© 2005 Cognizant BPO: A Transformational Strategy Chuck Clement, Andesa Services Rob Mattioda, The Life & Annuity Group, Inc.

Page 2© 2005 Cognizant Definitions DEFINITION: Business Process Outsourcing occurs when an organization turns over the management and optimization of a business function, such as accounts payable or purchasing, to a third party that conducts the activity based on a set of predetermined performance metrics. – Computer World DEFINITION: - Transformation a : to change in composition or structure b : to change the outward form or appearance of c : to change in character or condition: - Webster’s Trend: BPO Market will grow to 146 billion dollar industry by Forrester

Page 3© 2005 Cognizant Business Objectives Today Are Increase Share Holder Value Time To Market – New Products Cost Containment – Delivering Lower Unit Cost Processing Flexibility That Adapts to Business Direction & Strategy IT solutions That Support And Deliver The Business Adding Functionality Without Complexity Growth – Organic and Mergers & Acquisitions * Have These Really Changed Over The Years ?

Page 4© 2005 Cognizant Business Transformation Transformation Is About Change, It’s About Business Improvement - Better Delivery – Products & Services - Better Processes – Streamlined & Clean - Lower Costs – Business & IT - Greater Flexibility To Grow The Business - Consolidation – Fewer Moving Parts - Increased Share Holder Value Business First – Technology Second

Page 5© 2005 Cognizant The Legacy Transformation Value Triangle Legacy / Business Transformation Labor Costs Greater degree of automation Lower effort per transaction Less training / fewer resource management issues Outsourcing (BPO) Business Processes Time to market improvement Increased productivity Lower cost per policy Application Software Platform Time to market improvement Consolidation = lower maintenance costs Enables process improvement

Page 6© 2005 Cognizant BPO Is A Transformation Strategy Transformation Is About Change, It’s Not Repeating Or Replicating Today’s Limitations & Issues BPO Is Transformation - Delivers Better Processes – Facilitates Today's Business Objectives, Best Of Breed - Delivers Modern Applications – No More Piecing Together Disparate Packages - Delivers End To End Well Configured Components – Common Look and Feel Across All Products - Delivers Time To Market and Lower Cost

Page 7© 2005 Cognizant Why BPO As A Transformation Strategy BPO Is a Bundled Approach To Transformation – Processes, Technology, Service & People Legacy Applications Are So Intertwined Within A Company’s Infrastructure That Change Becomes More Difficult And More Expensive BPO Strategy Focuses On Core & Non Core Functions By Bundling Technology, Business Process Improvement, Re- Engineering And Productivity Improvements Implemented As A Program In One Box BPO Transformation Is A fundamental Change From Legacy Business Problems And Legacy Applications To Best Of Breed Business Processes And Modern Technology Platforms

Page 8© 2005 Cognizant Conventional BPO Vs. Transformational BPO Conventional Outsourcing BPO Transformation Operations and Technology Focus Benefits Derived From Labor Arbitrage Isolates – Delivers Some Degree Of Control Executes Legacy Business Processes Delivers Higher Performance – Specialized Company Reduces Non Core Functions From The Business To Provide A Single Release Of Capitol Business Focus – Business Driven Process Improvement – Creates Value – Labor Arbitrage Deliver Confidence – Manages Risk Modern Business Re-Alignment, Technology & Services Delivers Higher Performance & Economies Of Scale Business Transformed Enabling Sustained Savings & Sustained Value

Page 9© 2005 Cognizant BPO Transformation BPO Transforms When: You Derive Value From Every Aspect Of The Business – Not Just An IT Solution Deliver The Business Consistently Across Products – Fewer Resources Required Business Processes Align With Business Objectives Legacy Maintenance No Longer Stifles Business Growth Business Results Are Improved BPO Is Less Effective When: Outsource The Business, Focused Only On The Savings From Labor Arbitrage Haven’t Driven Savings From All Aspects Of The Business Replicate The Deficiencies Under The Management Of Others Viewed As A Technology Solution You Haven’t Positioned Your Business For Growth And Business Results Are Not Self Evident

Page 10© 2005 Cognizant BPO Transformation Components Business Processes Strategic Outsourcing Technology Infrastructure Methodology Systems People Management Value Cost Containment

Page 11© 2005 Cognizant Business Growth Through Budget Transformation The Current Budget Paradigm Does Not Support Growth Budget Dollars Are Consumed By Maintaining The Business Application Maintenance 70% Amortization Expense 10% Discretionary Spending 20%

Page 12© 2005 Cognizant Transformation Effects Implement BPO Labor Arbitrage Re-Direct Resources Improve Process Consolidate Legacy Apps Maintenance Budget