Outsourcing, shared service centres

　　London, 26 November 2003

　　PricewaterhouseCoopers 2

　　Outsourcing, shared

　　service centres, off

　　shoring……

　　do you really

　　want to do this?

　　PricewaterhouseCoopers 3

　　‘This issue (reliability) has come to the fore recently, with customers quick to criticise the slow

　　response times and language barriers encountered in some overseas call centres’ (Bruce Petter,

　　Executive Director of the Management Consultancies Association)

　　‘Although India’s call center is thriving, its employees are not impressed’ (Dinesh Sharma)

　　‘It only takes a few large centres to move in and the pressure starts – wages rise and turnover

　　increases’ ( The Economist)

　　‘Call centre work has been identified as one of the three most unhappy occupations…turnover of staff

　　is at an average of 18% but can be as high as 80%’ (UNFI research, Feb 2002)

　　‘Trade Unions are likely to find fertile ground in companies with plans to move work abroad’

　　(‘Bombay Schemes’, People Management 6/11/03)

　　‘People like to talk about setting up a shared service centre and then moving up the value chain, but

　　they forget the bit in the middle. You have to make it work first’ (Martin Fahy, National University of

　　Ireland)

　　‘This attitude is an example of the idiocy of moving the inquiry service 10,000 miles away’ (Amicus

　　union in response to Network Rail’s decision to outsource inquiry service to India)

　　Some Insights and Challenges

　　PricewaterhouseCoopers 4

　　An Integrated view of the challenges

　　Brand/

　　Reputation

　　Local

　　Reality

　　Culture &

　　Language

　　The Transition

　　Process

　　Trade

　　Unions

　　Legal

　　Achieving

　　the business

　　benefits

　　PricewaterhouseCoopers 5

　　. To save costs

　　. To access skilled resources

　　. To improve quality

　　. To reduce cycle time

　　So why change the operating model

　　PricewaterhouseCoopers 6

　　. Headcount savings - wages in the US represent 70% of call-centre costs compared with

　　30% in India. British Airways has found that it saves nearly US$23 million a year for every

　　1000 jobs it relocates to India.

　　. Using highly skilled labour - a major insurance company has moved a large part of its

　　medical claims handling off-shore. Unlike its onshore equivalent, the staff teams undertaking

　　claim processes are led by medically trained team-leaders who provide quality assurance.

　　This increases the quality of the claims process, while still making significant cost savings.

　　. Round the clock shifts - the most obvious way to use the capital infrastructure more

　　intensively is to run round the clock shifts, even if they mean higher wages for odd hours.

　　This option simply wouldn’t exist in a high wage environment where wage premiums offset

　　any capital savings. One estimate is that by increasing the number of shifts, companies can

　　reduce their operating costs by 30% to 44%.

　　. Supporting a change agenda – Diageo started operations at its European shared-service

　　centre in Budapest in 2002. The move is part of a global ‘step-change’ strategy using new

　　systems, processes and people to transform the company into a global e-business.

　　Some examples of benefits

　　PricewaterhouseCoopers 7

　　. HR Shared Service Centres – often country based – are increasing significantly

　　. Increased focus on offshore HR both “captive” and outsourced – the suppliers are currently

　　IT focused and the HR market is immature

　　. Strategic HR outsourcing is now accepted in the US as a proven solution, often considered

　　prior to other options

　　. Overall, there is a much greater acceptance of HR outsourcing and its benefits, with

　　companies regarding this as a real alternative (or supplement) to in-house solutions

　　And what about HR itself

　　PricewaterhouseCoopers 8

　　Getting the best from new ways of working

　　. Treat as a strategic initiative

　　. Secure commitment from senior management at the outset

　　. Focus on change management

　　. Manage risk

　　. Set specific service levels and make sure you get them

　　. Pay attention to process re-design

　　. Manage provider relationships

　　PricewaterhouseCoopers 9

　　The Framework for success

　　Develop

　　culture

　　Define change

　　strategy

　　Build

　　commitment

　　Create change

　　vision

　　Design

　　organisation

　　Manage people

　　performance

　　Develop

　　Deliver

　　Business

　　Benefits

　　Leadership

　　The goal is rapid sustainable

　　business benefits at

　　minimum cost and risk

　　PricewaterhouseCoopers 10

　　Rising to the challenge

　　. It is worth doing but

　　. You could fail to achieve

　　benefits, damage brand and

　　compromise quality

　　. However, manage the

　　people and transition issues

　　well and the Benefits can

　　be realised