Enabling Exceptional Customer Relationships

GROWTH OPPORTUNITIES
DATE : JAN 11, 2002
BPO DEMYSTIFIED
3
Index
Section 1: BPO
Section 2: Contact Center Solutions
Section 3: Outsourcing
Section 4: Managing with Facts & Data !!
Section 5: Some Mega Deals Exemplified !!
Section 6: Key Considerations for a Service Provider
Section 7: IT ITES Comparables
Section 8: ITES Players
Section 9: What do we do
4
Satellite View
Service
Activities
BPO
Contact
Center
Solutions
Outsourcing
Service
Channels
Service
Verticals
Section 1

BPO
6
Value Chain
View 5
GE
Citibank
American Express
British Airways
eServe
Daksh
Lufthansa
eServe
MsoucrE
Spectramind
Microsoft
McKinsey
GE
GE
Citibank
GM
Global Tele
Infotech Enter.
Data Entry
Call Centers
Collections
Cust.Serv.
Technology
Help Desk
Research
Engineering
Designs
S/W Devo.
Accounting
Legal Services
e-learning
What cant be done
in India ?
7
Outsourced IT-Enabled Processes
The BPO Space View 1
Business
Process
Outsourcin
g
Sales, Marketing and
Customer Care (CRM)
Customer Analysis
Inbound Customer Service
Consulting
Consumer Information
Services
Outbound Collections
Outbound
Telemarketing/Sales
Back-Office
Front-Office
Daksh
Human Resources
Payroll/Benefits Processing
Training and development
Employee Benefits
Management
401K
Eg. Hewitt Associates, Indialife,
Crossdomain solutions
Payment Services
Loan Administration
Credit/Debit Card Services
Check Processing
Eg. eFunds, eServe
Finance and Administration
Claims Processing
Accounts Receivable
Accounts Payable
General Ledger
Accounting Services
Shareholder Services
Eg. Goldman Sachs, Charles Schwab
Eg. Tetetech, PRC
Source: DB Research
Logistics
Inventory and Warehousing
Industry Management
Order Fulfillment /
Procurement
Transportation and
Distribution
Eg. StarTek
Put Simply: Managing Consumers, Money and People Matters
8
Demand Side - BPO Market
4
8
10
21
12
23
13
26
22
43
25
46
33
68
0 10 20 30 40 50 60 70
Indirect P rocurement
Administ rat ion
Finance
Sales/ M arket ing/ Cust omer Care
P ayment Services
Supply Chain M anagement
Human Resource
2000 2005E
Source: Gartner Dataquest
USD Billions
15%
13%
15%
14%
13%
15%
15%
Demand Side - Processes Under-penetrated
0% 20% 40% 60% 80% 100%
HR
Finance & Account ing
Administ rat ion
P ayment Services
Supply Chain M anagement
CRM
Currently Outsourcing Considering Outsourcing Not Outsourcing
Source: Gartner Dataquest
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Highly Outsourced process represent a relocation opportunity not new Outsourcing Deals
10
How complex is the customer interaction?
Flight
departure/
arrival
information
Catalog
order
Brokerage
Technical
support
Promotional/
event
marketing
Tele-marketing Expert call
back
Information Transaction Consultation
Complexity of call
Outbound
Inbound
Source
of call
The more
complicated
the call, the
harder it will
be to
outsource
11
Full Contact Center Solution
View 1
Call Center
services
solutions
Accounts for 26% of the overall Worldwide call center services
Accounts for 74% of the overall Worldwide call center services
Source: IDC, 1999
12
Full Contact Center Solution
View 2
Live agent call
Video kiosk
Fax
Snail Mail
E-mail
Web Self Service,
Text Chat and
collaboration

Automatic
Voice response
unit
Business processes
Face-to-face
Customer
contact


Product development


Marketing


Fulfillment


Billing/account
maintenance
Contact
Center
Contact Center must strategically fit with other channels
and link to the corporate business processes
13
Skill-sets required
College Graduates/
Graduates with a certificate
or degree in computers
Work experience of 1-2
years,
Between 21-25 years of
age
Keen interest in the
Internet and have strong
working knowledge of
computers
Have very good written
communication skills in
English
High-End
Medium-End
Low-End
Professionally qualified
such as MCAs,
Engineers, CAs, ICWAs
Work experience of 2-3
years
Specific domain
knowledge
Graduates
Work experience not
essential
Working knowledge of
computers preferable
Specific domain
knowledge
Understanding the
customer culture..eg.
For Medical
Transcription
Section 4

Managing with Facts & Data !!
15
Market SizingThe Numbers
U.S. Market
US agents in Outsourced segment are 17.5% in 2000, 22.4% in 2002 and 27% in 2005 of the total US Call
Center market agents (Datamonitor)
The revenue per agent is $ 45,714 based on top 10 players in the industry and remains same for 2002 & 2005
Also, another analyst from Datamonitor states that US agents in Outsourced segment are 11% in 2000 of the
total US Call Center market agents.
Assumptions
99
16.5
111
22.2
156
38.9
U.S. Outsourcing Market U.S. Total Market
Revenue
($B)
2000 2002 2005
851
3404
2166
361
2428
486
U.S. Outsourcing Market U.S. Total Market
Agents
('000)
2000 2002 2005
16
Market SizingVertical Industry Segments
Source: IDC 2001
Vertical
2000
($ B)
% Share
2002
($ B)
% Share
Telecom 5.20 32% 7.10 32%
BIF 3.30 20% 4.30 19%
Banking 1.30 8% 1.70 8%
Insurance 0.80 5% 1.10 5%
Finance 1.20 7% 1.50 7%
Technology 2.80 17% 3.80 17%
Retail 2.20 13% 3.00 14%
Others 3.00 18% 4.00 18%
Total 16.50 100% 22.20 100%
Outsourced Contact Center Environment Analysis: USA Revenue
by Vertical Industry
The market is growing at CAGR of 18.6% over 2000-05
17
Channel
2000
($ B)
% Share
2002
($ B)
% Share
2005
($ B)
% Share
CAGR
5 yrs
Telephone 11.9 85% 14.1 75% 22.8 70% 14%
Email 1.4 10% 3.8 20% 8.1 25% 42%
Text Chat 0.1 1% 0.2 1% 0.5 2% 28%
Web Collaboration 0.1 1% 0.2 1% 0.3 1% 17%
Fax 0.4 3% 0.4 2% 0.5 2% 6%
Voice over IP 0.1 0% 0.1 1% 0.3 1% 36%
Video over IP 0.0 0% 0.1 0% 0.1 0% 66%
Total 14.0 100% 18.8 100% 32.6 100% 18%
Total Outsourced Market (U.S.) 16.5 22.2 38.9
Customer Interaction Pie 85% 85% 84%
Outsourced Contact Center Environment Analysis: USA Revenue by Service Channel
Market SizingService Channel
Strong Email concentration Chat failed
Notice shift towards Email by 2005
Voices loss is Emails gain
Source: IDC 2001
18
Market SizingService Activity
Largest opportunity in Inbound Care
Highest growth in the Tech Support
Source: IDC 2001
Activity
2000
($ B)
% Share
2002
($ B)
% Share
CAGR
5 yrs
Customer Service (I/B) 6.30 45% 8.10 43% 16%
Sales (O/B) 4.20 30% 5.60 30% 18%
Marketing (O/B) 1.80 13% 2.50 13% 14%
Tech/Support/ Help Desk (O/B) 1.70 12% 2.60 14% 30%
Total 14.00 100% 18.80 100% 18%
Total Outsourced Market (U.S.) 16.50 22.20
Customer Interaction Pie 85% 85%
Outsourced Contact Center Environment Analysis: USA Revenue by Service Activity
19
60 50 0 13
263
2,250
375
115
30
4,072
0
1000
2000
3000
4000
5000
Customer Interaction
centers
Financial &
accounting services
Human resources
services
Insurance claims
processing
All Segments
Business Segments
R
e
v
e
n
u
e
s

(
$
M
)
2,000 2,005
India Projections
IT-Enabled services from India to North America
Segment share to
increase from 23% to 54%
Source: Stevens Report
20
Growth
The volume of contact centre/ BPO out-sourced to India
Source: Nasscom
93 222
778
1667
3000
4222
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
S
p
e
n
d
i
n
g

(
$

M
.
)
21
Summary
Largest Service Activity

Largest Market Segments




Top Channel of Communication

Inbound Customer Care

Telecom
BFI
IT
Retailing

Voice
Email
45%

32%
20%
17%
13%

85%
10%

Year 2000
Initial Pilot Established > Just Execute on a Larger Scale
1. Ability to get more customers
2. Ability to hire more agents
Driven By
Done
In process
Not Done
Section 6

Key Considerations for a Service Provider
23
Customer view of assessing a Partner
Review Criteria Weighting Vendor 2 Vendor 3 Vendor 4 Vendor 6 Vendor 10
Factor
Weighted Weighted Weighted Weighted Weighted
Score Score Score Score Score
Company Background, History & Credibility 4 8 12 16 16 20
Size and Scope of Company Operations 4 4 16 20 16 20
Management Team Experience 5 20 15 10 25 25
Financial Health 4 8 16 8 8 0
Financial Backing 3 6 12 15 12 0
Equity Investment Opportunity 3 15 15 12 9 6
CIC Facilities - Locations 4 12 16 16 12 20
CIC Facilities - Quality of Buildings & Work Environment 3 9 15 0 9 15
CIC Facilities - Capacity & Expandability 5 10 25 25 15 25
CIC Facilities - Channel Diversity 5 25 20 25 25 5
CIC Facilities - Quality of Operations 4 12 16 20 16 16
CIC Facilities - Quality of Technology & Disaster Recovery 4 16 20 20 20 20
Training Programs 2 6 10 10 10 10
Agent Skills 3 9 15 15 15 0
Customer Base 2 2 10 10 2 10
Pricing 5 15 5 25 25 15
Total Score 177 238 247 235 207
Average Score 10.4 14.0 14.5 13.8 12.2
Ranking 7 2 1 3 4
DelhiCall Infowavz TransWorks Customer WebHelp
Asset
24
Winning Service attributes for Service providers

Attribute Description
Make cost savings
a priority
Keep cost as a differentiator and contract winner
Core value sought in turning to a service provider
Use creative business practices to pass along cost savings to their
clients and prospects
Focus on
delivering value to
clients
Must demonstrate and deliver value in addressing each clients
business goals
ROI or customer value analysis can help illustrate a service firms
value proposition and ensure contract growth in the future
Expand vertical
industry expertise
Winning contracts will be directly related to the range and depth of
skills within each industry
Winning contracts with different verticals would necessitate sector-
specific knowledge
Customer and
data analytics
Customers are the most important asset
Incorporate this into overall CRM and Customer care services
strategy
25
Winning Service attributes for Service providers

Attribute Description
Full support for multi-
channel communications
needs
Support all the various communication channels to
conduct business
Move beyond operational
services
Will need to tap deeply into higher margin revenue
services such as consulting, system integration and
training services
Be receptive to partnering Increasing number of service components can be
considered customer care
Partner with companies that offer complementary
services
Be a one-stop shop / total customer care solution
Indian BPO Scenario
27
Players in Indian BPO Sector
Category
Basic
Theme
Advantages
Challenges

Critical
Success
Factors
Global Captives
Cost Reduction
Assured
Business
No Customer
Churn
Limited
Professional
Career
Opportunities
Executive
Sponsors
Building an
Empowered
India
Organization
Global
Outsourcers
Customer
Retention
Access to
Global
Customers
Cultural
Connection
Building an
Empowered
India
Organization
IT Services
Manage
Current
Downturn
Indo-US
Corridor
Synergy
Dilution of
Core
Competencies
Synergistic
Customer
Acquisition
Independent
Service
Delivery
Business
Houses
Riding a Growth
Sector
Capital
Availability
Management of
Scale
Experience
Indo-US
Corridor
Mechanics
HR Orientation
Customer
Acquisition
Capabilities
Non-hierarchical
organization
Independent
Wealth
Creation
Core
Competency
Focused
Managing
Customer
Volatility
GET BIG
FAST
28
India vs. Philippines
India Philippines Advantage
People Availability
Numbers XXX XX India
Attrition XX XXX India
Telecom Infrastructure
XX XXX Philippines
People Quality
Management Depth XXX X India
Voice Agents XX XXX Philippines
Tr. Processing Agents XXX XX India
Costs
People XX XXX India
Telecom XXX XX Philippines
Infrastructure
Quality XX XXX Philippines
Cost of Creation XXX XXX At Par
Incentives by Govt.
XXX XXX At Par
Scalability & Management depth are key challenges for Philippines ; Highly Proactive Government though

3:1 will be Offshore Mix (India : Philippines)
Supply Side - Talent Pool
12500
30000
43200
137600
380000
950000
2000000
Singapore
Malaysia
Ireland
Mexico
Philippines
China
India
Source: Nasscom
Total Number of Graduates p.a.
30
Key Ingredients of Success Firm Level
Robust Business Model managing five block in a
synchronized manner
Strong balance between Customer Acquisition
Capability in US and Service Delivery Capability
in India
Scale Mind Set
People Practices
Quality Work Practices
Strong Platform of Corporate Governance
31
Key Ingredients of Success Country Level
Geo-political Stability
Expansion of Labour Pool Influence Education
System
Successful Execution of Initial Pilots Building
of India Brand
Creation of Ancillary Industries
Continued Flow of Capital
32
Process
Optimal management of 5 blocks helps a $ of equity generate
a $ in perpetuity profit; Elapsed period 2 years
Idea
Wealth
Creation
Build
Infrastructure
Raise
Capital
Operational
Excellence
Hire
People
Acquire
Customers
Building a Successful BPO Company
33
Email
1000s
100s 10s
Fortune 500
Mid Tier
Enterprise
(Direct)
Third
Party
Work
Voice Chat
Multiple
Countries
Single City
Double Digit
Revenue
Single Digit
Revenue
De-risked Business Model
BPO
Multiple
Cities
Round 3
$ 10-20 Mln
Round 1
$ 2 Mln
Round 2
$ 5 Mln
Service
Sales
Scale
Geography
Revenue
Capital
34
Daksh Potentially by 2005
25 Fortune 500 Customers
Metrics $ 75 - $ 100 million in revenue, 20% - 25% net margin, 4000-5000
people, customer satisfaction at least 90%
Infrastructure 3500 seats in 2 Indian and 1 global location, 4 US offices +
2 Europe offices, 1 transitioning center in the US, 3 US POPs and 1 UK POP,
100 MB of bandwidth
People and Organization 6-8 Vertical Business Units, A 15 member
Executive Team, a Global Board of Directors, Compensation & Audit
Committees, Public Company
Services Inbound voice (40%), outbound voice (20%), Web-based support
(10%) and Back-office processing (30%)
35
Indian Comparable Company Analysis
FY01
Revenue
(US $ M)
Net Margin
%
Market Value /
Revenue
P/E
Indian Companies
Large Cap
Wipro - Local 636 22 10.6x 49.7x
Infosys Tech - Local 396 33 13.4x 41.4x
HCL Tech 298 33 4.0x 15.0x
Satyam Computer-Local 254 26 5.1x 22.1x
Average 8.3x 32.1x
Mid Cap
NIIT 238 7 0.8x 12.2x
SSI - Local 103 14 0.6x 4.0x
Silverline 147 17 0.7x 3.5x
DSQ 72 24 1.1x 2.8x
Aptech 97 17 0.5x 2.9x
Visualsoft 27 47 2.3x 4.9x
Mascot 71 11 1.4x 12.6x
Aztec 16 26 3.4x 13.2x
Average 1.3x 7.0x
Small Cap
Sonata 47 15 0.9x 5.8x
Mastek 54 5 0.9x 16.8x
PSI Data 17 22 1.1x 4.9x
Trigyn 36 NM 0.8x NM
eServe 33 6 1.2x 20.6x
Mphasis 64 -6 0.9x NM
Infotech Enterprises 20 17 1.3x 7.5x
Average 1.0x 11.1x
Size Matters: Big
companies group
trades 10 times the
small companies
group

Business Imperative:
Enter scalable
business and build
leadership positions
fast (GBF)
Rewards of
Leadership:
Disproportionate
P/E Multiples