Revealed: Secrets to outsourcing success

UK multinationals have this week laid bare their sometimes rocky relationship with outsourcing and described how offshoring is helping them survive the recession.

Aviva Global Services (AGS), the business unit that provides back office and IT services to the financial services group Aviva, set up its first in-house, offshore operation, known as a captive, in 2003 with 2,500 staff.

By 2006, its offshore operations had grown to multiple captives based in India and Sri Lanka employing 6,000 staff and with responsibility for delivering a range of insurance processing and back office IT services.

Speaking at the FT Outsourcing and Offshoring Conference this week, AGS group CEO Steve Turpie said there had been problems with the scale of the initial growth: "When we first offshored we were learning. Like many organisations and we made some mistakes," he told the conference.

Describing Aviva's initial decision to offshore large parts of entire business processes as "probably a recipe for disaster", he said that over the past two years the company had reviewed all of the processes it outsourced.

AGS stepped back from running its own offshore operations last year, selling its five captives to Indian outsourcer WNS, which will use the captives to provide a range of insurance, accounting, customer and other support services to Aviva under a $1bn deal.

Turpie said that the decision to step away had been the right one: "The maturity of the BPO business is very different today, as is the way that we do business with our customers.

"For example when you renewed a car insurance policy five years ago most people would have done so by phone, whereas in today's world 50 per cent of our customers renew over the web, which is a very different business model for us.

"We made the decision on the basis of capability, cost and flexibility and given what has happened in the last nine - 10 months we feel that we made the right choice."

Turpie said that the deal with WNS had allowed Aviva to "accelerate what we are doing".

"It has helped dramatically improve efficiencies and customer experience.

"The cost of what we have offshored and outsourced is relatively small compared to the savings on taking one per cent off of our claims costs, for example," he added.

He said that the transition of the captives to WNS had gone smoothly so far and would be almost complete this year.

International drinks manufacturer Diageo takes a very different approach to offshoring to Aviva.

Diageo relies on a hybrid offshoring model, where services are provided both from its own captive in Budapest in Hungary and a number of offshore centres run by outsourcer Accenture.

Its offshore operations started...

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