Transcription
HfS PriceIndicatorTM MethodologyMay 2017Jamie SnowdonChief Data Officer, Research Operationsjamie.snowdon@hfsresearch.com
IntroductionThis presentation sets out the methodology used by the PriceIndicator product. Contents- About PriceIndicator - Definitions- Methodology- FAQ 2017 HfS Research LtdProprietary Page 2
About PriceIndicator HfS PriceIndicator is a real-time, research based price benchmarking service thatprovides clients an insight into current ITO and BPO pricingCurrently PriceIndicator provides a bi-annual set of hourly FTE rate cards for ADM,F&A BPO, Insurance BPO and Healthcare Payor BPOHfS subject matter experts use the rate card data to tailor a response to a specificpricing enquiryHfS analysts provide clients with valuable knowledge and coaching to steer themaway from relying primarily on "rate-card" FTE pricing, and to evaluate morestrategic pricing methodologies, namely outcome-based and transactional-basedapproaches. HfS analyst experts are available on-call to provide informed strategicguidance to our clients through ongoing pricing research that incorporates laborbased, transactional/volume-based and outcome-based pricing strategies. 2017 HfS Research LtdProprietary Page 3
Definitions HfS Research defines BPO as a service provided by a supplier external to a customerwhereby the supplier manages a customers business function or set of businessfunctions using supplier employed staff. The element that makes the arrangementoutsourcing is the suppliers management of the process. They are not implementingor advising the client, they are managing the operation of a business function or setof business functions.F&A and Procurement BPO includes these individual sub processes separately or asa group:- Order to Cash (accounts receivable)- Expense management- Purchase to pay (accounts payable)- Payroll- Record to report (general ledger and reporting)- Financial management (financial analysis and budgeting)- Risk and compliance (cash management, treasury management, risk management, tax) 2017 HfS Research LtdProprietary Page 4
Definitions Healthcare and insurance includes these individual sub processes separately or as agroup:- Claims processing- Customer acquisition- Policy administration- Policy exitADM- Application Development includes the definition, development, testing and documentation of 1) a new application or 2)customization of software prior to roll-out.The process includes requirement analysis and planning, software evaluation/ selection,prototyping, coding, testing, and implementation.- Application Management Includes the modification of software to maintain or improve the program through regular versionupdates, bug- fixing, feature addition, database administration, and performance tuning.The process includes requirement analysis and/or identification of bugs, designing,implementation, testing, and final delivery. 2017 HfS Research LtdProprietary Page 5
Eleven Pricing Work Categories – F&AClerksLevel 1(Clerk)Level 2 (JnrAccountingClerk)AccountantsLevel 3(Accountant,Entry)Level 4(Accountant,Mid-level)Level 5(Accountant,Senior or 2017 HfS Research LtdProprietary Page Team LeaderJuniorProjectManager/Team LeaderAssociateProjectManager/Team LeaderSenior
Eleven Pricing Work Categories – HealthcareVoice AgentsLevel 1 4 weekstrainingLevel 2 5-7weekstrainingLevel 3 morethan 8weekstrainingData AdministrationLevel 1 4 weekstrainingLevel 2 5-7weekstrainingLevel 3 morethan 8weekstrainingSpecialistHealthLicensedAgents 2017 HfS Research LtdProprietary Page 7MedicalAdvice(Nurse)AnalyticsLevel 1 –DataAnalystLevel 2 –DataModellerLevel 3 – DataConsultant
Nine Pricing Work Categories – InsuranceVoice AgentsLevel 1 4 weekstrainingLevel 2 5-7weekstrainingLevel 3 morethan 8weekstrainingData AdministrationLevel 1 4 weekstrainingLevel 2 5-7weekstrainingLevel 3 morethan 8weekstrainingAnalyticsLevel 1 – DataAnalyst 2017 HfS Research LtdProprietary Page 8Level 2 – DataModellerLevel 3 – DataConsultant
For ADM, the HfS PriceIndicator reflects input based / FTEpricing across 13 roles Design and ManagementProgrammanager –8 years PMPcertifiedProjectManager 7 years PMPcertifiedSeniorBusinessAnalyst –7 years BusinessAnalyst –5 years SeniorArchitect –7 years Architect –5 years DevelopmentSeniorDevelopment 2017 HfS Research LtdSeniorSystemsAnalystSystemsAdminProprietary Page 9Support StaffDeveloperTechnicalWriterTesterJuniors
HfS PriceIndicator covers all major sourcing markets andgeographiesUKUSRussiaEastern w locations are added as they become relevant to the market and our clients.Coverage dependent on relevance to individual market. 2017 HfS Research LtdProprietary Page 10
HfS Pricing Method Stage 1Examines the components that make up FTEpricing calculationSalary of staff in different locationsCost of employing staffBenefits/InfrastructureLikely margins made by the outsourcing suppliersExperienceDeal analysisHfSproprietarypricingmodel Stage 2Compare output with available contract pricingand adjust Stage 3Expose pricing to suppliers and buyers of BPOservicesThis feedback is used to adjust cost model andmargin calculation Stage 4Analyze feedback and apply changes to themodel 2017 HfS Research LtdProprietary Page 11FeedbackfromindustryexpertsDatabase of1000 sourcingtransactions
The process starts with a proprietary cost-plus approach tocompute FTE pricing For each role, HfS uses both proprietary andpublic data to build a bottom-up cost analysisacross multiple countries. This analysisincludes collating the following costs: Staff salary, bonus, and benefitsRequired office space and associatedequipment costsManagement overhead costHfS combines these elements todefine a narrow range of hourlyFTE pricing benchmarks theworld’s major outsourcingdestination countries HfS then estimates supplier marginsleveraging the experience and expertise of itsinternal sourcing analysts, publicly availabledata, and the assessment of key markettransactionsHfS has a data-driven approach to develop FTE pricing. The data sources range from privatelyavailable information to public information from credible sources 2017 HfS Research LtdProprietary Page 12
HFS leverages transaction data from over 1,000 engagementsat stage two of the pricing assessment At stage two of the assessment, HfS compares the cost-plus output from stage 1 to itsproprietary database of over 1,000 transactions The database is made of up actual transaction data scrubbed clean of all proprietaryinformation50% of transactions in the database were signed post 2009 Each transaction within the database is assigned several attributes (i.e., geography andtotal contract value) that enables targeted comparisons between like transactions andthe cost-plus output from stage 1 Any significant variance between the two data sources triggers a reassessment of theinputs from stage 1 and 2 to account for and, if required, adjust for the differences.HfS’s transaction database guides and, as required, redirects the cost-plus output fromstage 1 – the result is a refined and market relevant benchmark 2017 HfS Research LtdProprietary Page 13
Finally, HfS leverages its network of sourcing experts to furtherrefine the model resultsHfS leverages its network ofsourcing providers and buyers tofurther test, refine, and improvethe results from both stage 1 andstage 2This stage will include theexamination of pricing data inthe context of buy side andsupply side survey responses 2017 HfS Research LtdProprietary Page 14The final results areconsolidated into a standalone benchmark documentthat is shared with our clientbase
Data sources Primary HfS Proprietary Price Benchmarking (PI) Database HfS Proprietary Transaction Database Contracts of key outsourcing deals Internal network of sourcing providers, buyers, and advisors Internal HfS pricing experts with 10 years of experience of deal advisory Large scale survey’s of supply and buy-side executives Secondary Survey and Research Reports: Reed Salary Guide, Hays Salary Guide, HudsonSalary Guide, Kelly Employment Outlook and Salary Guide, and Cushman &Wakefield - “Office Space Across The World” Provider annual reports and financial analysts reports Websites: payscale.com, monster.com.br, salariometro.sp.gov.br, oanda.com,and monster.com, International Financial and Economic Institutions: World bank and US bureauof labor statistics – US Department of labor Industry articles from a variety of news websites 2017 HfS Research LtdProprietary Page 15
FAQWhat is included in “Price indicator”ratesPrice Indicator aims to provide an “all-in” price – so it includes all direct and indirect labor costs, includingwages, benefits, tax, insurance, IT costs, and office environment.What is not-included?Anything non-standard is not included. With specialist language skills we would apply an uplift to the FTEprice. Productivity can be included and we have helped with calculations of this type – but these aresimply the reduction of FTEs over time. Something like business continuity would be included if it wassimple non-physical backup/recovery/redundancy, but not guaranteed physical alternative site provisionfor an individual client.What about transition costs?Some of the costs of transition can be calculated from these rates – so when transition includes additionalFTEs for a short period both on and off shore.Does this include governance costs?Additional management required for governance would be included in the FTE mix – so if a contractrequired 4 supervisors and 1 administrator to provide governance on a deal this would be calculated asadditional FTEs. Governance provided through account managers and general management is built intothe overhead of the price.You mention graduate in the job titles,how is this defined?In the price indicator, ‘graduate’ is equivalent to bachelor degree level study. So a graduate from college(US) or university (UK).What is the difference between “Longterm Outsource rate” and “short termOutsource rate”?Long term outsourcing – is the standard rate for an FTE contracted continuously for more than 6 months.Short term is a day rate for an FTE less than that – for example in transition. Short term rate was calledthe transition rate originally – but someone changed to make it cover universal short term requirements.How often is PI updated?Every 6 monthsI want to understand salary costs – can“Price Indicator” help?Salary levels are inputs into the model, but Price Indicator is focused on the price of an outsourced servicerather than the relative salary levels between locations for a shared service center, for example. 2017 HfS Research LtdProprietary Page 16
FAQI can’t find the exact pricing I need, canyou help?We provide an inquiry service which can model prices for different locations where we have someinformation and we can produce worked examples of full engagements. Just ask we may be able to help.Are prices for Local or Landed resources?All are local apart from short-term outsource rate for F&A which contain landed resources for India/China.Are these prices for competition asIndian Pure Play Services Providers (e.g.Infosys) or Global Services Providers (e.g.IBM)?They include both.What about transition costs?Some of the costs of transition can be calculated from these rates – so when transition includes additionalFTEs for a short period both on and off shore.What does Low and High in the Pricerepresent?The low price is the average of the lowest price quartile excluding outliers and the high is the top quartileequivalent.I understand that the PI databaseleveraged by HfS has 50% deals signedpost 2009; what about the rest of the50% deals?All the contracts we use are post 2012 - originally we used older deals but this has moved on.When was the last time the source datawas updated?The source data is updated continuously - both as absolute price points and as proportional indicators (sofeedback on the rate being too high/low).Were the rates collected from a pool ofproviders, recipients of provider services,or both?We get rates and feedback on rates from providers and buyers of services.Is rate data available for ADM rates byindustry by location?No, unfortunately, we don't have industry splits for ADM. 2017 HfS Research LtdProprietary Page 17
About the Authors 2017 HfS Research LtdProprietary Page 18
Phil Fersht, CEO and Chief AnalystMy Research Practice Areas for 2016:§§§§§§§§The Intelligent OneOfficeFinance & AccountingAs-a-Service Delivery ModelsNext Generation IT ServicesDesign ThinkingPeople and TalentIntelligent Automation and CognitiveVertical Market OfferingsThe 4 Leading HfS Ideals of the As-a-Service Economy Impacting My �Plug and Play Digital ServicesCollaborative EngagementIntelligent AutomationDesign ThinkingKey Themes Impacting My Research Practice in 2016§§§§§§§ 2017 HfS Research LtdUnderstanding the impact of As-a-Service on BPOIntegrated vertical service offerings across business processes and technologyAugmenting human capabilities through the deployment of intelligent automationBusiness model transformation and its digital enablementThe future role of the finance professional in the face of As-a-ServiceThe strategic response of IT and BPO service providers to revenue cannibalizationNew buyer needs and evaluation criteria in selecting operational serviceProprietary Page 19
Jamie Snowdon, EVP Research OperationsMy Research Practice Areas for 2016:§§§§§§§Public Sector and Business Services VerticalsMarket Sizing & ForecastingCompetitive analysisPriceIndicatorQuantitative SurveysBespoke ResearchCloud and IT Service’sThe 4 Leading HfS Ideals of the As-a-Service Economy Impacting My §§§Plug and Play Digital ServicesDesign ThinkingWrite Off LegacyAccessible & Actionable DataKey Themes Impacting My Research Practice in 2016§§§§§§§ 2017 HfS Research LtdQuantifying the impact of plug and play services on traditional IT and business servicesIdentifying the scenarios which will drive service adoption over the next 18 monthsIdentifying the market opportunities for traditional and plug and play digital servicesExamining the opportunities for providers – what buttons to push and what boxes to tickSeeing the shift in buyer need as demands shift in response to the as-a-service economyMapping the winners and the losers in the BPO and IT services competitive landscapeLooking at how are pricing models are evolving in BPO and IT servicesProprietary Page 20
About HfS ResearchArchitects of the As-a-Service EconomyWe coined the As-a-Service Economy term because we see a profound change under way that is more all-encompassingthan a simple business model or product line. It's a global shift that will leave few sectors of business or societyuntouched.To help our clients and the market get to the As-a-Service Economy, we serve the strategy needs of business operationsand IT leaders across finance, supply chain, human resources, marketing, and core industry functions in organizationsaround the world. HfS provides insightful and meaningful analyst coverage of best business practices and innovations thatimpact successful business outcomes, such as the digital transformation of operations, cloud-based business platforms,services talent development strategies, process automation and outsourcing, mobility, analytics and social collaboration.HfS applies its acclaimed Blueprint Methodology to evaluate the performance of service and technology in terms ofinnovating and executing against those business outcomes.HfS educates and facilitates discussions among the world's largest knowledge community of enterprise servicesprofessionals, currently comprising 100,000 subscribers and members. HfS Research facilitates the HfS SourcingExecutive Council, the acclaimed elite group of sourcing practitioners from leading organizations that meets bi-annually toshare the future direction of the global services industry and to discuss the future enterprise operations framework. HfSprovides sourcing executive council members with the HfS Governance Academy and Certification Program to help itsclients improve the governance of their global business services and vendor relationships.HfS trailblazed the freemium research model. More than 75% of our published research requires just a few check boxes inour simple registration to download—no subscription, no hassles.See how we're revolutionizing the research business with the Four Pillars of HfS Research—our guiding principles. Learnmore about our services. 2017 HfS Research LtdProprietary Page 21
Appendix 2017 HfS Research LtdProprietary Page 22
ADM Role DetailsRoleActivitiesExperienceProgramManagerLeads all project teams. Coordinates resources and identify resource mix, plan budgeting and scheduling, and manages changes to theproject plan. Manages and facilitates projects from development to implementation. 8 years of experience /PMP certifiedSr BusinessAnalystEnsures all project solutions, testing, and disaster recovery parameters meet client's business requirements. Strong understanding ofclient's business requirements, processes, and IT strategy. Extensive experience translating client's business requirements in tofunctional requirements. Performs gap analyses. Supports the project manager in creating project schedules and deadlines. 7 years of experienceSr. Architect Significant experience designing a complete solution including hardware and software. Applies technical knowledge to build a solutionthat improves client's business objectives. Significant understanding of tools and their application to client's current and future needs.Designs and implements new software systems for the client.ProjectDelivers the project work within the agreed timescale, cost, and expected quality levels. Oversees completion, delivery, andManager documentation of all phases of the project. Defines and project plan and resource requirements - identifies issues and resolves. Designsand maintains technical and project documentation. 7 years of experience 6 years of experience/PMP certifiedBusinessAnalystGathers, understands, and documents the business requirements to shape the technical solution for the client. Ensures all resulting 5 years of experiencesolutions, testing, and disaster recovery parameters meet client's business requirements. Strong experience identifying and documentingbusiness processes.ArchitectTechnical lead that creates the overall solution as per client’s requirements. Oversees development of and provides the technicalsolution to the team including hardware and software. Reviews code, supervises testing, and reports to senior management on progressof the project. 5 years of broadtechnology experienceSeniorDeveloperLeads developers to complete application programs. Tasks include coding, designing, testing, and configuring. Guides and monitors theproject schedule and quality levels. Programming and testing subject matter expert. Liaises with senior staff to develop solutions. 4 years of broadtechnology experienceSeniorConverts client's requirements into technical specifications. Strong technical knowledge of a number of IT languages, platforms, andSystemsoperating systems.AnalystSystems/ DB Develops, implements, and manages database policies and procedures for physical db. Monitors and adjusts databases to improveAdministrator performance. Migrates data and conducts data back-up activities. 4 years of broadtechnology experience 3 years of specifictechnology experienceDeveloperWrites code to fulfill functional requirements. Strong experience coding in the required IT language. Supports user testing, de-bugging,and documentation. 2 years of specifictechnology experienceTechnicalWriterSupports the project team by capturing technical information for use by project management and other technical staff as required. 2 years of technologyexperienceTesterTests applications and documents test results. Provides summary of results to the development team. Defines and develops testrequirements. Support the development of the test environment. 1 year of experienceJuniorsCompletes development and test activities under the direction of a Developer or Tester.No more than 2 years ofexperience 2017 HfS Research LtdProprietary Page 23
F&A Role DetailsRoleActivitiesExperienceLevel 1 (Clerk)Basic complexity processing, rules based, basic resolution, back office activities. Education: undergraduate.0-2 yearsLevel 2 (Jnr AccoutningClerk)Complex processing, rules & judgment based AR work. Education: undergraduate.2-3 yearsLevel 3 (Accountant, Entry)High complexity processing, rules & judgment based work, fixed assets, basic analysis and reporting Education:0-2 yearsGraduate, CPA/MBA equivalent.Level 4 (Accountant, Midlevel)Comprehensive general accounting activities, complex journal entries & reconciliations, fixed Assets, basicanalysis & reporting. Education: Graduate, CPA/MBA equivalent.2-3 yearsLevel 5 (Accountant, Senior )Extensive general accounting activities, complex journal entries & reconciliations, tax analysis & accounting;fixed assets, advanceds & reporting. Education: Graduate, CPA/MBA equivalent4-5 yearsFunctional SupervisorSupervises functional work, reviews work deliverables, ensures work is accurate and timely. Produces variousreports for management5-7 yeasFunctional ManagerManages the function within the organization's established policies. Arranges and oversees completion of allwork. Supplies regular or written reports.8 yearsProject Manager/TeamLeader JuniorProject Manager/TeamProgram Management Expertise; Led PMO; Led multiple teams and multiple programs; Project leadershipLeader Associateexpertise.Project Manager/TeamLeader SeniorSOX Compliance Accountant Accountant experienced in SOX assessment testing 2017 HfS Research LtdProprietary Page 241-4 years5-7 years8 years5-7 years
Healthcare Role DetailsRoleActivitiesExperienceVoice Level 1Dealing with customer enquiries, rules based basic problem resolution.Education: Undergraduate.Training c.4wks.Voice Level 2Dealing with customer enquiries, rules and judgement based basic problem resolution. Education: Undergraduate.Education: Undergraduate.Training c.5-7 wks.Voice Level 3Dealing with customer enquiries, more advanced rules and judgement based problem resolution. Education:Graduate.Education: Graduate. Trainingc.8wks .Back office admin (data entry,admin.) Level 1Basic processing, rules based, basic resolution, data entry. Education: Undergraduate.Education: Undergraduate.Training c.4wks.Back office admin (data entry,admin.) Level 2Basic processing, rules and simple judgement based work, data entry and other back office activities. Education:Undergraduate.Education: Undergraduate.Training c.5-7 wks.Basic processing, rules & judgement based work, back office activities. Education: Graduate.Education: Graduate. Trainingc.8wks .Graduate data analyst.Graduate. 2-4 years experiencegraduate data analyst, with more experience building complex models, acts as program manager.Graduate. 4 years experienceProvides insight into data, delivers analysis to clients.Graduate. 8 years experience.Qualified Medical Voice (Nurse)Qualified nurse meeting requirements to give advice in onshore locationGraduate. Qualified nurse 2 yearsLicensed AgentsExplain features, advantages and disadvantages of various policies to promote sale of insurance plansMust meet individual staterequirements and hold agentlicenseBack office admin (data entry,admin.) Level 3Analytical / actuarial services - DataanalystAnalytical / actuarial services ModellerAnalytical / actuarial services Consultant 2017 HfS Research LtdProprietary Page 25
Insurance Role DetailsRoleActivitiesExperienceVoice Level 1Dealing with customer enquiries, rules based basic problem resolution.Education: Undergraduate.Training c.4wks.Voice Level 2Dealing with customer enquiries, rules and judgement based basic problem resolution. Education: Undergraduate.Education: Undergraduate.Training c.5-7 wks.Voice Level 3Dealing with customer enquiries, more advanced rules and judgement based problem resolution. Education:Graduate.Education: Graduate. Trainingc.8wks .Back office admin (data entry,admin.) Level 1Basic processing, rules based, basic resolution, data entry. Education: Undergraduate.Education: Undergraduate.Training c.4wks.Back office admin (data entry,admin.) Level 2Basic processing, rules and simple judgement based work, data entry and other back office activities. Education:Undergraduate.Education: Undergraduate.Training c.5-7 wks.Basic processing, rules & judgement based work, back office activities. Education: Graduate.Education: Graduate. Trainingc.8wks .Graduate data analyst.Graduate. 2-4 years experiencegraduate data analyst, with more experience building complex models, acts as program manager.Graduate. 4 years experienceProvides insight into data, delivers analysis to clients.Graduate. 8 years experience.Back office admin (data entry,admin.) Level 3Analytical / actuarial services - DataanalystAnalytical / actuarial services ModellerAnalytical / actuarial services Consultant 2017 HfS Research LtdProprietary Page 26
Delivery Location Details For Each CategoryF&A BPOArgentinaBrazilApplicationDevelopment &MaintenanceArgentinaAustraliaChinaCosta UKUSBrazilChinaCzech aUKUS 2017 HfS Research LtdInsurance BPOIndia (All Roles)China (Voice)Healthcare BPOIndia (Voice & Data)China (Data)Philippines (Voice)Mexico (Voice)Costa Rica (Voice)US (Voice)Poland (Voice)Romania (Voice)South Africa (Voice)UK (Voice)Philippines (All Roles)Mexico (Voice & Data)Costa Rica (Voice & Data)US (All Roles)Poland (Voice & Data)Romania (Voice & Data)South Africa (Voice)Insurance & healthcare BPO vary roles by delivery location assome roles commonly only delivered on-shore or fromspecific location. For example, medically trained voice agentsare typically delivered from the US and the PhilippinesProprietary Page 27
Large scale survey's of supply and buy-side executives Secondary Survey and Research Reports: Reed Salary Guide, Hays Salary Guide, Hudson Salary Guide, Kelly Employment Outlook and Salary Guide, and Cushman & Wakefield -"Office Space Across The World" Provider annual reports and financial analysts reports
