GSOctFINAL01:Layout 1 10/20/2010 1:21 PM Page 1

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 2

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 3

GLOBAL SERVICES A CYBERMEDIA PUBLICATION

An integrated media platform which connects the

various constituents of the global technology and
E. Abraham Mathew
business processing services industry ecosystem. President

Ed Nair
DIRECTORY OF SERVICES Editor
NEWSLETTER ed@cybermedia.co.in

A regular digest of key industry happenings. Satish Gupta

Associate Vice President
DIGITAL MAGAZINE satishg@cybermedia.co.in

The fortnightly digital magazine features research Ashwin Razdan

reports, articles and experts’ views. Available on ashwinr@cybermedia.co.in
www.globalservicesmedia.com
Pratibha Verma
WEBINARS pratibhav@cybermedia.co.in
Global Services’ web-based seminars aim to
impart useful information related to outsourcing Sruthi Ramakrishnan
sruthir@cybermedia.co.in
industry in the form of presentations and dis-
cussions by industry specialists.
Niketa Chauhan
niketac@cybermedia.co.in
RESEARCH
We deliver indepth analysis and research reports OFFICES
on sourcing subjects.
Global Services Media LLC.
806 Green Hollow Drive, Iselin, NJ 08830
MICROSITES
T: 678-665-6005
Online resource center designed to provide
focused content on special subjects to the out- Global Services
sourcing community. Cyber Media (India) Ltd.
CyberHouse, B- 35, Sector 32
EVENTS Gurgaon-122001, India
Tel: +911 24 4822222
From multi-day, high-level, resort conferences to Fax: +911 24 2380694
intimate breakfast discussions we offer a number
of opportunities that connects the outsourcing Contact: globalservices@cybermedia.co.in
community.

CUSTOM PROGRAM LETTERS TO THE EDITOR

Customized services rendered through different Send letters to ed@cybermedia.co.in, or to
media platforms. any of our writers. We reserve the right to
OSOURCE BOOK edit all letters. Postings submitted to our
blogs and letters to the editor may be pub-
A directory of global outsourcing service lished in our digital magazine or Website.
providers.
www.osourcebook.com

October 2010 www.globalservicesmedia.com GlobalServices 3

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 4

O c t o b e r 2 0 1 0 Vo l u m e 2 , I s s u e 1

FEATURES

M&As: The
Rising Tide
10
Hunger for growth is
driving M&A deals

Fueling the tide 12

Q&A with Aaron
Solganick 15
M&As by the
numbers 16

8 TRACKING THE OPD RECOVERY 17

By Sruthi
Ramakrishnan
The formula for recovery is
old fashioned: hold on tight
to your existing customers,
over-deliver on your value
proposition, and be open to
looking at new engagement
models.
INDUSTRY- SPECIFIC PROCESSES
Digital Production— An Opportunity for Providers Pg 17
By Vivek Shenoy
Is Insurance Analytics Outsourcing set to Surge? Pg 18
By Reetika Joshi
24
WHY EUROPEAN RPO STAYS WITHIN
EUROPE
By Pratibha Verma
Stringent data protection laws require employee information to be
kept within the Union

20 25
WHAT
INDUSTRY-SPECIFIC BPO
COGNIZANT
WILL EVOLVE STRONGER
THINKS
THAN HORIZONTAL BPO
By Ed Nair
by Sruthi Ramakrishnan
Q&A with Malcolm Frank,
The US Healthcare Reform bill is being seen as the biggest bonanza Cognizant
yet for the industry. While strong IT services vendors have been
developing BPO niches in specific verticals, newer BPO vendor
entrants are entering through the industry-specific domains.

4 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 5

Releasing November 16th

To advertise or to participate
contact: Satish Gupta at satishg@cybermedia.co.in
GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 6

EDITOR’S NOTE

Understanding the
Nature of Change
C hange is slow to be noticed. It is understood better, when things add
up over time or when a large shift happens.
This issue of the digital magazine is all about change; how micro-
trends will become waves of change or how systemic shocks like the reces-
sion can reset the economy and the market.
ED NAIR For instance, the story on how the OPD market is recovering from the
recession focuses on the impact of cloud computing on software product mod-
Editor els and the attractive mid-market opportunity. Mid-market software com-
ed@cybermedia.co.in panies are treating their OPD vendors as extended R&D organizations, while
enterprise software vendors will use OPD vendors to handle entire families
of products. Globalization of R&D is a far-reaching trend.
Microtrends will Similarly, the cover story on M&As spells out the need for companies to
buy their way into market share and the increasing willingness of small com-
become waves of panies with service niches to sell out. These trends will endure for a few years
change; systemic to come. Reason: buying market share is the fastest way to accelerate growth
shocks like the and to get into new geographic market for services (India, China, Brazil, oth-
ers).
recession can reset the Another interesting example of change is brought out by the story on RPO
economy and the in Europe. Very strict data laws mandate that RPO work not be offshored
market. outside the European Union. The laws are not aimed at curbing offshoring;
they are aimed at strengthening data privacy. This is in stark contrast to the
US trying to enact laws that penalize offshoring with increased taxes, dis-
criminating against Indian companies by hiking visa fees, or any other pro-
tectionist measures.
Finally, the story about Cognizant drives home the point on how a com-
pany can synthesize various signals that combine to form large forces of change
and make it a way of life both inside and outside the organization. The Cog-
nizant way is a fantastic example of thought leadership. GS

6 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 7

Releasing November 30th

Case Studies are invited from service providers. For more details
contact: Satish Gupta at satishg@cybermedia.co.in or visit:
www.globalservicesmedia.com/live
GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 8

Product Development

Tracking the
OPD Recovery
The formula for recovery is old fashioned: hold on tight to your existing
customers, over-deliver on your value proposition, and be open to looking at
new engagement models.
By Sruthi Ramakrishnan

P
ost recession the outsourced product develop-
ment (OPD) segment is coping with an empty
deal pipeline. "We were all faced with a bifur-
cated market during the worst of the downturn.
Most companies were on a spending 'lock
down'”, says Pallab Chatterjee, ex-CEO and presently
chairman on the board of Symphony Services." However,
there was a sliver of the market that was willing to make
the bold R&D investments necessary to emerge stronger
during the recovery. The challenge for OPDs was to find
and exploit those opportunities."
Jim Walsh, Chief Technology Officer, GlobalLogic agrees
with Chatterjee. "Companies less than $100 million in
annual revenues tended to shrink, and some of the small
ones went out of business. So we lost some business in that
sector. But in the $100 million category, people saw OPD as
a cost saver. So we had more growth there. This growth off-
set the shrinkage." Pallab Chatterjee, Chairman on the
board of Symphony Services
Market Sweet-spots
It is precisely to this category, that is, to companies in the
$25 -500 million range, that OPD vendors are looking to enough for sustenance, and big companies are already suffi-
to lift them out of the downturn. "Large ISVs still represent ciently penetrated. So it’s basically a very safe strategy to fol-
excellent growth opportunities as they are driving innova- low,” says Karthik Ananth, Director-Market Expansion,
tion across a number of areas, such as Cloud enablement, Zinnov Management Consulting.” And it’s not something
SaaS, PLM, etc. That said, the midsized market is extreme- that companies started doing last year, they have been doing
ly compelling to us because this is where some of the most this for the past three years. They took a halt last year as they
exciting and current technology development (e.g., unified did not know what would happen to the mid-size market,
communications) is occurring. So we intend to continue but now they are following the same strategy again.”
taking advantage of opportunities with larger ISVs while Besides the mid-size market, OPDs are looking to exploit
expanding our footprint to include the mid market," says the opportunities provided by companies wanting to refresh
Chatterjee. their product lines. “Companies wanting to grow in newer
The mid-market attraction, though, is not a new factor. markets want to revitalize their product lines so that they
"Going to the mid-market is only logical--startups are not can be rapidly deployed and configured at a lower price

8 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 9
point in the newer areas,” says Walsh. “There has been no
talk of cost arbitrage in the last nine months. Instead, com-
panies are looking at revenue generation activities, revitaliz-
ing their product lines and broadening their markets by
leveraging new technologies.”
Besides Asia, Europe is one of the geographies OPDs are
looking to expand in. “We’re continuing to invest sales and
marketing resources in China – for clients who want to tap
OPD VENDORS ARE LOOKING
AT COMPANIES IN THE
$25-500 MILLION RANGE TO
LIFT THEM OUT OF
THE DOWNTURN
China’s huge and highly skilled workforce (while maintain-
ing a toe hold in a region that represents a huge market for
them). And we are investing heavily in Europe for optimiz-
ing the R&D functions of a number of ISVs, telcos/carriers,
etc.,” says Chatterjee.
Challenges
Perhaps the biggest challenge for OPDs in the post-recession
period is to match up to the increased expectations from
them. As Jim puts it, “The playing field is becoming more dif-
ficult for companies, they need to be much better than they
were. The bar for software quality and presentation has gone
way up.”
As Ananth points out, the recovery story happened three
months back. “Now it’s about finding out which are the
growth areas and where are the new avenues of growth.” He
opines that with the advent of cloud computing and SaaS,
software moving to them will have significantly larger
opportunities. GS
9 GlobalServices www.globalservicesmedia.com
Product Development
Third-party Partnerships:
Future of Software R&D
l According to Zinnov's study on Software R&D
Globalization, only 5% of R&D budgets are cur-
rently being spent on outsourced partnerships,
which means about 95% of the R&D is conduct-
ed by companies in-house (HQ, Captive models)
l For many of the large sized companies that par-
ticipated in the Zinnov survey, mature/ existing
products account for more than 75-80% of
their total revenues. Hence they have to invest
heavily on maintaining and enhancing these
products to suit requirements.
l Inkeeping with their low spend strategy, compa-
nies are now focusing on new products for both
the US market and the emerging markets to tap
into newer opportunities and newer customer
requirements.
l Amitava Roy, COO, Symphony Services,"Two
major challenges to software product companies
today - freeing up resources to work on new
products and maintaining margins for legacy
products,”
l Majorityof companies are increasing R&D spend
in captive centers in emerging geographies such
as India and China
l Biggestcaptive center challenge- the tag and
the brand recognition to attract and retain
people
l 'Go-to-market'strategy: companies are asking-
should we develop it on our own or should we
get a partner who can not only develop it for me
but also help me in penetrating newer markets
and support me in expanding my existing mar-
ket?
l Challengesfaced by small and medium sized
ones: higher total cost of ownership, high set up
cost and lower productivity
l The new pricing models offered by vendors to
clients: outcome based pricing, revenue share
pricing and risk reward pricing. Companies are
now looking to leverage the risk-reward partner-
ship model, where the vendors are willing to
absorb a certain amount of business model risk,
across the lifecycle of products
October 2010
GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 10

M&As: The Rising Tide Special Report

The Rising Tide

for M&As

10 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 11

M&As: The Rising Tide Special Report

■ Fueling the tide 12

■ Q&A with Aaron Solganick, Generation
Equity Advisors 15
■ M&As by the Numbers 16

11 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 12
M&As: The Rising Tide
Fueling
the Tide
By Sruthi Ramakrishnan
The hunger for revenue growth is driving M&A deals
in ITO and BPO
T
HE ACQUISITION of Unisys Insurance
Services Limited (UISL) by TCS' UK sub-
sidiary Diligenta has brought into focus an
interesting trend in M&As in the services
industry.
Recent deals show that instant growth in market share is
increasingly becoming a driver for M&As. The Unisys
acquisition, for instance, was done primarily to increase
TCS's market share in the UK insurance space. Suresh
Menon, CEO, Diligenta had said at the time of closing the
deal, “Diligenta will use its vast experience of life and pen-
sions BPO and the existing expertise available at UISL to
continue to build its UK operations and service UISL’s
customers.”
Buying Market Share
TCS has seen instant gains following the transfer of UISL’s
business, with the former having become the second-largest
insurance BPO provider in the UK, after winning two deals
12 GlobalServices www.globalservicesmedia.com
Special Report
worth £250 million ($392.5 million) and business for the
next six years.
A similar trend can be seen in several M&As of recent
times. Genpact's acquisition of Symphony Marketing
Solutions, Capgemini's purchase of majority stake in
Brazilian major CPM Braxis, IBM's purchase of Unica have
all had established vendors in niche sectors being acquired
by bigger players who offer a wider range of services. "The
last two years saw businesses focusing more on managing
costs to take a conservative view during the global down-
turn. Now we see them back like in pre-crisis growth mode
and resuming investment – both organic and inorganic,"
says Sashi Reddi, Founder & Chairman, AppLabs. The soft-
ware testing and quality management company acquired
Value Minds, a developer of web-based testing tools last
month.
Symphony Services is another company that has been
active on the acquisition front, with two recent acquisitions-
CoreObjects and Proteans - adding to their expertise and
October 2010
GSOctFINAL01:Layout 1 10/20/2010 1:22 PM Page 13

M&As: The Rising Tide Special Report

client base. While the company has found the two acquisi- beyond their domestic market base and gain access to a larg-
tions complementary "to the work we have historically done er clientele, besides granting association with a known name.
with ISVs", it has also benefited In such cases, target compa-
by adding "Proteans’ established, nies aim to, as David
international client base to our Shpilberg, Vice Chairman of
global ISV client roster". the Board of CPM Braxis said
The company is not ruling out in an interview with
more takeovers in the near future. EuroBusiness Media, "create a
"We are always on the lookout for solid, global-standard compa-
highly specialized and differenti- ny that continues to grow at
atetd providers that will add to above market rates".
our core competencies; bring Besides markets, compa-
greater value to our client base; nies are also looking to acquire
and add strong engineering talent expertise in services that seem
to our team. We have very aggres- potentially profitable. IBM
sive growth goals for the next sev- seems to be leading the race in
eral years, and we plan to reach this regard, with the company
those goals through a combina- spending more than $11 bil-
tion of organic and inorganic lion in the past five years to
growth," says Sanjay Dhawan, shore up on higher-margin
CEO of Symphony Services. software businesses like
The strong M&A wave is set OpenPages, Unica and
to hold across company sizes and Coremetrics. “We will contin-
price bands, as the industry strives ue to see action from active
to return to its pre-recessionary
“The last two years saw busi- acquirers such as IBM who
galloping growth rate and compa- nesses focusing more on man- indulge in large to small size
nies keep all growth options open. transactions throughout the
"We are actively seeking ERP test-
aging costs. Now we see them year,” says Ratna Srivastava,
ing companies in the $40-50 mil- back like in pre-crisis growth Senior Analyst, Tholons.
lion range to help us address the
large enterprise market. Many of
mode and resuming investment Going Organic
our customers are demanding – both organic and inorganic,” M&As are like growth on
highly specialized ERP testing steroids. While they work as
skills and we would be open to an Shashi Reddy, an instant growth booster, do
acquisition in that space," says Founder & Chairman, AppLabs they have an adverse effect on
Reddi. in-house initiatives for
growth? "Most of the buyers
Small Firms Willing to be have been chasing targets offering complementary services
Acquired and hence not a threat to the in-house initiatives," says Ratna
This works well for mid-tier companies, several of which Srivastava. "However, a few large deals initiated in the past
were facing closure during the recession. Unica had a loss of couple of months were primarily in line with acquirer’s
$22.5 million on revenue of $100.6 million in the fiscal year major line of businesses, but has not been a threat because
ended Sept. 30, 2009. Kale Consultants, a mid-size out- the objective was to gain access to a geography or a new
sourcing services firm, sold out to European back office client segment."
provider, Accelya. Several others like Hexaware Ultimately, internal growth will drive a company's suc-
Technologies, Mastek, and Patni witnessed a tough year and cess. “Inorganic growth is fast and allows immediate utiliza-
shrank in revenue. For such companies, choosing to sell out tion of acquired assets. But, if the firm grows only inorgani-
to a bigger (and financially more stable) company may seem cally then it would be difficult for it to maintain sustainable
a viable option. growth from within and is a strategy for failure. Hence, there
But for profit-making enterprises like Brazil-based CPM has to be a good balance between organic and inorganic
Braxis, such M&As enable the target companies to reach out growth," sums up Reddi. GS

13 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 14
GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 15

M&As: The Rising Tide Special Report

We are seeing the continuation of

a two-year consolidation phase
Aaron Solganick, Founder President and Managing Director,
Generation Equity Advisors, spoke with Ed Nair about the
prevalent trends in M&A in the services industry. Aaron believes
that the tide is rising compared to the stillness that prevailed in
the past two years. Excerpts from the conversation:

GS: What are you seeing in terms of
the climate for M&As in the services
industry for 2010?
AS: The overall climate for M&A for
the Software & IT Services industry
for 2010 is one of the most active in
terms of number of transactions
announced in the U.S. and globally.
We are seeing a continuation of a 2-
year consolidation phase of major
software and IT services firms. M&A
is steadily improving quarter-to-quar-
ter 2010 and has clearly gained signif-
icant improvement since a dismal
2009. M&A for 2010 is still at below-
normal levels as compared to 2005-
2007, but is steadily improving.
GS: What kind of deals are these?
What are the drivers?
AS: So far this year, the largest M&A
deals mostly involved BPO firms,
while transactions with the highest
multiples spanned offshore outsourc-
ing, government, specialty consulting
and digital marketing services, show-
ing that healthy valuations are not just
tied to one area. Overall, companies
are acquiring to gain traction in a
product or service offering or geo-
graphic reach (India to US, Europe to
US, Latin America to US).
We see a consistent trend in larger
IT services and BPO firms acquiring
small-to-mid market companies that
add strategic value to their current
offerings. The mega-mergers over the
past 2 years have mainly been to take
advantage of a lower valuation and
sometimes a near fire-sale.
GS: But large deals seem to be miss-
ing; the likes of HP-EDS, Dell-
Perot, ACS-Xerox. How are the large
companies doing?
AS: Even though deals of the type you
mentioned have not happened, all of
the major technology conglomerates
such as IBM, HP, Accenture and
Capgemini have been steadily active
in acquiring companies in 2010.
Nippon Telegraph and Telephone
Corporation (NTT), one of the
largest global telecommunications ser-
vice providers announced the acquisi-
tion of Dimension Data Holdings Plc
(Dimension Data), a global specialist
IT services and solutions provider, for
$3.2 Billion. PwC also recently
announced the acquisition of
Diamond Management & banker. He has completed over $8.4 billion
Technology Consultants, Inc. (DTPI)
for $378 million, a move to improve
its global management consulting and
systems integration offerings. Aon
Corporation’s acquisition of human
resources consulting and outsourcing
solution provider Hewitt Associates
for $4.8 billion and 1.6x revenue was
a large deal in Q3. Add to this,
Accenture-Ariba and CapGemini-
CPM Braxis kind of deals.
GS: What about the Indian vendors?
AS:As for the Indian companies such
as Wipro, Infosys and HCL, there
have been few M&A announcements
in 2010. We see Indian firms acquir-
ing small-to-medium sized BPO firms
in the U.S. and Europe, but not India-
to-India firms. We also do not see
U.S. or European firms acquiring any
of the large Indian firms this year and
possibly the next due to large valua-
tion gaps (1x’s revenue for U.S. IT ser-
vices firms versus 4x’s revenues for
Indian IT services firms). GS
Aaron Solganick, Founder President and
Managing Director, Generation Equity Advi-
sors, is an experienced technology investment
in transactions to date including M&A,
private capital raises and IPOs. He has
worked at top-tier and middle-market M&A
firms and gained experience in complex
transactions of most shapes and sizes.

15 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 16

M&As: The Rising Tide Special Report

M&As by the Numbers

GLOBAL M&A DEALS DEALS WITH OVER $500M VALUE

600
TOTAL VALUE IN USD (IN BILLIONS)

1500 1420.20
515
1137.98 500
1200

NO. OF DEALS
400
900 323
300
600 200

300 100

0 0
Q3 '09 Q3 '10 Q1-Q3 2009 Q1-Q3 2010
QUARTER QUARTER

GLOBAL M&A DEALS COUNT AVERAGE M&A DEAL SIZE

10000 60 58
8,010
TOTAL NO. OF DEALS

USD (IN MILLIONS)

8000 50
6,864
40
6000
30 27
4000 21.95
20
2000 10

0 0
Q3 '09 Q3 '10 Q3 '09 Q3 '10 Q3 '10
(for IT services only)
QUARTER QUARTER

DISCLOSED DEAL VALUE VC-BACKED M&A DEALS

4.0 3.8
120
3.5 104
USD (IN BILLIONS)

2.9 100 97
3.0
NO. OF DEALS

2.5 80 69
2.0
60
1.5 1.4
1.0 40

0.5 20
0.0
0
Q3 '09 Q2 '10 Q3 '10
Q3 '09 Q2 '10 Q3 '10
QUARTER
QUARTER

Sources: Thompson Reuters, Capital IQ, National Venture Capital Association, Dow Jones Venture Source,
MergerMarket

16 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 17
The Digital Production Opportunity
For publishing companies undergoing cost and revenue pressures, the digital
market presents a holistic solution- one that opens a channel of revenue with
non-linear growth, while ensuring minimal costs of production & sales. However,
creating digital offerings presents its own sets of problems.
Vivek Shenoy, Analyst — Publishing, ValueNotes Sourcing Practice
O
n the 19th of November 2007, Amazon
released its first generation Kindle – an event
that shaped the digital market. Since then,
large corporations such as Sony, Barnes and
Noble, Google, and more recently Apple,
have been giving the digital content market significant atten-
tion – adding credibility and more so, validating the digital
market as a strong revenue source. Consumers have respond-
ed well to digital content as evident by e-book sales in the US:
The International Digital Publishing Forum (IDPF) reports
sale of digital content/books in the US, for the first two quar-
ters of 2010, in excess of $150 million – a 200% growth since
the same period last year.
Publishers, over the last few years, have faced significant
cost and revenue challenges – challenges that have shaped
how the industry is currently operating. For publishing com-
panies undergoing cost and revenue pressures, the digital mar-
ket presents a holistic solution – one that opens a channel of
revenue with non-linear growth, while ensuring minimal
costs of production & sales. Whether it is opening a new
channel of revenue through digital sales or migrating to digi-
tal only operations, the publishing industry worldwide is get-
ting a digital facelift. However, creating digital offerings pre-
sents its own sets of problems.
Optimal Production of Digital Content is a Challenge
To better understand how publishers address the digital mar-
ket the ValueNotes Sourcing Practice is conducting a survey on
“The Current State of Digital Content”. Initial responses from
our survey suggest that integrating a digital workflow in addi-
tion to the existing print workflow is a challenge – more than
two-thirds of the respondents having indicated so. Most pub-
lishers view the creation of digital content as two activities:
n Digitisation of backlist/archives
n Digitisation of existing/future content
Digitisation presents its own set of challenges and is highly
dependent on the value of the content (particularly for
STM/Academic, reference and trade book publishers).
Publishers with a large backlist have faced issues while organis-
ing content, identifying source files (due to multiple versions),
developing workflows in-house and most importantly organis-
17 GlobalServices www.globalservicesmedia.com
Industry-specific Processes
ing the resources required while undertaking the digitisation.
On the other hand, digitisation of existing/future content
is highly dependent on developing strong workflows that
incorporate multiple formats. The biggest challenge remains
in maintaining a uniform user reading experience – across var-
ious e-readers and formats. To truly monetise the digital mar-
ket, publishers need to not only develop the necessary tech-
nology skills and infrastructure, but also develop the resources
in-house – a significant cost outlay.
Leveraging the Outsourcing Model
Traditionally, publishers have leveraged outsourced publishing
services providers to cut costs. However, with the onset of dig-
ital content, publishers are going beyond cost as the primary
criteria for choosing a vendor. For example, a large education
publisher we interviewed rated product expertise as the prima-
ry driver for choosing a vendor. Varying formats, ensuring uni-
formity of reading experience and integrating deliverables in
the buyer’s workflow all require capability and skill on part of
the vendor.
Buyers have also indicated lack of in-house capability
(technological expertise) and resources (scalability of opera-
tions) as other important drivers of outsourcing. While buy-
ers might consider outsourcing more, satisfaction levels are a
concern. Quality, timeliness and delivery processes remain
areas where most buyers seek improvement.
Providers (pure-play publishing services and otherwise)
now stand at the threshold of a significant opportunity – that
of digital production. This opportunity includes volume dri-
ven services such as conversions, XML, etc. to value added
services such as workflow and process consultancy. However,
to successfully address this opportunity; providers will need to
match up to the buyers expectations of quality and delivery.
Publishers will soon need to find a lasting solution to quality
issues – consumer expectations from digital content is increas-
ing rapidly. As the market grows, the publishing industry will
adopt digital content on a wide scale and as the market matures,
there will be more opportunities to cross-sell content. Whether
publishers outsource or not, the need of the hour is to digitise
in a holistic manner – one that will facilitate the digital pro-
duction of existing/future content optimally. GS
October 2010
GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 18

Industry-specific Processes

Is Insurance Analytics
Outsourcing Set to Surge?
By Reetika Joshi, Analyst, ValueNotes Sourcing Practice
Providers are striving to gain critical industry experience and evolve
their banking, financial services and insurance practices indepen-
dently, with a keen eye on high-end services for the near future

T
he last few years saw the deconstruction of
the mighty ‘Banking, Financial Services and
Insurance’ (BFSI) segment, for the out-
sourcing industry. With significantly dis-
similar business environments, processes
and outsourcing needs, the distinct differences in the
banking and insurance sectors have become apparent.
They are now treated as exclusive customer segments, and
the addressable market for each of them have proved
extremely lucrative for outsourcing providers. Due to this
reason, providers are striving to gain critical industry expe-
rience and evolve their ‘banking’, ‘financial services’ and
‘insurance’ practices independently, with a keen eye on
high-end services for the near future.
The insurance segment, worth US$4066 billion in
global premiums (Swiss Re Sigma Study, 2009), is no
stranger to outsourcing. Insurance, reinsurance and inter-
mediary companies have relied on outsourcing application
development and infrastructure management outsourcing
for many years, like the aggressively outsourced banking
segment. With confidence established in the ‘outsourcing’
concept, in the last decade UK based insurers moved ahead
to set up offshore captive centres and Third Party
Administrator agreements for various low-end business
processes as well. Simultaneously, insurance companies in
the US engaged with BPO providers instead, and it is due
to their efforts that the intensity of insurance BPO out-
sourcing has grown to today’s volumes. Collectively, the

18 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 19
North American insurance BPO market was valued at
US$2 billion in 2009 by Celent, a consulting firm. By
2013, this figure is estimated to double, despite the sizing
relating to only core low-end BPO processes.
Moving up the Enterprise Value Chain Through
Insurance Analytics
Processes outsourced today by insurers in the
US/Europe include a wide variety of volume-led transac-
tions, in the fields of policy administration and servicing,
claims administration, various marketing/ sales/new busi-
ness outbound voice processes, and customer support.
These back-office/voice processes have been easier for
insurers to outsource, as they are relatively less critical,
offer greater savings potential, and are easier to migrate
due to their high process maturity.
As the industry matures, several major BPO providers are
now transitioning to position themselves as high-value busi-
ness partners, and are offering a range of knowledge inten-
sive services, to move up the value chain. Of these KPO ser-
vices, insurance analytics looks to be the strongest contender
in the coming years, due to the influence of several compet-
itive forces in the insurance segment, elaborated below.
1. Legislative and regulatory compliance requirements:
The US healthcare reform will bring in over 30 million
new insured over the course of the next four years, intro-
ducing complete new segments for US insurers to service.
While this is a great opportunity for insurers, they will
need strong risk and price remodelling to aid their product
development. European insurers, meanwhile, are subject
to compliance requirements from the Solvency II regime,
which will bring about a more effective risk management
framework for the EU. As a result, insurers have to set up
extensive risk modelling to comply with the Solvency II
requirements, including quantitative requirements (Pillar
I), governance, supervision and risk assessment (Pillar II),
and disclosure of insurance operations (Pillar III).
2. Strong competitive pressures encouraging ‘core’ out-
sourcing: Insurers face a market with falling premiums and
profitability, compared to the pre-recession years. There is
severe competition, coupled with newer customer and dis-
tribution channel dynamics. To be able to compete, insur-
ers must achieve the highest degree of efficiency and lean-
ness. Once ‘unoutsourceable’ core processes are no longer
viewed as such. Risk modelling, actuarial services and new
product development were traditionally the most core
insurance activities, directly linked with company perfor-
mance and competitive differentiation. The entire gamut
of these services was then retained in-house. However,
with the paradigm shift, even high level research and ana-
lytics work is being considered for outsourcing. This
19 GlobalServices www.globalservicesmedia.com
Industry-specific Processes
includes services such as: Predictive analyticsClaims and
profitability analysisPersistency modelling and
analysisMortality/morbidity modelling and
analysisProduct profitability analysisNew product develop-
ment – pricing, valuationCommissions analysisActuarial /
statutory reporting Actuarial dataInformation manage-
ment
While initially more reporting and information man-
agement services were outsourced within analytics,
providers are now seeing a surge in actuarial and prof-
itability/pricing analytics as well. Based on the industry
redefinitions taking place, in the coming years only work
that is heavily governed by regulations and/or is incapable
of being delivered through technology will remain as ‘core’,
to be retained in-house.
3.Provider base gaining KPO domain expertise: The
majority of high-value insurance processes are complex,
being knowledge and judgment intensive. Hence, these
‘KPO’ services will only be entrusted to established ‘niche’
providers who have demonstrated domain expertise in
insurance. Towards this, BPO providers are rapidly vertical-
izing in order to enhance insurance expertise. Existing out-
sourcing relationships with IT/BPO insurance clients are
being leveraged to cross-sell analytics services. The top
insurance BPO providers have a significant presence in
India, and are benefiting from the country’s strong talent
pool, with strong analytical/mathematical skills and English
language capabilities. With robust business delivery mod-
els, domain expertise and a large talent pool, providers are
positioned well to move up the insurance value chain.
When is the Shift?
While the stage has been set for insurance analytics to
gain traction, it must be noted that the bulk of outsourced
work still remains heavy back-office processing and cus-
tomer support. What has changed for insurers is the
increased focus on risk modelling, due to changes in the
competitive and regulatory environment. This might not
translate into more business for BPO providers in the short
term, save for existing accounts that have grown, given
higher confidence in vendor capabilities. As providers
become more verticalized, and further develop their dedi-
cated insurance practices, the shift towards higher value
analytics services will accelerate in the next three years.
Risk, marketing and operational analytics, coupled with a
consultative approach, will greatly help insurers gain com-
petitive advantage in a challenging and complex competi-
tive environment. Due to heightened demand and the
strong value proposition offered by the global vendor base,
‘claims processing’ as the most outsourced activity may see
some competition in the years to come! GS
October 2010
GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 20

BPO Trends

Industry-specific BPO Will Evolve

Stronger Than Horizontal BPO
The US Healthcare Reform bill is being seen as the biggest bonanza yet for the indus-
try. While strong IT services vendors have been developing BPO niches in specific verti-
cals, newer BPO vendor entrants are entering through the industry-specific domains.
Opportunities will be widespread where BPO and IT services can be bundled together.

By Sruthi Ramakrishnan

V
ertical-specific BPO services present a larger
and more diverse market opportunity as
compared to horizontal BPO services. The
US Healthcare Reform bill has been the
biggest newsmaker in this regard, with many
already terming it the “biggest bonanza yet” for the indus-
try. Service providers with expertise in the healthcare area,
both from industry leaders like India, Philippines and
nearshore locations like Canada, Mexico are queuing up to
grab a share of the approximately $2.5 trillion US health-
care pie.
Experts say that opportunities will be widespread
in those industry domains where BPO and IT services
can be bundled together under a single vendor's provision.
This will help to generate more efficient business outcomes
and to secure future IT work with existing clients. So
the providers who can bring in industry domain
expertise are set to emerge as significant players in the
coming year.
A trend which is indicative of this growth potential is
that newer vendor entrants are entering the BPO industry
through the industry-specific (vertical) process domains.
Most of the strong IT services vendors have also been
developing BPO niches in specific verticals where they
have developed some strong process acumen and client
credibility.
According to a survey by Horses for Sources, one-in-ten
financial services firms, and one-in-five from life sciences,
are looking to move into some form of domain-specific
BPO this year for the first time. These are typically areas
where there is some immediate labor arbitrage opportuni-
ty, like trade settlement transactions and mortgage pro-
cessing in financial services, and data storage and manage-
ment processes in life sciences.
Reasons for Evolution of This Sector
At the outset, process outsourcing had been primarily a
cost-control strategy driven mainly by labor arbitrage.
Cost-control is still relevant. But in today’s environment,
especially keeping the slow economic recovery in view,
organizations are searching for value--for ways to do things
better, faster, and cheaper--and for the ability to truly
transform their businesses. To do that, they need BPO that
is based on industry-specific knowledge and that is driven
to achieve measurable business outcomes.
On the buyer side, several industries- financial services,
life sciences, healthcare, retail, manufacturing, media, etc.
- are undergoing fundamental changes, right from their
infrastructure to business model to customer expectations.
In such a situation, outsourcing processes is no longer seen
as abhorrent or unusual. Another reason is the success of
existing domain-specific BPO engagements. Over half of
all the financial services and life sciences firms recently sur-
veyed by Horses for Sources are looking to expand existing
BPO engagements this year, and very few intend to pull
work back onshore. However, this doesn't necessarily
entail massive increased spending overnight, but more a
gradual incremental increase in engagement scope.
Suppliers also find the marketplace increasingly crowd-
ed, and industry-centric capabilities enable competitive
differentiation. Moreover, the move to greater domain-
specificity is intrinsically tied to the business utility model
of the future, where there are signs of the convergence of
SaaS, Cloud and BPO/ITO models within an engagement

20 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 21
structure. The need for clients and vendors to define,
develop and implement holistic end-to-end process solu-
tions is slowly coming to the forefront.
All these reasons have led an increasing number of indus-
try verticals to explore new and radical means to improve
productivity, source new revenue opportunities and drive-
out cost. Other benefits sought from providers include
enhanced customer service, greater competitive agility, and
measurable long-term business value, to name a few.
Vertical-specific Potential
Healthcare outsourcing : The Healthcare Reform bill has
the outsourcing industry abuzz with anticipation. Many
BPO firms, including several Indian ones, recently
increased or are in the process of increasing their onshore
presence in the US or seeking possible mergers and acqui-
sitions with other companies so as to broaden their exper-
tise and so gain more business from the on-the-brink-of-
booming healthcare industry there.
But capturing the US healthcare market is easier said
than done. So far only a few IT and BPO firms have made
a headway into the US healthcare provider and payer mar-
ket despite the huge potential for automation and out-
21 GlobalServices www.globalservicesmedia.com
BPO Trends
sourced services in areas such as revenue cycle management
and claims processing. Industry players and experts cite
issues like lesser willingness to outsource as compared to
the financial services players, regulatory and privacy con-
cerns related to patient records, compliance to specific Acts
such as HIPAA (Health Insurance Portability and
Accountability Act), knowledge of medical procedures and
codes, and variations between states which make this mar-
ket more challenging.
But with 32 million Americans slated to join the ranks
of the newly-insured, many providers will soon be seeking
assistance in the processing of not just the new enrollees,
but their existing clients as well. Insurance providers who
were previously hesitant about outsourcing services will
also now be forced to rethink, especially as competition
will be tougher than ever in their industry. Of course with
that, competition to gain profit from healthcare services
will be tougher in the outsourcing industry as well.
Financial sector outsourcing: The financial services sec-
tor has seldom faced a tougher set of business, market, and
regulatory challenges. Many firms face threats from ongo-
ing consolidations, more mature non-traditional competi-
tors, and proliferating compliance demands. To meet these
October 2010
GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 22

BPO Trends

challenges, BPO is increasingly being seen as a logical and trials will provide opportunities for additional growth in
proven tool for banks, card issuers, mortgage, insurance future years.
and other financial services firms. Banks and other organi- Besides, with the consolidation of the pharmaceutical
zations are using BPO to manage risk, to reduce costs, and industry and the continued trend of strategic partnerships
to comply with increasingly rigorous regulatory demands. between CSPs and their clients, many companies in the
Mortgage Process outsourcing: The major challenge sector will be drawn to find new revenue sources.
which service providers face while offering mortgage ser- Besides India and Japan, China is emerging as a poten-
vices is the integration of services like loan origination, tial industry leader in this vertical. According to a 2008
vendor management, post-closing processing services, report ‘The Changing Dynamics of Pharma Outsourcing
third party services until underwriting, modification ser- in Asia: Are You Readjusting Your Sights?’ by
vices, technology services etc. PriceWaterhouseCoopers, big pharmaceutical companies
TCS (Tata Consultancy Services) shared with Global rated China as the best location for outsourcing in Asia.
Services ('New Demands in Mortgage Processing BPO', The country’s large population represents enormous mar-
September 28, 2009) that as mortgage rates dropped to ket potential for Western firms whose domestic profits are
under 5% early last year, re-finance activity increased cre- coming to a standstill. Pharma companies are also drawn
ating a spike in demand for origination and loan closing by China’s low production costs. The Wall Street Journal
related services. This demand cooled as rates edged up. estimates that the total cost of a scientist in China is
For default related services including MODs and real $30,000, compared to $250,000 in the U.S. Worldwide
estate owned (REO) there were pharmaceutical firms looking
early demand spikes as servicers to expand sales into emerging
began to deal with the mort-
The move to greater domain- markets are contributing
gage crisis. An uncertain regu- specificity is intrinsically tied to resources to China.
latory environment and politi- Supply Management out-
cal pressures for moratoria on the business utility model of the sourcing: The market sur-
foreclosures late in 2008 con- future, where there are signs of passed a billion dollars in
tributed to a slowing in default expenditure for the first time
outsourcing. As moratoria the convergence of SaaS, Cloud last year, with a 30% hike in
expire and MOD programs and BPO/ITO models within an expenditure on new multi-
become better defined, service scope BPO contracts, as
providers are facing a need to engagement structure reported by the AMR
rapidly add scale. Cycle time Research Supplier
has shortened dramatically. For Management BPO services
service providers this translates into a need for excellence report of 2009. The main reason for this uptake is the
in manpower management, recruiting, and training. An increased availability of low-cost offshore services for pro-
additional critical element is deep domain expertise – the cure-to-pay and strategic sourcing support, with 72 per-
ability to work with the client to optimize processes, find cent of services being delivered from India for largely
ways to automate more fully and expand the scope of North American and European organizations. But
potentially outsourced business processes. experts say that this market will not sustain its growth
Life sciences outsourcing: The industry-wide drive for trajectory unless customers think beyond short-term
pharmaceutical and biotechnology companies to lower labor arbitrage, and service providers introduce signifi-
costs, access specialized services and increase flexibility cant process and technology enhancements to the early
through outsourcing work to Contract Service Providers adopters to help them optimize their delivery.
(CSPs) was highlighted by BioCrossroads’ latest report on Publishing outsourcing: The pressures that publishers
Industry Developments in U.S. Biopharmaceutical faced in the wake of economic recession stimulated the e-
Contract Services. The new report acknowledges that book market. In the US alone, trade wholesale electronic
while 2009 was slow for many CSPs, the underlying rea- book sales amounted to $167 million according to the
sons for pharmaceutical and biotechnology companies to International Digital Publishing Forum (IDPF). The e-
outsource selected activities will continue for the foresee- book segment is growing and has witnessed serious
able future. CSPs should continue to grow as the pharma- attempts by publishers to make it a strong revenue
ceutical industry moves towards a more flexible business source.
model. Biomarker services and the need for larger clinical Outsourcing is being looked upon, besides to tackle

22 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 23
cost pressures, to deal with the challenges of adapting to
new technology, lack of in-house capability and addressing
new geographies.
According to a 2010 ValueNotes survey of publishing
service buyers, India was followed by the US in popular
publishing outsourcing destinations, while the Philippines
was the second most preferred offshore destination after
India. ValueNotes estimates the Indian publishing out-
sourcing industry to grow to a $1.2 billion annual market
by 2012 from $660 million in 2008. This growth is
expected to come from the rise in the number of publish-
ing firms that will outsource their work.
Indian players are shifting focus from the matured aca-
demic segment to the more lucrative segments in the pub-
lishing market- educational, magazines, corporate, B2B,
trade and e-books will be attractive segments over the next
three-four years, and Indian service providers can extend
their current capabilities to service these upcoming oppor-
tunities.
The industry still suffers from a serious piracy problem,
caused largely by the high price of books, especially foreign
books published under license, where currency exchange
rates push up the prices. Besides, diversifying into new
areas of business and providing value-addition within cur-
rent offerings are areas where outsourcing is yet to be
viewed as a complete solution, the ValueNotes survey
revealed.
Media outsourcing: The global media and entertain-
ment industry revenue is likely to increase by leaps and
bounds due to the proliferation of content in multiple for-
mats across media platforms. The media process outsourc-
ing opportunity is huge since most of the existing contents
worldwide are in the analogue form and need to be digi-
tized for new platforms.
As advertising declines, the pace of onshore and off-
shore outsourcing in the media industry appears to be
picking up. The Everest Group reported an increase in
media-related outsourcing deals in the last year. Mergers
among media companies are driving some of those deals,
but most of the push to outsourcing is due to pressures in
the ad market. Publishers see labor arbitrage and off-
shoring as one of the easiest things they can do to cut costs.
Many companies today understand the importance of
maintaining a good profile on the internet. Hence, they
seek social media services like SMO (SM optimization) for
their websites from third party vendors to boost their
online business marketing while they focus full time on
their core business development.
Other Verticals
Industry specific variations of horizontals continue to
23 GlobalServices www.globalservicesmedia.com
BPO Trends
remain unaddressed though a few areas such as Revenue
Accounting (Travel) or Revenue Assurance (Telecom) are
drawing interest. Travel (airlines) is a sector where industry
specific services such as Pricing/Fare filing or Yield
Management or Load Management have seen demand
though "revenue accounting" has been leading in the sec-
tor.
Insurance is a sector which has been waiting for a good
platform solution for a few years now.
Firms looking at supply chain functions, such as man-
agement of environmental compliance, distribution man-
agement, sourcing etc. are also choosing to outsource
them.
Other emerging verticals include technology, telecom
and transportation.
Opportunities and Risks
The 2009 Everest report ‘Industry-Centric BPO
Solutions- Opportunity to Attain Distinctive Market
Positioning’ says that while “verticalization” of services
implies numerous opportunities for value creation, there
are also potential risks, and suppliers need to identify and
adopt mitigation strategies for these risks.
Among opportunities, the report mentions that while
the overall BPO market is highly competitive, the market
by industry is concentrated. Also, the industry specificity
of services sets the stage for the introduction of higher-
value pricing models. On the other hand, strategic invest-
ments for capability building in vertical services will carry
larger risks.
Experts also warn that while industry-specificity will
clearly be a major driver in outsourcing, the financial pres-
sures on vendors to maintain their profit margins may
override its development. The capability to deliver genuine
domain-specific process acumen to clients is quickly
becoming a major differentiator in the market. However,
investing in the talent to truly scale these capabilities is
expensive, and the margins aren't as appealing as those cur-
rently being displayed by several vendors delivering the
easy, operational work. As a result, sector-specific skill
shortages (specialized skill categories for vertical-specific
processes such as actuaries for Insurance BPO) are likely to
emerge, according to the Nasscom- Everest India BPO
Study (2008).
While some vendors are clearly content with a thin
veneer of vertical capability, others are picking verticals
where they feel they can gain an edge over the competi-
tion. But it's a gradual development, and experts say that
it will take patience and attitude on the vendors’ side to
invest in the depth of talent they need, and less concern
about short-term profits and demands. GS
October 2010
GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 24

Human Resource Outsourcing

Why European RPO Stays

Within Europe
Stringent data protection laws require employee information to be kept within the Union
By Pratibha Verma

T
he European recruitment process outsourc- The seventh principle (concerning information security)
ing (RPO) market is not amenable to off- is relevant to how the information is sent and the necessity
shoring. Despite being a segment growing at to have contracts when using subcontractors abroad.
annual rate of 10 percent, the RPO market Dunphy says, "If data is going outside the EU you
in Europe relies solely on a mix of onshoring would have to inform every candidate about it. These are
and nearshoring. Cultural affinity and the nature of the constraints. A lot of organizations worry that they don't
recruitment process is only part of the reason. Alsbridge want to be the first one to have a legal case about holding
Senior Manager Shaun Dunphy says, " Onshoring of RPO data in India or any other offshore destination. For many
with some nearshoring is emphatically practiced in Europe RPO companies it is easy to retain the data within the EU.
because of data protection laws.” The reason why RPO is not offshored is also because it can
The Data Protection run easily in the same conti-
Directive (Directive 95/46/EC nent.”
on the protection of individu- “A lot of organizations worry What do RPO buyers need?
als with regard to the process- that they don't want to be the RPO buyers want streamlined
ing of personal data and on the recruitment processes from ser-
free movement of such data) is first one to have a legal case vice providers, which means
a European Union directive about holding data in India or they want providers to reduce
that regulates the processing of the time it takes to hire good
personal data within the any other offshore destination.” candidates, reduce the cost per
European Union. It is an Shaun Dunphy, Alsbridge recruitment. They want to move
important component of EU to fixed price per recruitment
privacy and human rights law. campaign and to lower the
According to Information Commissioner's office, the recruitment cost from what they have in-house. It would
Data Protection Act says that personal data shall not be have been easier to reduce costs through offshoring but the
transferred to a country or territory outside the European laws prevent it. GS
Economic Area (EEA) unless that country or territory
ensures an adequate level of protection for the rights and
freedoms of data subjects in relation to the processing of Recent RPO Deals in Europe
personal data. l SourceRight Solutions for Siemens (announced
This is the eighth data protection principle, but other August 9, 2010)
principles of the Act are also relevant to sending personal l Alexander Mann Solutions for Cobham Plc
data overseas. For example, the first principle (relating to (announced July 14, 2010)
fair and lawful processing) will in most cases require to l Xchanging for BAE Systems (announced May 18,
inform individuals about disclosures of their personal data 2010)
to third parties overseas.
l Harvey Nash for Buying Solutions (announced
Dunphy says that employee-data cannot be transfered to March 2, 2010)
other countries without the employee's consent. So, if the
l Alexander Mann Solutions for Atos Origin
data is going to be stored in the other country, it becomes
(announced October 21, 2009)
mandatory for the employee to sign an agreement before
Source: Ovum IT Services Contracts Analytics
joining the company.

24 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 25

Q&A

WHAT COGNIZANT THINKS

Thoughts are things, as they say. Powerful thoughts have shaped institutions, orga-
nizations, nations, and civilizations. Malcolm Frank, SVP-Corporate Marketing and
Strategy, Cognizant, was asked by his CEO (Francisco D’Souza) to synthesize the
signals from the market and come up with a strategy that would define what and
how the company did. In an exclusive phone-side chat with Ed Nair, Malcolm
explains the evolution of Cognizant’s thought, called as ‘Future of Work’ and how
Cognizant applies it to the marketplace.

M
en and organizations do fundamental
rethinking when something is serious-
ly broken. So, what happened at
Cognizant?

MF: The recession. Companies in our sector, including us,

had grown at superlative rates for the past five to six years.
And then suddenly growth stalled. Institutions of the likes of
Bear Stearns and Lehman Brothers fell. It was scary.
GS: Did you panic?
MF: Our CEO Franc D’Souza did a very wise thing. Instead
of panicking, he gathered the senior managers at Cognizant
and charged them with coming up with a synthesized view of
what was happening. The top 20 managers locked themselves
up in a meeting all Friday, Saturday, and Sunday for many
weeks that followed. Instead of just providing our opinions on
what we thought went wrong, we looked at what was hap-
pening through the lens of our clients.
We went client-by-client, half an hour each, in a rigorous
way. These meetings were not fun, but after the third one, the Malcolm Frank, SVP-Corporate
pattern started to emerge. Marketing and Strategy, Cognizant
GS: What was that?
MF: Customers were recognizing that this was not a cyclical
downturn; they recognized that this was a shift point. The build a new curve, that they need to find new ways of orga-
trigger for that might have been the mortgage crisis, but there nizing, new ways of delivering, and new ways of creating
were some very large forces at work. It was not about tighten- value. That was the initial view into what we now call as
ing the belts or laying off a few people. ‘Future of Work’.
Change is accelerating as the global recession gives birth to GS: Future of Work. Sounds eclectic. So those large forces of
a “reset economy” in which organizations in every industry are change that you mentioned ...
reassessing their business models to overcome unpredictable MF: Yes. There are a few easy ones. One was certainly global-
markets, greater margin pressures and a drought in invest- ization. For us, in terms of what we do during the day, we are
ment capital. too close to the trees to be able to see the forest clearly. Our
There was this feeling amongst many clients that some- clients had globalized this one piece around IT but there were
thing was seriously wrong at the basic level, that they need to many other portions of their business model that were not

25 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 26
globalized. Clients were closely looking at that. Work, of all
forms, is migrating to its right location worldwide, allowing
companies to leverage expertise anywhere and everywhere it
resides.
Second is virtualization and I don’t mean it only in the
techie sense. New virtualized platforms are enabling real-time
collaboration both within organizations and with outside
partners, leading to new ways of working, managing and
innovating. Virtualized company, virtualized work experi-
ence….because of financial pressures companies were highly
motivated to try out these new things.
GS: What about technology? Isn’t that a force of change by
itself? There is so much talk about cloud computing, social
media…
MF: Yes. Cloud computing, social networking, broadband
and mobility are enabling new business and technology mod-
els that improve operational flexibility and knowledge shar-
ing. There was first-hand experience at this. The experience
they were having on Sunday nights— very exciting and
engaging social computing experience using their iPad or to
Tweet or chat with friends on FaceBook. And then, on
Monday morning and face the old world kind of
26 GlobalServices www.globalservicesmedia.com
Q&A
work……the difference is vast and things are not going to go
on this way for long.
This dissonance between the Sunday night and Monday
morning experience was driving some real change not just
with the IT footprint but also overall with the organization. It
is being turbocharged by the ‘millennial’ generation. This
brings us to the next major force of change- the ‘millennial’
generation and their mindset.
GS: What about the generation of millennials?
MF: A major shift in the nature of work coincides with the
growing presence of the Millennial generation in the work-
force and the consumer marketplace. There are an estimated
50 million Millennials, defined as persons ranging in age from
18 to 29, who were born after 1980 and have come of age in
the new millennium. Approximately 65% of this group is
now in the workforce on either a full-time or part-time basis.
(Pew Research Center, “Millennials: A Portrait of Generation
Next,” February 2010.)
GS: What do these ideas point toward? What did you do
about them?
MF: There were two perspectives: outside-in and inside-out.
Outside-in, the answer was unambiguous. But this was the
October 2010
GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 27

Q&A

general theme. How does this show up in the retail banking,
how in the life sciences industry, how in certain portions
of the manufacturing industry. We really understand that. It
was beneficial for us, but it was more important for the cus-
tomers.
The second important thing was inside-out. Lot of cus-
tomers came back to Cognizant and said that, “You seem to
embody these principles”. That makes sense because if we
look at what we do- we are by definition highly globalized and
they were particularly intrigued by the management team that
is virtual but works in a very cohesive way. We embrace the
virtual experience in a meaningful way. Third, we run the
company on social technology. It looks like FaceBook. Called
as Cognizant 2.0 or C2, it is the marriage between social com-
puting, cloud computing, and knowledge management.
Today, C2 provides a virtual “town square” for more than
89,000 Cognizant asso-
ciates and some 54,000
users have collaborated
on hundreds of projects “Change is accelerating as the global
worldwide. About 90 recession gives birth to a “reset econ-
percent of our employ-
ees are millennials. omy” in which organizations in every
When customers look at industry are reassessing their business
Cognizant, they say that
we already embody a lot models to overcome unpredictable
of the attributes of
Future of Work.
markets, greater margin pressures and
GS: Is this a vision or a a drought in investment capital.”
value proposition or a
set of corporate guide-
lines…..how does the
‘Future of Work’ play
out at Cognizant?
MF: We live by it. It is not a vision or value proposition to
attract clients or new recruits. It is a very pragmatic way of
doing things, the way things are done at Cognizant. We
believe these are going to become operating norms for the
next generation. We talk about it internally a lot. The
opportunities that are created for our associates- how do you
manage teams that are globally distributed teams, virtual
teams located in many different places, located across differ-
ent organizations in a very cohesive way. These are capabili-
ties that are going to serve them well for the next decade
or so.
GS: All of these are concepts validated by what’s happening
in the world. But in the end, Cognizant is an IT services and
BPO company. How do you apply this ‘Future of Work’
construct to your business?
MF: The ‘Future of Work’ helps us understand and analyze
the future of every industry. Our great strength is the 2-in-a-
box model, we have got senior client partners onsite with cus- T
tomers. It helped us get in front of the customer quickly, to i
take these concepts, and really hone them across various S
industries. Our broad findings were:
1. Organizations need more scalable and flexible IT systems (
and processes that allow knowledge to be captured and u
applied by virtual teams inside and outside the conven-
tional organizational structure.
2. Powered by new (and often cloud-enabled) platforms of I
collaboration, new systems which rely heavily on social e
computing and mobility solutions, are emerging to C
replace or extend traditional systems of record to deliver
just-in-time insights, across disciplines.
3. The impact of this is unique. Knowledge is getting cre-
ated, captured, and used differently. This is fueling high-
value, knowledge-based processes at forward-thinking
companies. These activi-
ties range from clinical
trials data management
in life sciences, to risk
management and under-
writing in insurance, to
mortgage loan-decision-
ing in retail banking,
among others.
Cognizant delivers IT
and business capabilities
to its clients. We do it by
combining applications,
platforms, infrastructure,
knowledge processes,
and domain expertise in
unique ways.
GS: Give me live examples.
MF: We helped a global life sciences company have access to
real-time reports from a fully outsourced sales and marketing
analytics solution. This solution was delivered as a business
process as a service (BPaaS) solution. While delivering more
accurate and timely cost data, the BPaaS solution is enabling
the company to flex its sales and marketing operations as busi-
ness conditions dictate.
Another top-five global life science company engaged us to
help optimize and extend how it analyzes sales and marketing
data (e.g., segmentation, promotion response analysis, align-
ments, call planning, and incentive compensation). Using a
mix of next-generation solutions (hybrid and pure BPaaS), we
helped the company reduce its analytics spend by 33% in
2009 (compared with 2008), while reducing its OpEx across
sales and marketing operations to fund other ongoing busi-
ness transformation initiatives. GS
Ed Nair

27 GlobalServices www.globalservicesmedia.com October 2010

GSOctFINAL01:Layout 1 10/20/2010 1:23 PM Page 28