum’ – European Client Chairman quote on leaving from his India visit in December 2005

Case Studies – Summary

DSG and Skandia

To all the remaining doubters out there: HCL has just

whipped away your comfort blanket. These deals are proof

that Indian-based outsourcers have what it takes to beat

the established players.

-- Eamonn Kennedy, research director, Ovum

maximizing business impact from outsourcing · •offshore projects begun in all...

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