1. The Future of Business Process
Outsourcing
1

2. The BPO Hype Cycle
• Rising investments
• Explosion in # of
new entrants
• Market confusion
• Valuation spikes
• Market CAGR
estimates range
from 50% - 80% for
the next five years
Source: Gartner Group, “The Hype Cycle for IT Services”, June 6, 2003.
2

3. Long-Term Business Pressures Drive
More Outsourcing
3

4. Moving Up the Value Chain
Future
Business
Functions
Complex
Simple Processes
Processes
Source: Edelweiss Capital, “Business Process Outsourcing: Coming of Age?”, May 2003
4

5. The Evolution of BPO Models
Offshore Commodity
Offshore BPO
Transformational
Offshore BPO
Example: GE Capital
(Payroll Services)
Commodity Transformational
Onshore BPO Onshore BPO
Example: CSC, EDS Example: Sabre
(IT Services) (Travel Services)
Onshore
Commodity BPO Transformational BPO
5

6. Approaches to BPO
Bottom-Up Approach Top-Down Approach
Growth Opportunity: Niche Leverage:
• Identify complex processes vertical apps • Deep process expertise in
that require industry / domain vertical industries
expertise • Trusted partner relationships
• Build differentiated High-volume and reputations
competencies that boost vertical To Create:
market position processes • Highly customized, industry-
To Create: specific services
• Best-of-breed commodity • Long-term differentiation /
Broad competitive advantage
services shared
• Immediate cost savings services Growth Opportunity:
• Flawless process execution • Leverage outsourcing
competency to reduce costs
Leverage: Simple bulk and boost performance
• Economies of scale transactions throughout value chain
• Labor arbitrage opportunities processing • Consider “retailing” services
• Industry best practices to competitors
Source: Cognizant Analysis of Forrester Research Report: “BPO’s Fragmented Future”, August, 2003.
6

7. Emerging Offshore BPO Opportunities
Banking /
Financial Services Healthcare Insurance Other Verticals
• Transaction • R&D
• Medical billing • Insurance
processing • Equity Research
• Claims application
• Credit Card / processing & processing • Clinical Trials
Check adjudication • Claims • Revenue
processing
• Member processing & Accounting
• Loan processing management adjudication (Airlines)
• Mortgage services • Member • Engineering
processing • Medical management Design
transcription services
• Collections • Architecture
Sales and Marketing
Contact centers, telesales/telemarketing, customer care, web sales and marketing, market analysis
Human Resources
Payroll processing, benefits administration, HR administration
Finance and Accounting
Accounts receivables / payables / general accounting, financial reporting, shareholder services
7

8. Possible BPO Structures
Pros Cons
Outsourced Service • Can get going quickly • Higher ongoing P&L
• Lower client cost vs. alternatives
management overhead • Limited value creation
potential for client
• Less control
Service
Arrangement Build Operate Transfer • Eases entry into • Limited value creation
offshore operation with (captive)
experienced partner • No ownership Day 1
• Lower long-term cost • Retention
• Complete control • Only 2nd tier partners
Service Management • Leverage partner’s • Limited value creation
offshore infrastructure (captive)
and experience
Joint • Ownership Day 1
• Lower costs (initial and
Venture long-term)
People & Investment • Leverage partner’s • Value creation
offshore infrastructure opportunity (if non-
and experience captive)
• Exit issues
8

9. Offshoring and Reengineering Can Lead
to Dramatic Performance Improvements
9

10. Opportunity for Value Creation - FDC
(FORMERLY AMEX INFORMATION SERVICES)
LOB Highlights
• Provides bank card processing, Results
Bank card • 2002 Revenues: $7.636 billion
payment products for Mastercard, Visa,
processing/ 2002 Earnings: $1.238 billion
American Express, and numerous
receivables • AMEX sold 40 million shares
private-label cards
• Recent expansion in receivables (40% ownership) in early 1992
management (American Creditors for $22/share; recently traded at
Bureau, Ingram) $160/share (split-adjusted)
• AMEX further reduced stake to
22% through second offering
worth approximately $1 billion in
Telemarketing • Provides inbound and outbound 1993
services telemarketing services and, through • Acquired FFMC (August 1995)
joint venture with AT&T, interactive for expanded operation and
services for 800/900 telephone industry greater economies of scale
• Finalizing acquisition of Concord
• Manages the processing for 20 million EFS
Mutual fund
mutual fund shareholder accounts
services
Source: FDC annual reports; industry articles; Datamation 10

11. Cognizant’s Initial Approach
Transformational Outsourcing
Clients Joint Analysis Cognizant
• Industry Value Chain • Excellence in Offshore
• Deep Process • Industry Competitive Recruiting/People,
Experience Forces Processes/Infrastructure
• Company Core • Excellence in Delivering
• Deep Industry Competencies High-quality Services
Expertise • Business Strategy Remotely
• Company Outsourcing • Established Market
Readiness Leader in the India Space
• Strategic Outsourcing
Decisions
• Highly Customized Service
Offerings
• Long-term Competitive
Advantage
11

12. Strategy To Drive BPO Decisions
Feasibility
Scope Discovery Analysis
Assessment
• Inventory key business • Identify root drivers of • Determine cost savings • Determine BPO structure
processes and current process costs and per business process model
SLA parameters inefficiencies based on task • Identify pilot
• Catalog support • Gather transaction migration and • Determine resource
technology platform volume data and improvement requirements
requirements and skill model across • Identify costs of • Identify changes to support
sets of support staff processes process migrations process in
• Map underlying • Identify any key onshore/offshore model
support systems sequencing needs
Undertake a BPO strategy assessment to determine which
processes to outsource, financial impact and
implementation plan
12