market assessment call center outsourcing

8/3/2019 Market Assessment Call Center Outsourcing

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Market Assessment: Call CenterOutsourcing Industry in the U.S.

April 2010

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CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited

David Coleman Tolga OguzAlexander Edlich Sanjeev SomaniFernando Fanton Achi YaffeSomesh Khanna


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Document overview

This document provides a strategic perspective on the US Call Centeroutsourcing industry, from a BPO service providers point of view

Emphasis has been laid on pain points and value proposition in 3verticals: Telecom/Media, Banks, and Utilities

Objective

The document contains:Market overviewCompetitive landscapeVertical-specific pain points and value proposition

Capability self-assessment score cardsDetailed Appendix on key companies in verticals, recent BPO deals,

and key BPO vendor profiles

What isincluded?

Can be shared with ED approval Intended for teams working with either existing BPO&O service

providers, or large insourcers looking to become providers, on topicssuch as market entry, growth strategy, and offering development

How could itbe used?

Bottoms-up model for developing 5-year revenue and operating profitprojections; please contact the authors if interested

What is notincluded?


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Section overview

Market

overview

Key insights

1

Competitivelandscape

2

Valueproposition

3

US Call Center outsourcing market in Media/Telecom, Financial Services,and Utilities verticals is large (~$14B in 2009), andgrowing at ~10% CAGR

Media/ Telecom and Financial services account for ~40% of spend Low levels of outsourcing in Utilities (~5% spend) due to unionized work force,regulation (e.g., cost-plus pricing creates disincentives for cost cutting in mostregulated markets), and obligation to serve local community

Majority (~70-75%) of contact center work is still in-house: Large insourcers (>10,000 seats) have scale advantage; cost arbitrage not

sufficient to offset outsourcing risk Call segmentation used to manage outsourcing/ offshoring risk; multiple

vendors employed Current market dominated by lower margin standard deals, majority of which

are under $50MM Premium programs (e.g., cross-selling) largely onshore and in-house Offshore represents ~15% of total market, but growing faster than onshore

Future outsourcing waves likely driven by strategic goals: Given sluggish growth in new subscribers, Media/ Telecom clients want to

increase revenue per existing customer by converting service calls to sales Given recent M&A, Financial services clients want to drive greater synergies

across product lines (e.g., increase product penetration per customer) As smart meter adoption picks up, Utilities will become an attractive mid-term

opportunity due to need for flexible capacity to handle call volume spikes


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56

77

+10% p.a.

13

49

23

18

2012

45

21

17

2011

40

20

14

2010

37

16

15

2009

33

15

13

5

US contact center BPO market is large and growing;opportunity exists for onshore service provider

US contact center BPOmarket is large (~60% ofWW contact center BPOspend), and projected to

grow at 10% CAGR

Majority contact centerresources are still in-house and onshore,suggesting growthopportunity exists foronshore service providerwith competitive cost

structure anddifferentiated valueproposition

US contact center BPO revenues, by activity$ Billions

OffshoredOutsourced

25-30

10-15

Outsourcing and offshoringPercent of contact center FTEs

Sales and Marketing

Customer service

Helpdesk/support

SOURCE: IDC; interviews; team analysis

Size




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Telco/ MSOs are amongst largest outsourcers ofcontact centers; most resources are in-house andonshore due to quality considerations

Size

2010

6.7

3.0

2.81.0

2009

6.1

2.8

2.50.9

+11% p.a.

2012

8.3

3.9

3.2

1.2

2011

7.4

3.7

2.61.1

5040

20112009 Offshored

10-15

Outsourced

25-30

Keycompanies

Telco/ MSO isamongst the topverticals in terms of

spend, representing~17% of contactcenter outsourcingmarket

Contact centersconsidered strategictouch point withcustomer, potentially

explaining high levelof in-house andonshore resources

US contact center BPO spend

$ Billions

Companies outsourcing

contact center workPercent

Outsourcing and offshoring

distributionPercent of contact center FTEs


Sales and Marketing

Customer service

Helpdesk/support

ESTIMATES
http://images.google.co.in/imgres?imgurl=http://www.ukcheapbroadband.com/broadband-blog/wp-content/uploads/2009/06/virgin_media_logo.jpg&imgrefurl=http://www.ukcheapbroadband.com/broadband-blog/17388/virgin-broadband-motorola-team-up-to-offer-next-gen-faster-broadband-access-via-docsis-30-200mbs/&usg=__PDUerGSC-0Bh6mfkAU8HdEAaTwY=&h=300&w=350&sz=18&hl=en&start=1&tbnid=EwVsv-tbbl_7vM:&tbnh=103&tbnw=120&prev=/images%3Fq%3Dvirgin%2Bmedia%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://www.ipadrblog.com/uploads/image/qwest_logo_2_jpg_aoiw.jpghttp://images.google.co.in/imgres?imgurl=http://blogs.nyu.edu/blogs/bmg258/berniestakeonthead/TimeWarnerCable_Logo_1.jpg&imgrefurl=http://blogs.nyu.edu/blogs/bmg258/berniestakeonthead/2009/02/&usg=__RLZlMIWbhfF9Z_xLbVxh_0rzHZM=&h=400&w=600&sz=16&hl=en&start=1&tbnid=UuDulox7mJSpmM:&tbnh=90&tbnw=135&prev=/images%3Fq%3Dtime%2Bwarner%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1



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Financial services firms outsource contact center worksignificantly; penetration expected to double by 2011

Financial services isamongst the top

verticals in terms ofcontact center BPOspend, representing~16% of contact centeroutsourcing market

Continued focus oncost reduction explainsabove average level of

outsourcing/ offshoring

Keycompanies

Companies outsourcingcontact center work

Percent

Outsourcing and offshoringdistribution

Percent of contact center FTEs

2.30.8

3.4

1.0

2.6

2.4

6.3

2.8

2.60.9

20102009

5.7

+11% p.a.

2012

7.8

3.6

3.01.2

2011

6.9


70

35

20112009

30-3520-25

Outsourced Offshored

US contact center BPO spend

$ Billions

Sales and Marketing

Customer service

Helpdesk/support

ESTIMATES

Size
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Utilities have not been outsourcing as much in comparison,but significant growth expected in mid-term

Utilities do not currentlyoutsource contactcenter work as much(representing only ~5%

of contact centeroutsourcing market)

Regulated markets(e.g., cost-plus pricing)and unionized workforce probably explaincurrently low degree ofoutsourcing/ offshoring;

only ~25% residentialmarket deregulated

50

15

20112009 OffshoredOutsourced

10-15

5-10

Companies outsourcingcontact center work

Percent

Outsourcing and offshoringdistribution

Percent of contact center FTEs

Keycompanies

0.3

+11% p.a.

2012

2.8

1.31.1

0.4

2011

2.4

1.20.9

0.4

2010

2.2

1.00.9

0.3

2009

2.0

0.90.8


ESTIMATES

US contact center BPO spend$ Billions

Sales and Marketing

Customer service

Helpdesk/support

Size
http://images.google.co.in/imgres?imgurl=http://national.nsbe.org/Portals/0/images/BCA/AEP.jpg&imgrefurl=http://robotics.phmschools.org/AEP&usg=__NbTBZvLbXSonKNIUGcwuKu3LY7E=&h=455&w=1200&sz=97&hl=en&start=6&tbnid=jtZpMDnAUYaOoM:&tbnh=57&tbnw=150&prev=/images%3Fq%3DAMERICAN%2BELECTRIC%2BPOWER%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.seeklogo.com/images/P/PG_and_E_Corporation-logo-62B327A351-seeklogo.com.gif&imgrefurl=http://www.seeklogo.com/search.html%3Fq%3DPG&usg=__w4VJqFXTZE1fuuITQy7rP57Wv_E=&h=200&w=200&sz=2&hl=en&start=1&tbnid=AY0V5zVgS8hrwM:&tbnh=104&tbnw=104&prev=/images%3Fq%3DP%2BG%2B%2526%2BE%2BCORP%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.esa-conference.org/imgs/AES.jpg&imgrefurl=http://www.esa-conference.org/article/view/2009Sponsors&usg=__KOOv7WnyCJ96iYMF4wMQw613OsI=&h=293&w=716&sz=77&hl=en&start=2&tbnid=kjwmjUPpalycBM:&tbnh=57&tbnw=140&prev=/images%3Fq%3DAES%2BCORP%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://ir.oneok.com/common/alerts/OKE/default/logo.gif&imgrefurl=http://ir.oneok.com/releasedetail.cfm%3FReleaseID%3D407084%26ReleaseType%3DONEOK%2520Events&usg=__bob_xqaK0irIZHAuobGnyOLeS_o=&h=53&w=171&sz=5&hl=en&start=1&tbnid=MqTQ_jq-tC1tyM:&tbnh=31&tbnw=100&prev=/images%3Fq%3DONEOK%2BINC%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.celebrateri2009.org/images/DOMINION_web_logo.gif&imgrefurl=http://www.celebrateri2009.org/about.htm&usg=__m1yMazbburQu-lJS72L3BFVEFR4=&h=91&w=200&sz=8&hl=en&start=6&tbnid=F_aKw1p59OcyqM:&tbnh=47&tbnw=104&prev=/images%3Fq%3DDOMINION%2BRESOURCES%2B%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.floridafarmtofuel.com/i/FPL%2520Group%2520Logo.jpg&imgrefurl=http://www.floridafarmtofuel.com/summit_2008_Sponsor_Logo.htm&usg=__CF1g1jFM-0gFnDD-uhweYzNh1CI=&h=482&w=1004&sz=47&hl=en&start=2&tbnid=yxncMutshJV50M:&tbnh=72&tbnw=149&prev=/images%3Fq%3DFPL%2BGROUP%2BINC%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.energysolutionscenter.org/images/memconsort/LogoPECOExelon.jpg&imgrefurl=http://www.energysolutionscenter.org/about/mem_exelon.asp&usg=__GhajYEyr24PKlcPCy91389yGEzU=&h=65&w=197&sz=6&hl=en&start=2&tbnid=BB4xQf6bJHvuvM:&tbnh=34&tbnw=104&prev=/images%3Fq%3DEXELON%2BCORP%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://software.tsg.net/Content/Images/Clients/ceg.jpg&imgrefurl=http://software.tsg.net/Software.aspx/Work&usg=__6kZSy9H9I06I72l-qnWHh2zKGLs=&h=179&w=728&sz=104&hl=en&start=2&tbnid=1k1zhEI-IS7H2M:&tbnh=35&tbnw=141&prev=/images%3Fq%3Dconstellation%2Benergy%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://upload.wikimedia.org/wikipedia/de/thumb/4/4b/Southern_Company_Logo.svg/781px-Southern_Company_Logo.svg.png&imgrefurl=http://de.wikipedia.org/wiki/Datei:Southern_Company_Logo.svg&usg=__ImwBt9uMXS0xxs0NQXTQ8P-EyIk=&h=369&w=781&sz=46&hl=en&start=2&tbnid=whGmFBLcf5IISM:&tbnh=68&tbnw=143&prev=/images%3Fq%3DSOUTHERN%2BCO%2Blogo%26gbv%3D1%26hl%3Den%26um%3D1&um=1&itbs=1


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Motivation (and barriers) for outsourcing differ by vertical

SOURCE: Interviews; team analysis

Key market dynamics

Telco/ Media

Among the highest users of outsourcing/ offshoring (~17% of outsourced spend)

Quality of service is key Large players (>10,000) seats have in-house scale advantage Willing to pay more for proven, reliable quality

Slowing growth implies revenue per customer key economic driver Contact centers considered strategic touch point; premium programs (e.g.,

churn management) largely onshore and in-house

Financialservices

Amongst highest users of outsourcing/ offshoring (~16% of outsourced spend) Cost reduction has been primary driver for outsourcing/ offshoring Rapid industry consolidation has outpaced value capture due to synergies (e.g.,

desire to increase share of wallet by cross-selling across BUs)

Utilities

Traditionally low use of outsourcing (~5% of outsourced spend)

~75% residential market regulated; regulation (e.g., cost-plus pricing) createsdisincentive to reduce costs in the short-term Unionized work force slows outsourcing (e.g., attrition replacement vs. layoffs) Obligation to serve local community makes outsourcing difficult, even onshore Smart grid/ meter adoption in mid-term likely to outpace contact-center

capacity


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Majority deals are under


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Deal characteristics comparison

Key commentsStandard deal Premium value-share deal

Revenue/pricing

Blended service/ salescalls require superioragent skills

$25-30/hour;$50-60K/ FTE/year

$35-45/hour;$70-90K/FTE/year

Includes value sharingarrangement

Cost structure

Higher salaries andcommissions for salesagents

Labor: $16-20/hour;$32-37K/FTE/year

65-70% direct cost

Labor: $22-25/hour;$43-49K/ year

70-75% direct cost

Margin

Value pricing boosts

margins, despite higherlabor costs

10-12% 15-25%

Typicalcontract valueper year

Larger scope due to end-to-end relationshipmanagement

Greater risk-rewardsharing

$15-25MM Bonus/ penalty: +/- 5%

$20-30MM Bonus/ penalty: +/- 20%

Criticalcapabilities

Competitive cost structure Distinctive operational

metrics (e.g., FCR, AHT,utilization)

Integration with 3rd partysystems

Customizable CRM-drivenoffer engine

Scalable sales infrastructurewith low defects (e.g., hiring,performance management)

Case studies oncomparable 3rd party clients

Proprietary tools andprocesses to achievegoals, consistently (i.e.,ability to tie compensationto performance)


ESTIMATES


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Market

overview

1

Competitivelandscape

2

Valueproposition

3

Highly fragmented market Top 20 players account for 40%) from few, marquee clients concentrated in 2-3 verticals Winning and retaining showcase clients in target verticals is key Need to offset high revenue risks (e.g., can lose large client overnight due to

industry M&A)

Section overview

Key insights


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Worldwide BPO market extremely fragmented; typical EBITDAmargins 9-16% depending on offshore-onshore strategy

0

0

0

StarTek

Others

2008

109B

3

2

2

2

2

1

1

10

85

100%

Convergys

Teleperformance

Aegis

West

Sitel

TeleTech

WNS

2008 worldwide BPO spend2

$ Billions

0

2

4

6

8

10

12

14

16

18

20

22

0 20 40 60 80 100 120 140

EBITDA margin

%

Offshore work stations% of all work stations

Total number ofwork stations (2008)

Convergys, the largest horizontal BPO services1provider, has just 3% of the market

There appears to be a correlation between BPO vendorprofitability and degree of offshore presence

SOURCE: IDC; analyst reports; Bloomberg; team analysis

1 Horizontal BPO market includes contact center, finance and accounting, HR, and procurement services2 Assuming 2006-08 CAGR of 10%
http://images.google.co.in/imgres?imgurl=http://www.lakelandedc.com/_Images/Employers/Logos/ICTGroupLogo.jpg&imgrefurl=http://www.lakelandedc.com/MajorEmployers/TopTenServices.aspx&usg=__9StsvGMKOH0hwL592_6E-OLchkE=&h=73&w=215&sz=4&hl=en&start=1&tbnid=ErlksPuWJT-poM:&tbnh=36&tbnw=106&prev=/images%3Fq%3DICT%2BGroup%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.novascotiabusiness.com/site-nsbi/media/NovaScotiaBusinessInc/convergys_logo.gif&imgrefurl=http://www.novascotiabusiness.com/en/home/aboutus/stories/convergys.aspx&usg=__tL4D1zcjIXUOFYcinI6fvxMdD6I=&h=170&w=350&sz=11&hl=en&start=1&tbnid=ywOIcMFOK8yo8M:&tbnh=58&tbnw=120&prev=/images%3Fq%3DConvergys%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.graftonrecruitment.com/Portals/2/TelePerformance%2520Logo%2520medium.jpg&imgrefurl=http://www.graftonrecruitment.com/LookingforaJob/FeaturedEmployers/Teleperformance/tabid/262/Default.aspx&usg=__-VRfNWcWcQ884XOd8jUUVg3kN_Y=&h=113&w=421&sz=16&hl=en&start=1&tbnid=ETq0Rlxpdy6POM:&tbnh=34&tbnw=125&prev=/images%3Fq%3DTeleperformance%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.itexaminer.com/images/articles/1/aegis%2520logo.jpg&imgrefurl=http://www.itexaminer.com/aegis-bpo-may-grab-satyam-assets.aspx&usg=__i1NbihjoyuBRZvUzJwh8pWRGte4=&h=174&w=226&sz=5&hl=en&start=2&tbnid=9yytQlFhkOma5M:&tbnh=83&tbnw=108&prev=/images%3Fq%3DAegis%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.guitarsfordreams.org/wp-content/uploads/2008/06/sitel2.jpg&imgrefurl=http://www.guitarsfordreams.org/%3Fpage_id%3D7&usg=__v55n6PXh3Hg1xe2OVrAea18VVZU=&h=268&w=465&sz=36&hl=en&start=2&tbnid=9mXAEUQuix_4RM:&tbnh=74&tbnw=128&prev=/images%3Fq%3DSitel%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.the-edirectory.info/graphics/GR1274_L2_WNS%2520logo.JPG&imgrefurl=http://www.the-edirectory.info/partner.asp%3FEDEV_ID%3D1%26EDPA_ID%3D937&usg=__dtzR48S1LdXT0bD1aHj2NHdlS_s=&h=109&w=380&sz=7&hl=en&start=2&tbnid=qzMIaTVIOEyvXM:&tbnh=35&tbnw=123&prev=/images%3Fq%3DWNS%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.itexaminer.com/images/articles/1/aegis%2520logo.jpg&imgrefurl=http://www.itexaminer.com/aegis-bpo-may-grab-satyam-assets.aspx&usg=__i1NbihjoyuBRZvUzJwh8pWRGte4=&h=174&w=226&sz=5&hl=en&start=2&tbnid=9yytQlFhkOma5M:&tbnh=83&tbnw=108&prev=/images%3Fq%3DAegis%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.the-edirectory.info/graphics/GR1274_L2_WNS%2520logo.JPG&imgrefurl=http://www.the-edirectory.info/partner.asp%3FEDEV_ID%3D1%26EDPA_ID%3D937&usg=__dtzR48S1LdXT0bD1aHj2NHdlS_s=&h=109&w=380&sz=7&hl=en&start=2&tbnid=qzMIaTVIOEyvXM:&tbnh=35&tbnw=123&prev=/images%3Fq%3DWNS%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.jamescwilliams.com/logo(teletech).jpg&imgrefurl=http://www.jamescwilliams.com/&usg=__LHeUT8Xpk-IREUs3Dh5V9AGOITg=&h=126&w=460&sz=40&hl=en&start=2&tbnid=5cEm-XyHSqr0FM:&tbnh=35&tbnw=128&prev=/images%3Fq%3DTeleTech%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://i.pbase.com/u43/snowflake7/upload/27763492.Sykes.gif&imgrefurl=http://www.pbase.com/snowflake7/image/27763492&usg=__kv7bGjnkkObwiBBBMnINhB6igaE=&h=63&w=150&sz=6&hl=en&start=3&tbnid=1V7d4hBZ27rCTM:&tbnh=40&tbnw=96&prev=/images%3Fq%3DSykes%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.novascotiabusiness.com/site-nsbi/media/NovaScotiaBusinessInc/convergys_logo.gif&imgrefurl=http://www.novascotiabusiness.com/en/home/aboutus/stories/convergys.aspx&usg=__tL4D1zcjIXUOFYcinI6fvxMdD6I=&h=170&w=350&sz=11&hl=en&start=1&tbnid=ywOIcMFOK8yo8M:&tbnh=58&tbnw=120&prev=/images%3Fq%3DConvergys%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.novascotiabusiness.com/site-nsbi/media/NovaScotiaBusinessInc/convergys_logo.gif&imgrefurl=http://www.novascotiabusiness.com/en/home/aboutus/stories/convergys.aspx&usg=__tL4D1zcjIXUOFYcinI6fvxMdD6I=&h=170&w=350&sz=11&hl=en&start=1&tbnid=ywOIcMFOK8yo8M:&tbnh=58&tbnw=120&prev=/images%3Fq%3DConvergys%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.graftonrecruitment.com/Portals/2/TelePerformance%2520Logo%2520medium.jpg&imgrefurl=http://www.graftonrecruitment.com/LookingforaJob/FeaturedEmployers/Teleperformance/tabid/262/Default.aspx&usg=__-VRfNWcWcQ884XOd8jUUVg3kN_Y=&h=113&w=421&sz=16&hl=en&start=1&tbnid=ETq0Rlxpdy6POM:&tbnh=34&tbnw=125&prev=/images%3Fq%3DTeleperformance%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.itexaminer.com/images/articles/1/aegis%2520logo.jpg&imgrefurl=http://www.itexaminer.com/aegis-bpo-may-grab-satyam-assets.aspx&usg=__i1NbihjoyuBRZvUzJwh8pWRGte4=&h=174&w=226&sz=5&hl=en&start=2&tbnid=9yytQlFhkOma5M:&tbnh=83&tbnw=108&prev=/images%3Fq%3DAegis%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.guitarsfordreams.org/wp-content/uploads/2008/06/sitel2.jpg&imgrefurl=http://www.guitarsfordreams.org/%3Fpage_id%3D7&usg=__v55n6PXh3Hg1xe2OVrAea18VVZU=&h=268&w=465&sz=36&hl=en&start=2&tbnid=9mXAEUQuix_4RM:&tbnh=74&tbnw=128&prev=/images%3Fq%3DSitel%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.jamescwilliams.com/logo(teletech).jpg&imgrefurl=http://www.jamescwilliams.com/&usg=__LHeUT8Xpk-IREUs3Dh5V9AGOITg=&h=126&w=460&sz=40&hl=en&start=2&tbnid=5cEm-XyHSqr0FM:&tbnh=35&tbnw=128&prev=/images%3Fq%3DTeleTech%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://bp1.blogger.com/_9ZY_YPY1vkU/RcI3820e_KI/AAAAAAAAAFI/HRf9f4ZtuvI/s320/Genpact_logo.jpg&imgrefurl=http://indeinfos.blogspot.com/2007_02_01_archive.html&usg=__JrMRrfYrerHx_byR_Fy_XyHOAf4=&h=83&w=213&sz=8&hl=en&start=3&tbnid=lk1O3GjtzFN9LM:&tbnh=41&tbnw=106&prev=/images%3Fq%3DGenpact%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://i.pbase.com/u43/snowflake7/upload/27763492.Sykes.gif&imgrefurl=http://www.pbase.com/snowflake7/image/27763492&usg=__kv7bGjnkkObwiBBBMnINhB6igaE=&h=63&w=150&sz=6&hl=en&start=3&tbnid=1V7d4hBZ27rCTM:&tbnh=40&tbnw=96&prev=/images%3Fq%3DSykes%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.the-edirectory.info/graphics/GR1274_L2_WNS%2520logo.JPG&imgrefurl=http://www.the-edirectory.info/partner.asp%3FEDEV_ID%3D1%26EDPA_ID%3D937&usg=__dtzR48S1LdXT0bD1aHj2NHdlS_s=&h=109&w=380&sz=7&hl=en&start=2&tbnid=qzMIaTVIOEyvXM:&tbnh=35&tbnw=123&prev=/images%3Fq%3DWNS%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://www.lakelandedc.com/_Images/Employers/Logos/ICTGroupLogo.jpg&imgrefurl=http://www.lakelandedc.com/MajorEmployers/TopTenServices.aspx&usg=__9StsvGMKOH0hwL592_6E-OLchkE=&h=73&w=215&sz=4&hl=en&start=1&tbnid=ErlksPuWJT-poM:&tbnh=36&tbnw=106&prev=/images%3Fq%3DICT%2BGroup%2Blogo%26gbv%3D1%26hl%3Den%26rlz%3D1R2ADFA_enIN364%26um%3D1&um=1&itbs=1


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Most major competitors provide a full range of contactcenter offerings

Indicative offerings/ services (notexhaustive)

Customerservice

Account management Complaints and grievances Billing and payments Order management

Sales andmarketing

Upsell and cross-sell Outbound and inbound telesales Direct marketing and co-

marketing CRM analytics

Campaigns and promotions Segmentation

Customerretention1

Loyalty and rewards program Churn management program Customer satisfaction surveys

(Voice of Customer)

Helpdesk/technicalsupport

Specialty help-desk (e.g., troubleshooting technical productissues)

SOURCE: Vendor web sites; team analysis

1 Part of Sales and Marketing

NOT EXHAUSTIVE


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Leading BPO providers took at least 10 years to get to $1B in revenues

SOURCE: Annual reports, team analysis

Year ofinception

Revenues1

$MM

Years to $1B inrevenues(since inception)BPO provider

Operatingmargin1

PercentYear ofgoing public

Convergys 19853 2,827 N/A (4

)

1998

Teleperformance 1978 2,577 25 101998

Teletech 1982 1,168 20 91996

Genpact 1997 1,120 10 152007

Sykes 1977 846 352 81996

Mphasis BPO 1998 881 122 121999

WNS 1996 540 152 52006

ICT Group 1983 428 352 (6

)

1996

First Source 2001 411 92 72007

EXL Service Holdings 1999 191 172 132006

1 Most recent available financial data2 Projected, based on historical CAGR3 Estimated year of formation of Matrixx Marketing and Cincinnati Bell Information Systems, which got merged into Convergys


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Most pure-play, listed BPOs have not yet crossed $300MM in earnings;Convergys high was $320MM in Yr 2000 (1/2)

-100

400

300

200

100

0

2009080706050403020120001999

Convergys

0

50

100

150

200

250

300

350

400

2009080706050403020120001999

Teleperformance

0

100

200

300

400

500

600

700

800

900

2009080706050403020120001999

ACS2

50

400

350

300

250

200

150

100

0

050403020120001999

ClientLogic Sitel1

0

50

100

150

200

250

300

350

400

080706050403020120001999 2009

Teletech

0

50

100

150

200

250

300

350

400

20090807062005

Genpact

SOURCE: Annual reports; team analysis

Operating profit$ Millions

1 Merged with ClientLogic in 20072 Acquired by Xerox in Feb 2010


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Most pure-play, listed BPOs have not yet crossed $300MM in earnings;Convergys high was $320MM in Yr 2000 (2/2)

SOURCE: Annual reports; team analysis

50

400

350

300

250

200

150

100

0

2009080706050403020120001999

Sykes

50

400

350

300

250

200

150

100

020080706052004

WNS Global Services

100

200

400

0

300

20080706050403020120001999

ICT Group

07060504032002

300

400

50Series

100

200

150

250

0

08

350

Firstsource Solutions

0

50

100

150

200

250

300

350

400

2009080706050403022001

MphasiS BPO

0

50

100

150

200

250

300

350

400

080706052004 2009

Exlservice Holdings Inc

Operating profit$ Millions


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Key opportunities

Market

overview

1

Compe-titivelandscape

2

Valueproposition

3

Telecom/ Media clientshave sophisticated needs, mixed outsourcingexperiences

Willing to pay premium for proven quality (e.g., low FCR, high CSAT) Opportunity for value sharing in cross- and up-sell programs (e.g., 4x

performance difference between leading wireless telco and industry average)

Varying performance on strategic programs (e.g., churn management),kept largely in-house due to tight interface with business and product strategy

Financial services clients want scale efficiencies across siloed product

groups

Super agent for selling multiple products to high value customers

Increase utilization and FCR through cross-skilling and unified WFM

Multi-channel integration to reduce cost per customer and increase CSAT

Utilities looking for flexible capacity to address anticipated call volume spikes

due to smart meter adoption in the near- to mid-term

Section overview


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Value proposition

Pain points and potential value proposition

High-level capability gap assessment

Mini case studies

Media/Telecom

L T l MSO i i lli lli


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Large Telco/MSOs insourcers want to increase cross-selling/upselling onservice calls, but ensuring high customer satisfaction is just as important

Potential opportunity/value propositionKey pain points Propensity to outsource

Cost/customer Improve AHT and FCR throughproprietary tools (e.g., call flow,

knowledge management, CTI)

Increase utilization through worldclass WFM capabilities andflexible capacity

Increased competitioncreating need for reducingcosts without compromisingcustomer experience

Key cost drivers (e.g., AHT,FTR) getting tougher tomanage due to increasedproduct complexity

Medium Large telcos/MSOs (>10,000

seats) are consolidatingcontact centers in low-costU.S. cities to drive further costreduction

Revenue/customer

Improve performance of salesprograms through proprietary toolsand training

Mine consumer insights to improvesegmentation and tailor offerings

Low cross- and up-sellattach rates; in-house contactcenters lack sales capabilityto convert service calls intosales

High; by increasing offersmade/call and accept rates byjust 100 BP, an averagewireless telco can doublegross profits from cross-sell/up-sell efforts

Retention Reduce churn through proprietary

tools (e.g., predictive algorithms);

proactively identify at-riskcustomers and take preemptiveaction

Improve performance of retentionprograms (e.g., segmentation, savecapabilities)

Increasing churn assubscriber growth is

slowing down

Medium

Although data sensitivity is anissue for telcos, churnmanagement is a bigopportunity (e.g., T-mobilesmonthly churn in 2009 was3.2%, versus 1.4% forVerizon)

SOURCE: Merrill Lynch Global Wireless Matrix; interviews; team analysis

T l i d t b h k fi i t t ti l


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Telco industry benchmarks confirm improvement potential oncost, quality, and revenue fronts

SOURCE: Purdue 2008; team analysis

Average talk time intelcos is higher thanothers verticals,suggesting greater needto reduce cost/hour

Significant spread in FCRrates suggests need forstandardized workpractices and greaterautomation (e.g.,knowledge management)

Low attempts to cross/up-sell as most telco callcenters not equipped to

be high- performancesales teams

Inbound

Outbound

IndustryaveragePerformance metrics

Best inclass

65.83FCR rate (calls resolved onfirst attempt)

82.23

76.34%Agent occupancy 79.05%

23.23%Percent of sales calls that results in sale 17%

50%Do you engage in cross-/up-selling 47.73%

5.66Cost per callDollar

2.86

22.2Cost per sale

Dollar

23.31

3.49Sales per hour 0.59

115.21Average sale valueDollar

82.35

4.71Average talk time (including holdtime) in minutes

3.48

113,602Average revenue per agent per yearDollar

178,917

29.5380% calls answered in (seconds) 19.69

45.13Average time in queue (seconds) 26.27

T l f i t l d i li ti f l


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Telco performance improvement levers and implications for valueproposition (1/2)

Cost per hour High cost (predominantly onshore) but at-

scale operations, with average

infrastructure utilization

On-shore FTE cost-competitivenessand high infrastructure utilization

Standardized work practices andproprietary tools (e.g., CTI) to improveagent productivity and reduce AHT

Knowledge management tools,

triaging process, and skills-basedrouting to increase FCR rates

Call segmentation based on lifetimevalue of customer and likelihood tobuy, such that high value customersgo to most experienced agents

Effective workforce management andflexible staffing models (e.g., shifts,part time) to drive higher utilizationand better demand-supply matching

Cost

What we heard

Average Handle Time Multiple screens/systems lower

productivity Variability across agents (tenure, skill

group) due to lack of skills-based routing

Channel (contact)management

Good self-self service levels acrosschannels (IVR/Web/Email/Chat)

Basic call segmentation in place

SLAs Competitive industry, unwilling to

compromise on SLAs

Contact centerpain point

Opportunity to leverage technology toincrease FCR rates

Desire to lower support cost by improvingtrouble-shooting capabilities and reduce

false alerts to field support staff

First call resolution rate

Utilization Good utilization levels due to at-scale

centers, but poor skills-based routing (e.g.,all agents get all calls)

Fraud and delinquency Collections does not appear to be a major

point as yet

Lever

Cross-industry FCRaverage1 is 70%

1 McKinsey proprietary benchmark database

Desirable elements of a compellingvalue proposition

Telco performance improvement levers and implications


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Telco performance improvement levers and implicationsfor value proposition (2/2)

Contact centerpain point Lever

Desirable elements of a compellingvalue proposition

Customerloyalty

RevenuesConversion rate

Conversion rates are low or highly variableper agent; incentives often not aligned tomaximize cross-selling

Contribution/order Opportunity to improve average $ per or-

der through higher up-sell, cross-sell rates

Superior sales infrastructure (tools,training, culture) to improve averageoffers per call, accept rates, and cross-sell/up-sell rates

Joint marketing and targeted outboundcampaign execution capabilities

Proprietary tools (e.g., CRM analytics)and proprietary customer knowledge

that could drive higher campaignresponse rates and marketing ROI

Customer satisfaction Inconsistent customer experience, and

often not tailored to lifetime value ofcustomer

Number of contacts Traditionally weak on outbound campaign

capabilities

Constant threat from competitors andalternate technologies (e.g., IPTV, VOIP)Retention

High performanceteam culture

Across the board opportunities to improvemanagement systems and processes

Low agent turnover rate, optimalstaffing ratios (front-line, support), andworld class recruiting, training, and

retention programs Proprietary tools/ processes forcontinuously improving customerexperience and satisfaction acrossmultiple touch points

Track record in designing effectiveloyalty and churn management pro-grams (e.g., predictive technology toproactively identify at-risk customers)

Offers made percontact

Offers made per service call is low orhighly variable per agent; agents not well-trained to sell

Average cross-sellconversion rate: 3-4%(cross-industry average1)

A

B

What we heard

Examples follow

1 McKinsey proprietary benchmark database

Cross selling: significant performance variation amongst

A ESTIMATES


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Cross-selling: significant performance variation amongstwireless telcos confirms opportunity is real

Sales transactions(average1)

Millions

5.31.4

Best-in-class

Industryaverage

4X

Eligiblecalls2

Millions

Offers per eligible call(average1)

Accept rate(average1)

Percent

Top 5 carr-iers (avg)

26-28

3.0

1.5

Best-in-class

Industryaverage

2X

6.5-7.2

Best-in-class

Industryaverage

3.0-4.0 ~2X

A

SOURCE: Expert interviews; team analysis

ESTIMATES

1 Includes contract renewals, handset upgrades, accessories, additional lines, roadside assistance2 Assuming subscriber base of ~80-87 million

Considerable value creation opportunity for BPO

A ESTIMATES


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Considerable value creation opportunity for BPOprovider with superior cross-selling capabilities Industry average

Best in class

1.8 2.2

1.9 2.4 3.0 3.5

2.4 3.0 3.7 4.4

2.8 3.6 4.5 5.3

3.50

4.50 5.50

6.50

1.5

2.0

2.5

3.0

Accept ratePercent

Offersmade pereligiblecall

2.61.4

Number of sales transactions1

Millions

32.81 40.10

34.02 43.74 53.46 63.18

42.53 66.83 78.98

51.03 65.61 80.19 94.77

3.50

4.50

5.50 6.50

1.5

2.0

2.5

3.0

Accept ratePercent

Offersmade pereligiblecall

47.3925.52

Contribution margin1,2

$ Millions

By increasing offers made/calland accept rates by just 100BP, an average wirelesscarrier can more than doublecontribution margins fromcross-sell/ up-sell efforts

54.68


A ESTIMATES

1 Assuming number of eligible calls = 27 million2 Assuming average contribution margin per sale = $18

Somewhat satisfiedHighly dissatisfiedWireless telcos: Verizon leads in terms ofB


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23

22

44

23

22

22

13

23

15

16

13

13

6

6

6

2

6

10

5

4

4

U.S. Cellular 20 21

Sprint Nextel 21 24

MetroPCS 28 19 3

T-Mobile 25 25

AT&T 25 27 3

Verizon 26 31 4

Satisfied

Highly satisfiedSomewhat dissatisfied

DissatisfiedWireless telcos: Verizon leads in terms ofcustomer satisfaction and has lowest churnrates in the industry

Potential opportunityto pitch Higher quality

customer care totelcos lower on

customer satisfaction(e.g., US Cellular)

Proven churnmanagementcapabilities to telcosexperiencing highchurn (e.g., T-Mobile)

Average churn2

Percent

1.4

1.5

3.2

5.9

2.1 (post-paid)

N/A

1.9 (averageacrosswireless telcos)

SOURCE: McKinsey iConsumer research 2009; Merrill Lynch Global Wireless Matrix 2009; team analysis

B

1 Satisfaction being measured as the sum of Highly Satisfied and Satisfied2 Average monthly churn in 2009

Overall satisfaction1 with mobile service operator

Percent

Somewhat satisfiedHighly dissatisfiedCable/Satellite players: Verizon FIOS leadsB


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35

31

30

29

28

30

26

23

9

13

12

9

15

10

11

8

6

4

3

3

3

0

1

2

3

Time WarnerCable

18 36 1

Dish Network/EchoStar

21 38

Cox 22 32 31

AT&T U-Verse 24 33

DirecTV 25 32

Verizon FIOS 33 33 21

Comcast

Cablevision

3117

004214

Highly satisfied

Satisfied

Somewhat dissatisfied

Dissatisfied

Overall satisfaction1 with cable/satellite provider

Percent

Cable/Satellite players: Verizon FIOS leadsin terms of customer satisfaction

Potential opportunity topitch higher qualitycustomer care to MSOslower on customer

satisfaction andexperiencing high churn(e.g., Comcast)

Increasing triple-playpenetration throughsuperior cross-selling canhelp reduce churn (single

service customer segmenthas highest churn)

Average churn2

Percent

2.0

1.5

2.0

N/A

1.7

N/A

SOURCE: McKinsey iConsumer research 2009; Merrill Lynch Global Wireless Matrix 2009; team analysis

B

1 Satisfaction being measured as the sum of Highly Satisfied and Satisfied2 Average monthly churn in 2009

2.6

2.0

Value proposition


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Value proposition

FinancialServices


High-level capability gap assessment Mini case studies

Financial services firms want to broaden relationships by cross-


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Financial services firms want to broaden relationships by crossselling products, while optimizing operations to minimize costs


Cross-channelintegration

Integrated multi-channelcapabilities with aligned incentivesto migrate customers (e.g., sharesavings for reduced call volume)

Providing seamlesscommunications acrosschannels (e.g., branch, callcenter, web/email) whilemigrating customers to lowercost channels

Medium

Banks are looking to provideseamless customerexperience across all touch-points, in a cost-effectivemanner

Revenue/customer

Superior performance in salesprograms enabled by proprietarytools and training

Improved segmentation and skills-based routing to match highestvalue segments with mostseasoned agents

Limited cross-selling due tosiloed product centric-organizations

High BUs have different contact

centers, hence agents oftennot able to cross-sellproducts to high-valuecustomers

Economiesof scale

Shared services capabilities toachieve economies of scale inareas such as WFM, training, andrecruiting

Flexible capacity by balancingworkload across different groups

Minimal consolidation acrossdifferent BUs and productlines to drive down unit costs

Lack of standardization inprocesses across deliverycenters

High


Banking industry benchmarks confirm opportunity to improve


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Banking industry benchmarks confirm opportunity to improveFCR and sales conversion rates


Low average FCR ratessuggests need forstandardized work

practices and greaterautomation

Low sales conversion ratessuggests need for bettersales infrastructure(processes, talent, tools)

Inbound

Outbound


Best inclass

70.36%FCR rate (calls resolved onfirst attempt)

79.37%


13.90%Percent of sales calls that results in sale 11.63%

67.18%Do you engage in cross-/up-selling 74%


4.77

33.89Cost per saleDollar

15.25


6,224.71Average sale valueDollar

3,367


2.6

119,860Average revenue per agent per yearDollar

147,500



Value proposition


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p p

Utilities Pain points and potential value proposition


Mini case studies

Given the rollout of smart grids and smart meters, Utilities need to revamp


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g , ptheir billing systems, & plan for capacity to handle growth in call volumes


Customersatisfaction

Superior performance in careprograms that track CSAT

Strong CSAT managementpractices (e.g., after-call surveywith feedback loop)

Players in deregulatedmarkets (e.g., Texas) needto improve customerexperience to manage churn

Low to Medium

Majority (~75%) residentialmarket is regulated,customer satisfaction normsnot as stringent

Billing /statements

End-to-end billing solution thatprovides faster time to market andlower cost of ownership

Greater accuracy/ quality, tomitigate risk of customerescalations to regulatory bodies

Current billing systemsinflexible with long time tomarket for new products

Ability to bill on smaller timeincrements (Smart Meter)

High

Existing billing systems areantiquated, and cannotsupport smart meterimplementation over next5 years

Flexibility/capacity

Robust workforce management tohandle unpredictable call volumes

Flexible work force managementto manage demand fluctuationswithout having to deal with unionissues (i.e., complement, notreplace, existing work force)

Expected surge in volumefor players installing smartgrid technologies

Medium Majority utilities are regional,

and feel obliged to keep jobslocal; however, opportunityexists to partner for attritionreplacement anddemand spikes


Utility industry benchmarks confirm need for flexible capacity, efficient


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y y p ywork practices, and greater automation


High time to answer andtime in queue suggestneed for flexible capacity

to handle demand peaksmore efficiently

Low average FCR ratesimplies need forstandardized workpractices and greaterautomation

Inbound

Outbound


Best inclass

68.80%FCR rate (calls resolved onfirst attempt)

66.43%


23.68%Do you engage in cross-/up-selling 28.57%


3.24

0.5Cost per saleDollar

1.00


0.5Average sale valueDollar

1.00


3.63

0.5Outbound calls that result in salePercent

1



Value proposition


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Mini case studies


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Capability self-assessment contact centers for Telco, Utility, Capability gapStrong fit


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and FIG verticals (2/2)

Knowledge management system (e.g., systematicway to address issues resulting in higher FCRand lower AHT)

CRM system (e.g., determine lifetime value ofcustomer, track customer satisfaction)

Call segmentation based on lifetime value andcomplexity

Self-service channels (e.g., IVR, Web) to reducecall volumes Work force management and flexible staffing to

improve utilization Scripted call flows and single agent desktop to

minimize non-value added tasks and to provideconsistent experience across touch points

Capability to hire, train and onboard large (~300-500) number of FTEs per month

Front-lineeffectiveness

Minimal performance variability across agents of

similar tenure Skills-based routing to maximize FCR Highly trained and motivated customer-facing staff

(e.g., attitude tested during hiring and emphasizedduring performance reviews)

Frequent coaching sessions and low supervisor toagent ratio (e.g., < 1:15)

Robust performance management processes(e.g., daily team huddles, visual management)

Low attrition rates across agent tenures

Proprietarytools andprocesses

Capability requiredto win share Description Support for self-assessment

Providerself-assessment

Strong fit


Value proposition


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Mini case studies

Sophisticated customers are using hybrid offshore-onshore strategies toti l d iti t i k


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proactively manage and mitigate risk

Customer differentiation -Direct high value customers

to on-shore call center,others to offshore location;direct cosmopolitan citycustomers to India; directcalls by age group

Call differentiation- Directcomplex calls to onshorelocation, simpler calls tooffshore (screen calls usingupfront IVR)

Hybrid model - Combine useof near-shore, home-shore

(call centers run fromoperators home), and

offshore to achieve optimummix; use outsourcing vendorsfor special requirements(e.g., special languages)

ExamplecompaniesMitigation strategy

Does not offshore calls fromtop 200 customers

Routes corporate customersto onshore center

Sends unstructured calls (thatrequire more expertise) to UK,others to India;Sends dealer calls to UKcenter

Has five global centers across

the world including US, India,Australia

Has multiple global centers toprovide 24X7 coverage

DescriptionKey challenges withoffshoring

Loss of control of keycustomer facing processes

Lack of understanding ofprocesses

Security/privacy risk

Language barriers/accents/cultural differences (e.g.,unaware of local customs,sports teams)

High employee turnover atoffshore call centers

Hidden costs (e.g., additionalcoordination, travel, disasterrecovery preparation)

Reputation risk, i.e. negativepublic perception

Counterparty risk

Geopolitical risk

SOURCE: Press scan; industry publications; team analysis

Telco/MSO: mini case-studies


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Brief companydescription

Call-centeroperations Key priorities Views on outsourcing

Direct broadcastTV provider

13,000 FTEs Completely in-

house

Reduce cost perhour, but not averagecall time (to maintainhigh customersatisfaction)

Looking to cut costs,and will potentiallyoutsource if quality isnot at risk

Open to co-marketing, as longas customer

experience remainsconsistent

US-basedsubsidiary ofglobal provider ofwireless telecom

and data services

20,000 FTEs 25% outsourced,

some of which isoffshore

Offshore cost/hour is approx.half of onshorecost/hour

High customersatisfaction

Reduce cost per call

Looking to increaseoutsourcing to 35-40%

Experience with

offshoring notsmooth due to longlead times involvedin implementationand training


Capgemini entered into long-term agreement with TXUEnergy with a view to enter Utilities outsourcing market
http://images.google.com/imgres?imgurl=http://wpcontent.answers.com/wikipedia/en/thumb/1/1f/TXUenergyLogo.jpg/200px-TXUenergyLogo.jpg&imgrefurl=http://www.answers.com/topic/energy-future-holdings-corporation&usg=__-B3BhXsveuSwCNfIbT23-rlIKQ0=&h=110&w=200&sz=7&hl=en&start=9&um=1&itbs=1&tbnid=Py0Q4Ij1AuGk2M:&tbnh=57&tbnw=104&prev=/images%3Fq%3DEnergy%2BFuture%2BHoldings%2BCorp%2Blogo%26hl%3Den%26rlz%3D1I7GGIT_en%26sa%3DN%26um%3D1http://images.google.com/imgres?imgurl=http://boa.nc3a.nato.int/boa/9625/img/logo.jpg&imgrefurl=http://boa.nc3a.nato.int/boa/9625/9625.htm&usg=__nZzw56hQotUY1JdMePqUbGawzqI=&h=194&w=680&sz=85&hl=en&start=6&um=1&itbs=1&tbnid=B0YtZmnpTagPYM:&tbnh=40&tbnw=139&prev=/images%3Fq%3Dcapgemini%2Blogo%26hl%3Den%26rlz%3D1I7GGIT_en%26sa%3DN%26um%3D1


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Energy with a view to enter Utilities outsourcing market

Present StatusKey Details

Deal Details:

10-year partnership signed on May 18, 2004with a value of $3.5 billion

Services provided: Outsourcing

services for customer care, humanresources, finance and accounting, revenuemanagement, supply chain, and technologyfunctions.

Culminated in the formation of Capgemini

Energy LP, a limited partnership formed byCapgemini and TXU

~ 2,700 TXU employees transitioned toCapgemini Energy

Rationale for TXU

Cost reduction. Capgemini Energy chargedwith reducing TXUs run rate of costs by afactor of 30%

Improved customer satisfaction: Help TXUemerge as a best-in-class service providerto its current and prospective customer base

Rationale for Capgemini

Provided Capgemini entry into the U.S.large-utility outsourcing market

Terminated the fourth quarter of 2008; EnergyFuture Holdings Corp (EFH) acquired TXUEnergy and decided to terminate therelationship

Services be transitioned back to EFH oranother service provide by December 31, 2010(June 30, 2011, in the case of informationtechnology services)

SOURCE: Press search, IDC, team analysis

PRELIMINARY

Accenture and BC Hydro partnered to achieve operationalefficiencies and to pursue North American Utilities market
http://images.google.com/imgres?imgurl=http://216.139.233.88/sandbox/UserFiles/images/Adults/WOD%25202009%2520Gold%2520Sponsors/forgen_logo_col_lg.jpg&imgrefurl=http://www.ywcavan.org/content/2010_Sponsors/942/30/201&usg=__W9WqXRaz8Qa3VDTiacHYt0fv8XQ=&h=181&w=530&sz=78&hl=en&start=14&um=1&itbs=1&tbnid=by3HjtAd-DeBiM:&tbnh=45&tbnw=132&prev=/images%3Fq%3Dbc%2Bhydro%2Blogo%26hl%3Den%26rlz%3D1I7GGIT_en%26um%3D1http://images.google.com/imgres?imgurl=http://www.wikijob.co.uk/files/Accenture_logo.jpg&imgrefurl=http://www.wikijob.co.uk/accenture-graduate-scheme-graduate-jobs&usg=__9zCMNn7B7_UKjNhCv4C_B6P9pgU=&h=226&w=700&sz=15&hl=en&start=9&um=1&itbs=1&tbnid=HSUJi6cB7Vtf9M:&tbnh=45&tbnw=140&prev=/images%3Fq%3Daccenture%2Blogo%26hl%3Den%26rlz%3D1I7GGIT_en%26sa%3DN%26um%3D1


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efficiencies and to pursue North American Utilities market

Present StatusKey Details

Deal Details:

10-year partnership signed on 2003 with avalue of $1.45 billion

Formed a new BC-based company,Accenture Business Services of BritishColumbia Limited Partnership to provide BCHydro with Customers Services, Westech ITServices, Network Computer Services,Human Resources, Financial Systems,Purchasing, Building and Office Services

1543 employees were transferred toAccenture

Rationale for TXU

Cost savings (expected saving of 250 millionUSD in 10 yrs) and performanceimprovements

Will allow BC Hydro to focus on Core

BusinessRationale for Accenture

BC-based business to help Accenture toaggressively pursue North American utilitiesservices

Deal has helped BC Hydro in:

Cost Savings: Realized gross cumulativesavings of $76.2 million in the first four yearsof the contract

Service improvements: 99 percent of servicelevel metrics achieved

Improved customer satisfaction: Rankedsecond among Canadas largest powercompanies in the first customer satisfaction

study of Canadian electric utilities, conductedby Californias J.D Power & Associates in 2007

Improved internal client satisfaction: Internalclient satisfaction survey results showed anoverall improvement of 9% in 2008

PRELIMINARY

SOURCE: Company website, Press search, team analysis

Appendix


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Key companies

Recent BPO deals

Key vendor profiles

Telco/Media

Telecom and media industry highly consolidated; top-3 players accountfor 70-90% of industry revenues


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for 70-90% of industry revenues

2008

revenues$ Billions

Market

sharePercent

2008 resi-

dential linesMillionsProvider

62 50 31

48 38 21

2008

revenues$ Billions

Market

sharePercent

2008

subscribersMillionsProvider

Wireless providers (~70% revenues is consumer)

44.4 27 77

42.6 26 72

27.5 16 49

18.9 11 33

3.9 2 6

1.7 1 4

2.4 1 5

1.0 1 1

Cable providers

2008

revenues$ Billions

Market

sharePercent

2008

subscribersMillionsProvider

34.4 48 65.5

2008revenues

$ Billions

Marketshare

Percent

2008subscribers

MillionsProvider

Satellite providers

17.2 24 35.2

7.2 10 10.6

6.5 9 12.7

1.4 2 2.98

19.7 63 18.6

11.6 37 14.1

Telecom Media

Wireline providers (~40% revenues is residential)

SOURCE: Annual reports, Pyramid, SNL Kagan, Gartner, UBS, team analysis

Appendix
http://www.dishnetwork.com/default.aspxhttp://mediacom.com/http://www.charter.com/Visitors/Home.aspxhttp://images.google.co.in/imgres?imgurl=http://seeklogo.com/images/C/Cablevision-logo-3A735831F2-seeklogo.com.gif&imgrefurl=http://seeklogo.com/category.html%3Fq%3DC%26Page%3D2%26Sort%3DFormat-Asc&usg=__wvh-E-Zw464KP2ArffPVwlcbNXo=&h=200&w=200&sz=5&hl=en&start=5&tbnid=ukSIvmaP7m27GM:&tbnh=104&tbnw=104&prev=/images%3Fq%3Dcablevision%2Blogo%26um%3D1%26hl%3Den%26tbs%3Disch:1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://blogs.nyu.edu/blogs/bmg258/berniestakeonthead/TimeWarnerCable_Logo_1.jpg&imgrefurl=http://blogs.nyu.edu/blogs/bmg258/berniestakeonthead/2009/02/&usg=__RLZlMIWbhfF9Z_xLbVxh_0rzHZM=&h=400&w=600&sz=16&hl=en&start=1&tbnid=UuDulox7mJSpmM:&tbnh=90&tbnw=135&prev=/images%3Fq%3Dtime%2Bwarner%2Bcable%2Blogo%26um%3D1%26hl%3Den%26tbs%3Disch:1&um=1&itbs=1http://images.google.co.in/imgres?imgurl=http://gothampr.files.wordpress.com/2009/12/comcast_logo.jpg&imgrefurl=http://gothampr.wordpress.com/2009/12/03/comcast-buys-nbc/&usg=__z7YiaDmZQMPcO0-qZTFFF9PHBoc=&h=536&w=1826&sz=66&hl=en&start=1&tbnid=dXGfgboIjmvfkM:&tbnh=44&tbnw=150&prev=/images%3Fq%3Dcomcast%2Blogo%26um%3D1%26hl%3Den%26sa%3DN%26tbs%3Disch:1&um=1&itbs=1http://upload.wikimedia.org/wikipedia/en/d/dd/Nextel_logo.svghttp://en.wikipedia.org/wiki/File:Centennialcorplogo.pnghttp://www.uscellular.com/uscellular/index.jsp


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Credit card issuers Key companies

Recent BPO deals

Key vendor profiles

The card issuer market is consolidated, with Top 10 card issuersaccounting for 90% of outstandings


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accounting for 90% of outstandings ...

2008 outstanding$ Billions

2008 activeaccounts1

$ Millions2008 cards

$ MillionsCard issuer

52.0

29.0

40.6

26.1

31.8

20.7

6.8

15.3

5.3

2.3

183.3

160.0

106.2

96.3

60.1

54.5

36.4

29.4

18.5

16.6

119.4

76.6

91.6

54.0

46.3

57.1

17.3

37.3

11.2

5.1

1

2

3

4

5

6

7

8

9

10

SOURCE: The Nilson Report; team analysis

1 Defined as account used at least once in past 12 months

... while top 50 regional and private label issuers account for 90% ofremaining 10% outstandings
https://www.wellsfargo.com/http://www.discovercard.com/http://www.citigroup.com/citi/


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remaining 10% outstandings

2008outstanding$ Billions



$ Millions

Barclays Del.

Target (Retailers Natl)Advanta

First Natl Bank Omaha Nebr.

PNC Bank

Navy FCU

GE Money Utah

RBS Natl Conn.

Fifth Third

Cabelas WFB

CompuCredit

State Farm Bank

BB&T Ga.

Nordstrom

Associated Bank

Pentagon FCU

Town North National

Credit One Bank Nev

Merrick Bank

First Financial

ICBA Bancard

SunTrust Bank

Commerce Bank

First Premier

Suncoast Schools FCU

Card issuer

2008outstanding$ Billions



$ MillionsCard issuer

TIB

Compass BankBECU Wash.

Golden 1 CU

SchoolsFirst FCU

America First CU

BMW Bank of North America

M&I Bank

First Hawaiian

PA State Empl. CU Pa.

Digital FCU

VyStar CU

First Citizens Bank

Columbus Bank & Trust

TD Bank

Wescom CU

Arizona FCU

Patelco CU

UMB Bank

First Horizon

Security Service FCU

Zions Bank

Redstone FCU

State Employees CU

Virginia CU

1

23

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

2728

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

4.8

4.20.8

1.2

1.1

0.8

2.9

0.9

0.8

1.2

2.5

0.4

0.5

0.7

0.1

0.2

0.5

2.0

0.8

0.5

0.6

0.3

0.3

3.2

0.1

10.9

23.42.3

6.2

3.4

1.6

16.5

2.2

2.1

2.3

3.8

1.1

1.5

1.6

0.1

0.5

0.8

2.0

0.8

0.6

1.3

0.8

0.9

3.6

0.2

11.0

8.65.0

4.9

4.3

4.2

2.9

2.5

2.3

2.3

2.1

1.6

1.5

1.4

1.4

1.3

1.2

1.2

1.1

1.0

0.9

0.9

0.9

0.9

0.7

0.7

0.60.6

0.0

0.4

0.4

0.4

0.4

0.4

0.3

0.3

0.3

0.3

0.1

0.3

0.1

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.5

0.10.1

0.1

0.1

0.1

0.1

0.1

0.1

N/A

0.1

0.1

0.1

0.1

0.1

0.1

0.0

0.0

0.1

0.1

N/A

0.1

0.1

0.0

0.0

0.7

0.40.2

0.2

0.2

0.2

0.2

0.3

0.3

N/A

0.1

0.1

0.3

0.3

0.2

0.1

0.1

0.1

0.2

0.2

0.1

0.3

0.1

0.1

0.1

SOURCE: The Nilson Report; team analysis

1 Defined as account used at least once in past 12 months

Appendix


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Utilities Key companies

Recent BPO deals

Key vendor profiles

Residential utility market is fragmented, top 30 utilities account for only40% subscribers (1/2)


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( )

Ownership

Investor Owned

Investor Owned

Investor Owned

Investor Owned

Power Marketer

Power MarketerInvestor Owned

Investor Owned

Investor Owned

Investor Owned

Investor Owned

Investor Owned

Investor Owned

Investor Owned

Public

US state

NJ

FL

CA

CA

TX

TXNY

GA

VA

FL

IL

AL

PA

MD

NY

Deregulated

Yes

No

No

No

Yes

YesYes

No

No

No

Yes

No

Yes

Yes

No

Number of consumersMillions

1.83

3.99

4.23

4.62

1.93

1.542.31

2.04

2.02

1.45

3.44

1.21

1.40

1.08

0.99

2008 revenues$ Billions

2.08

6.21

4.59

4.16

3.74

3.122.83

2.71

2.72

2.27

3.28

2.00

1.92

1.87

1.87

Virginia Electric & Power Co
http://www.energystar.gov/ia/partners/promotions/change_light/join/images/Color%20LIPA%20logo-2.JPG


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Key companies

Recent BPO deals

Key vendor profiles

Recent Telecom and Media BPO deals (not exhaustive)


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Contract value$ Millions Scope

Contract startmm/yy

Contract lengthYears

ContracttypeVendorCustomer

25 Retention, customer care, technical support 5 Expansion05/09

15 Customer care, technical support 3 New09/08

50 e-billing 3 Extension03/09

300 Business/operational support, billing 5 New10/08

55 Customer care, technical support, ordermgmt

5 New08/08

30 Provisioning/activation and user mgmt,billing

5 Extension08/08

640 Customer care, technical support 3 New02/07

75 Customer service 01/07 3 Extension

100 Statements, customer communication 5 Extension01/09

71 Tier-1 tech support to video customers(1,400 FTEs)

2 Extension10/09

55 Technical support to internet subscribers,Voice of the Customer program

3 Extension10/09

72 Billing, customer support 3 Extension09/09

SOURCE: IDC BPO deals database; team analysis

Recent Utilities BPO deals (not exhaustive)


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Smart-grid billing, customer managementand collections

New60 409/09

Customer service Renegotiation76 707/08

Customer service, back-office, statements New130 1001/08

Customer service process improvement, IT

enhancements, workforce management,F&A

New350 1009/07

Expansion Call center services9 301/09

1 Customer care, statements, collections New505/07


Contract startmm/yy




Recent Banking BPO deals (not exhaustive)


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3 Direct marketing services 11/09 3 Extension

67 Call center, payment processing, skiptracing, pre-default collections

07/08 7 New

25 Customer management services 09/07 3 New

US FinancialInstitution

26 Customer management, backoffice 08/08 1 Extension

80 Customer care and collections support 02/08 5 New


Contract startmm/yy




Recent Insurance BPO deals (not exhaustive)

C t t l C t t t t C t t l th C t t


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Call center services 09/07 5 New

Claims processing, billing, mail room 09/09 5 New

Policy administration, customer service 09/09 5 Extension

Customer service, transaction processing 03/09 10 Extension

Call center, billing, document management 10/08 3 Extension

Call-center, reporting, and paymentprocessing

08/08 15 New

Call center operations 05/08 5 New

Customer relationship programs 05/08 5 Expansion

Back-office processes 09/08 10 New

Customer service, billing 09/07 10 New

Customer service 05/08 5 New

50

10

14

110

15

160

14

40

115

20

30


Contract startmm/yy




Appendix


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Key companies

Recent BPO deals

Key vendor profiles

Key vendor profiles


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Convergys

Sitel

Teleperformance

TeleTech

West

Sykes

Genpact IBM Daksh

WNS

Firstsource (ICICI Onesource)

Aegis

Exl Services

Infosys BPO (formerly Progeon)

Convergys

EmployeesRecent customer dealsHistory/background

MNC, specialists (BPO)


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p y

FTE, thousands

Key customers (functions supported)

Revenue

US$, million

Recent Organizational Highlights

y g

Locations

Service offerings

Formed as a division of Cincinnati Bell and spun off in1998

Leading provider of business process outsourcing(BPO) services, such as billing, human resourcesadministration, and customer care

84 customer contact centers

IndiaBangalore

EEBudapest (Hungary)

Latin AmericaSao Paulo (Brazil),

OthersPhilippines, Russia, Spain, China, England,Malaysia, France, Australia, Singapore, Japan

Customer Management: Provides agent-assisted ser-vices, automated self service and technology solutions

Information Management: Provides business supportsystem and operational support system (BSS/OSS)solutions for Communication and Media Providers

Human Resources (HR) Management: Provides globalhuman resource business process outsourcing (HRBPO) solutions

Rodale (February 2009): Portfolio of customer care andrelationship management solutions. First contract wincombining both, Convergys and Intervoice solutionssince Convergys acquired Intervoice in Sept., 2008.

Brazilian wireless carrier Vivo (January 2009):

Extended five-year partnership with a new two yearcontract to provide production operations support

Orange UK (December 2008): Extended contract forConvergys customer management solutions

Federal Deposit Insurance Corporation (FDIC)(December 2008): Five-year agreement to providecustomer management support

July 2008: Merger of Convergys and Intervoiceannounced

May 2008: MVNO enabler (MVNE) Visage Mobileannounced the sale of its subscriber managementbusiness to Convergys

AT&T (billing and customer care support ) ComCast (customer care services) DirecTV (customer service) Time Warner (billing, customer care) Wachovia (customer care services) T-Mobile (billing solutions) Schering-Plough ( Customer Care ) Starbucks ( Human Resources ) AnnTaylor Stores ( Customer Care )

7075

-3%

200908

~ 75

2007

2,8272,7852,844

0% p.a.

2009082007

SOURCE: Press search; company website; Onesource

Strengths and weaknesses

St th R iti d A d


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Strengths

Increased focus on ITO representing around 25% of thetotal revenue

Unique product offering like Web-based solutions Strong business models characterized by 90%+

recurring revenue and strong operating leverage

Key acquisitions such as Employease and VirtualEdgeto expand in markets beyond core HR BPO

Recognition and Awards

Placed in Leaders Quadrant in Gartner MagicQuadrant for CRM Contact Center BPO for North

America in December, 2009

Named to the Top 10 of the Global Outsourcing 100 list(Rank: 6th) compiled by International Association ofOutsourcing Professionals

Rated as one of Americas Most Admired Companies byFortune Magazine in 2009

Wins National Award from the Quality Council of India

Named Top HRO Performer by Global ServicesMagazine; Also Cited in BPO, Contact CenterCategories

Honored with Two Awards of Excellence from CustomerInteraction Solutions Magazine

Positioned as a Leader in IDC Leadership Grid,Worldwide Contact Center Services, 2008

Awarded 2008 North American Contact CenterOutsourcing Industry Innovation & Advancement of theYear Award by Frost & Sullivan

Additional competitionforeign contact center companiesbuying North American presence (i.e., Transworks-Minacs deal)

Continuing consolidation in the telecom space couldresult in a consolidating client migrating off ofConvergys platform

Overdependence on North America, with 86% of therevenue in 2007

Weaknesses

SOURCE: Analyst reports, IDC

Sitel

E lR t t d lHi t /b k d

MNC, specialists (call center BPO)


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Employees

FTE, thousands

Key customers (functions supported)

Revenue

US$, million

Recent customer deals

Recent Organizational Highlights

History/background

Locations

Service offerings

Was founded in 1985 as a result of the purchase ofHQ800, an answering service company owned byUnited Technologies

In 2007, SITEL announced a merger with ClientLogic Is privately held by private equity funds

27 countries including: India, Singapore, Philippines,Belgium, Bulgaria, Denmark, France, Germany, Spain,UK, Brazil, Canada, Chile, Mexico, Panama, USA

Provides solutions across 155 Facilities Service delivery from Europe is the largest of Sitels

global delivery portfolio, followed by North America

Customer Care Technical Support Customer Retention Acquisition and Sales Collections and receivables management solutions

Back Office Services Professional Services Transaction Processing

Travel management (January 2009): BPO services Major U.S. newspaper (January 2009): Integrated

customer support Home entertainment (December 2008): Wide range of

services for the company and its 4,000 store locations

Satellite teleservices (September 2008): Customercare and technical service support

Choice Hotels (September 2008). Expanded itsrelationship with Sitel, currently handling inboundreservation services

Satellite teleservices (June 2008): Customer servicesupport

The Haier Group (June 2008): Multilingual customercare and technical support solutions

December 2008: Established a BPO services facility inBangalore as part of a joint venture (JV) with ITCInfotech

November 2008: Expanded operations in Nicaraguawith the opening of its second facility in Managua forcustomer service, technical support, sales, and back-office services

September 2008: A new customer care facility opened

in Berlin, Germany. Throughout 2008: U.K. offices closed. GM ( Customer care services ) Dell ( Customer care ) Philips ( Contact center services ) Well Care ( Customer care) Wireless customers account for the largest percentage

of revenue, followed by ISPs, and then the technologyspace

6042

30

2008072006

+41%

1,8001,700

1,200

2008 (est)172006

+22% p.a.

SOURCE: Press search; company website; Onesource

1 2008 revenue reflects some clients shifting some work to lower-cost operating locations in the Philippines, Latin America, North Africa, and Eastern Europe

Strengths and weaknesses

Strengths Recognition and Awards


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Strengths

Fraud Prevention and Investigations group reflects Sitelsunderstanding of the high importance of the issue of securityto its clients

Merger with ClientLogic has created impressive synergies ingeographies such as India and the Philippines as well as inverticals

Has an impressive global reach through its Global DeliveryModel; 2008 expansion in the United States, Panama,Nicaragua, Morocco, Germany, and the Philippines haveincreases service delivery capabilities considerably

Well diversified and not being dependant on any one client,industry, or geography; discovering new business in

emerging markets, such as Brazil, is a savvy strategy

Recognition and Awards

Selected in the Leaders Category of IAOP's 2009 GlobalOutsourci