Reducing a Financial Organization’s Captive Center Provider Portfolio by more than 80 Percent

Executive Summary

With more than 50 IT and business process outsourcing providers in its portfolio, a global banking and financial services organization’s captive operation was experiencing significant portfolio management, governance and project allocation challenges. By clustering and classifying demand requests, evaluating all the providers in the portfolio, and identifying those best positioned to meet the parent company’s strategic requirements, Everest Group helped the captive reduce its provider portfolio by more than 80 percent, yielding cost savings and improved alignment with corporate goals.

The Client’s Challenge

The India-based captive operation for a global banking and financial services organization was using more than 50 IT and business process outsourcing providers – a mix of global majors, Indian providers and staff augmentation players – to support services delivery throughout the enterprise.

Personnel within the captive were devoting an inordinate amount of time to vendor management, governance, and coordination of such a bloated and highly fragmented portfolio. The situation was exacerbated by the massive volume, and disparate, undefined, data-light types of demand points requested of the captive by five different business units in four geographies around the world, which in cases resulted in ineffective allocation of requests to providers. To eliminate these challenges, the client needed to better understand all types of demand requests it received, and strategically rationalize its portfolio to a smaller set of providers capable of providing long-term value.

Insight to Action

Everest Group began by addressing the captive’s demand requests issue. Utilizing a two-by- two matrix-type methodology, Everest Group thoroughly analyzed the available data to form reasonable hypotheses to cluster and classify the demand into four categories based on the level of predictability and strategic importance to the parent company.

Everest Group then evaluated and identified the providers in the portfolio that were best positioned to handle the demand in each category. Leveraging data from its supplier intelligence practice, Everest Group ranked and rated each provider against a variety of five factors including capabilities, alignment of provider to scope, presence in the BFSI vertical, and ability to enter into a managed service relationship. This component of the engagement resulted in rationalization of the client’s provider portfolio from 50 down to less than 10.

Next, Everest Group helped the captive organization define a sourcing portfolio that enabled mapping of the demand categories to specific providers. And finally, Everest Group assisted the captive in development of a thorough, strategic implementation roadmap. This roadmap served as the foundation by which to structure the entire demand portfolio, with the selected providers brought on in a systematic manner.

Impact

The new provider portfolio, which Everest Group helped the client reduce by more than 80 percent, is currently being implemented by the captive operation. The provider rationalization engagement will enable the captive to move toward a more managed services approach, and in the longer term enable it to more closely align with the parent company’s overall business strategy and growth plan. The new provider approach will also result in better talent resources from the providers, which will further enable the captive to improve delivery on projects that impact overall business outcomes. Finally, although cost savings wasn’t a primary project driver, the rationalized provider portfolio is expected to yield a savings of five to 10 percent in vendor management and governance costs.