AIRLINES BUSINESS PROCESS OUTSOURCING SURVEY Vineet Malhotra

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1 AIRLINES BUSINESS PROCESS OUTSOURCING SURVEY Vineet Malhotra

2 Agenda Study Background Key Findings» Key challenges faced by the airlines industry» Opinions, perceptions and attitudes towards business process outsourcing» Expectations» Business Process and outsourcing requirement Conclusion

3 Study Background Study Objectives: This study particularly focused on the following areas: To understand the outsourcing interest and agenda of the airlines across the countries of interest To map

3 3 Study Background Study Objectives: This study particularly focused on the following areas: To understand the outsourcing interest and agenda of the airlines across the countries of interest To map Business processes which can be potentially outsourced and reasons for the same Key drivers of outsourcing To evaluate the drivers for choice of a service provider and expectations thereof Study Approach Web survey tool was used to register responses across the globe Telephonic interviews were conducted in conjunction with the web survey Sample Frame Coverage: Geographical Type of Carrier Respondent profile: CEO, CFO, CIO, CMD, COO, Director, President and Vice President Size of Carrier * Feedback Business Consulting Services Pvt. Ltd. was engaged to carry out the survey on behalf of Kale

4 4 Survey Instrument Exploratory interviews with airline industry experts Brainstorming : formulating questionnaire Test interviews to validate the questionnaire Development of web interface Challenges Business Processes Outsourcing needs BPO Opinion outsourcing Expectations Questionnaire Flow: Finalization of the web questionnaire Devised to capture opinions on the challenges faced by airlines today Test runs of the Web questionnaire This section designed to capture respondents opinion on various processes that he / she is part of. The functions captured were: Commercial, Customer Service, Finance, Crew Management, Support functions and Cargo management. Section designed to evaluate airline needs to outsource a particular business process Questions related to factors that leads a airline to outsource, criteria for choosing a specific service provider and impediments to outsourcing This particular section was designed to captures the attitude towards outsourcing Open ended section to capture respondents expectation from airlines BPO

5 5 Key challenges faced by the airlines industry worldwide Cargo Passenger Mean scores on a 5 point scale No Impact Low Impact Moderate Impact High Impact Significant Impact Extent of Impact

6 6 Is outsourcing the way to counter challenges? Cargo Passenger Mean scores on a 5 point scale Least influence Most influence Influence of decision to outsource

7 7 Preference for a 3 rd party service provider higher Outsourcing destination: Factors considered for choice of a service provider: Cost effective Domain expertise Established player Critical factors Quality of personnel End-to-end solution provider Important factors Scale of operation Political stability and the business environment of the country of the service provider Not so Important factors

Though preference for 3 rd party service provider higher; quality control & confidentiality high on concerns towards outsourcing 8 Cargo Passenger 3.79 4.27 3.87 3.93 4.00 3.76 4.00 3.68 3.

8 Though preference for 3 rd party service provider higher; quality control & confidentiality high on concerns towards outsourcing 8 Cargo Passenger Mean scores on a 5 point scale No Impact Low Impact Moderate Impact High Impact Significant Impact Extent of impact on decision to outsource

9 Airlines recognize the need for outsourcing There is no business risk involved when using a Service provider Strongly Disagree Disagree Neutral Agree Strongly Agree Overall Cargo Passenger There is

9 9 Airlines recognize the need for outsourcing There is no business risk involved when using a Service provider Strongly Disagree Disagree Neutral Agree Strongly Agree Overall Cargo Passenger There is no significant time and effort investment required from your firm There is no loss of control if a Service provider is used It is important for a Service provider to be a provider of end to end solutions (Technology + BPO) Effective outsourcing should involve business process reengineering as well Service providers have the capabilities to match the domain competencies required by your firm Though cost reduction is an important factor for outsourcing, some like improved business process performance and access to talent pool are equally important Cultural and language affinity are paramount factors while selecting a service provider 0% 20% 40% 60% 80% 100% Mean scores on a 5 point scale A global workforce available with a Service provider is better placed to meet your firm s needs Proportion of respondents indicating agreement / disagreement on the attitude statements

10 10 Expectations from airlines BPO Top 3 expectations from airlines BPO: Expectations on Cost Savings: Proportion of responses for each expectation % Average: % * Others include Smooth integration with the company s functions A partner rather than a service provider

11 11 Finance: Core, Centralized and Semi Automated Processes Extent of automation Control Criticality Revenue accounting (Passenger) Accounts receivable & payable management Sales audits Payable audits, payable reconciliations Completely manual Semi-automated Completely automated Decentralized Centralized Non-Core Core

12 12 Finance: Analysis of Outsourcing Needs Processes Can it be outsourced? Currently outsourced Intent to outsource in next one year Revenue accounting Accounts receivable & payable management Mean: 3.14 Mean: 2.50 Sales Audits Mean: 3.59 Payable audits, Payable reconciliations Mean: 2.90 Cannot be outsourced Difficult to outsource Need to invest in time and effort to outsource Can outsource with minimal effort Easy to outsource Yes No

13 Intent to outsource in near future MEDIUM LOW HIGH 13 Propensity to outsource: Finance 40 Sales audit Processes indicated in green high on outsourcing wish list 30 Revenue accounting 20 Accounts receivable and payable management Payable audits / reconciliations % LOW MEDIUM HIGH Currently Outsourced

14 14 Cargo management: Analysis of Automation Level Processes Extent of automation Control Criticality Revenue accounting Cargo booking, block space arrangements, booking confirmations, rebooking Sales & payable audit ULD management and control Completely manual Semi-automated Completely automated Decentralized Centralized Non-Core Core

15 Cargo management : Analysis of Outsourcing Need 15 Processes Can it be outsourced? Currently outsourced Intent to outsource in next one year Revenue accounting Flight planning, yield optimization, truck movement planning Mean: 3.47 Mean: 2.00 Sales & payable audit ULD management and control Mean: 2.50 Mean: 3.14 Cannot be outsourced Difficult to outsource Need to invest in time and effort to outsource Can outsource with minimal effort Easy to outsource Yes No

16 Intent to outsource in near future HIGH LOW MEDIUM 16 Propensity to outsource: Cargo Inventory management Claims management Flight planning Cargo booking Revenue accounting Processes indicated in green high on outsourcing wish list 10 Sales & payable audit ULD management & control % LOW MEDIUM HIGH Currently Outsourced

17 17 Conclusion Global airlines feel the need for outsourcing not only to achieve cost control but also as a business strategy towards sustainable growth Outsourcing seen as a strategic tool to overcome the current business scenario Positive shift Service providers seen as business partners rather than just service providers Airlines expectations gradually moving towards motivational factors; a positive sign Need for Outsourcing Though fears of quality control, confidentiality and loss of control high; airlines see benefit in outsourcing certain core processes by working closely with service providers Willing to outsource core processes Transition in outlook towards outsourcing

18 Transcending boundaries

Business Process Services. White Paper. Five Principles to Consider when Consolidating your Finance and Accounting Function

Business Process Services. White Paper. Five Principles to Consider when Consolidating your Finance and Accounting Function Business Process Services White Paper Five Principles to Consider when Consolidating your Finance and Accounting Function About the Authors Vikas Golchha, Associate Vice President, TCS Vikas is part of