Analysis of South Africa as a BPO Delivery Location 2015

Analysis of South Africa as a BPO Delivery Location 2015

Analysis of South Africa as a BPO Delivery Location 2015

Analysis of South Africa as a BPO Delivery Location 2015 Compiled by Nelson Hall

Analysis of South Africa as a BPO Delivery Location 2015
Analysis of South Africa as a BPO Delivery Location 2015
Analysis of South Africa as a BPO Delivery Location 2015
Analysis of South Africa as a BPO Delivery Location 2015

List of Exhibits Services Delivered from South African Contact Centers by Sector 5 Financial Industry-Specific Services Delivered from South African by Sector 7 Profile of Organizations Using South African Contact Center Services by Sector 9 Profile of Sectors Using South African Contact Center Services by Number of Call Center FTEs 9 Services Delivered from South African Contact Centers by Sector 12 Financial Industry-Specific Services Delivered from South African by Sector 14 BPS Incentive Qualification: dti Evaluation Criteria 17 BPS Incentive Bonus Scheme: Non-Complex Jobs 19 BPS Incentive Bonus Scheme: Complex Jobs 20 B-BBEE Generic Scorecard 21 Introduction 2 A.

Objectives and Scope 2 B. Methodology 2 C. Structure of the Report 2 Executive Summary 3 A. Evaluate as “Onshore-Equivalent” for Contact Center Services 4 B. Evaluate for Revenue-Generating Capability in Support of Online Businesses 6 C. Evaluate as GDN Center within Financial Industry-Specific & for Africa-to-Africa Back-Office Services 6 International Contact Center Services 8 A. Business Challenges Faced & Drivers for Offshoring to South Africa 8 B. Sectors Served and Services Delivered from South Africa 9 C. Benefits Achieved from South African Service Delivery 13 D. Contact Center Services Delivery Cost Structure 13 Financial Industry-Specific Services 14 A.

Business Challenges Faced & Drivers for Offshoring to South Africa 14 Skills Availability & Government Incentives 16 A. Skills Availability 16 B. Government Support & Incentives for BPO 16 Companies Delivering Services from South Africa 23 Contact Center Services 23 A. Aegis 23 B. Amazon 24 C. Barclays Africa Group Limited 24 D. Capita 25 E. Coracall 26 F. Merchants 26 G. Mindpearl 30 H. OUTsurance 30 I. Outworx 31 J. Sanclare 32 K. Serco 33 L. Shell 35 M. Teleperformance 36 N. WNS 36 O. Webhelp 37 Financial Services Industry-Specific BPO 38 P. Kleinwort Benson 38 Offshoring Support Services 39 Q.

EOH 39 R. KPMG 40 Table of Contents Analysis of South Africa as a BPO Delivery Location

Analysis of South Africa as a BPO Delivery Location 2015
Analysis of South Africa as a BPO Delivery Location 2015

About NelsonHall NelsonHall provides buy-side and sell-side organizations with deeper research and analyses in front office, mid-office and back office BPO than any other research firm in the world. The company’s subscription-based model provides subscribers with robust market analyses, case studies, vendor assessments, contract analyses, market reports and access to a content-rich BPO contracts database. The firm covers a wide range of industries including financial services, government and utilities sectors, and tracks worldwide and regional BPO activity. NelsonHall’s home page is: research.nelson-hall.com.

The company tracks business services activity. In particular, NelsonHall focuses on the following business services and process areas: • Front-office customer management services • Middle office industry-specific processing services such as network and work management • Back office support services such as HR services, finance & accounting services, and procurement services NelsonHall provides information to its clients in a variety of forms, including within: • NelsonHall’s BPO subscription services, to assist organizations in developing sourcing strategies and in supporting individual sourcing projects including vendor short-list development • Workshops, to assist organizations in identifying the most appropriate areas of BPO for their organization • Business case development, to assist organizations in deciding whether BPO is appropriate for individual processes • Custom assessments, to assist buy-side organizations in benchmarking individual processes and to assist vendors in successfully taking BPO concepts to market.

For more details, contact: U.S. Riverside Center 275 Grove Street Suite 2-400 Newton MA 02466 Phone: (617) 663 5737 U.K. Atrium Court, The Ring Bracknell RG12 1BW U.K. Phone: +44 (0)1344 393036 France NelsonHall 4 place Louis Armand Tour de l’Horloge 75012 Paris France Phone: +33 1 72 76 26 54 1 Analysis of South Africa as a BPO Delivery Location

Analysis of South Africa as a BPO Delivery Location 2015

Introduction A. Objectives and Scope The purpose of this report is to assess the role of South Africa as a BPO delivery location for international companies. The objectives of the report are to identify: • The experience of organizations that use South Africa for international BPO service delivery • The drivers for use of South Africa for delivery of BPO services for both contact center services and for financial industry-specific & back-office services • The profile of companies using South Africa BPO service delivery by industry sector • The profile of international service delivery from South Africa by service type • The benefits sought from South African service delivery and the profile of benefits achieved • The delivery cost structure associated with South Africa, including details of government incentives.

South African “BPO” service delivery typically covers three areas: • International contact center services • International non-voice services typically covering industry-specific financial services processes and back- office processes such as finance and accounting • Voice and non-voice support for the domestic South African market. This report will focus on the first two of these market segments and on the opportunity for organizations to support their international operations from South Africa. By service type the scope of the report is contact center services, financial industry-specific services, and back-office services such as finance & accounting B.

Methodology The survey is based on interviews with executives from organizations, both end user companies and suppliers that are currently using BPO services based in South Africa in support of their international operations. C. Structure of the Report The report is structured into the following chapters: Chapter I: Introduction Chapter II: Executive Summary Chapter III: International Contact Center Services Chapter IV:  Financial Industry-Specific & Back-Office Services Chapter V: Skills Availability & Government Incentives Chapter VI:  Companies Delivering Services from South Africa. 2

Analysis of South Africa as a BPO Delivery Location 2015

Organizations have in the past often polarized their service delivery between use of onshore centers for delivery of high customer experience and complex processes and low cost offshore centers for simple transaction processing and customer service cost deflection. However, the world has changed. While organizations still have a strong need to reduce their customer service costs, they are typically looking to do this through increased use of electronic channels and by improving customer journeys rather than at the expense of the customer experience. Indeed the most common need expressed by organizations in the area of customer service at the present time is the desire to reduce their customer service costs while maintaining their customer experience and levels of customer satisfaction.

This is typically accompanied by a longer-term vision to continue improving their customer experience and customer satisfaction while retaining this lower cost point of operation.

At the same time, the balance in customer service is shifting. This is the result of two factors: • Firstly, the move to electronic self-service for simple queries is in itself shifting the focus of customer service delivered by agents to the more complex end of the customer service spectrum Executive Summary • Secondly, there is an increased focus on using customer service to drive sales and revenue protection through techniques such as welcome calls, health checks, and proactive customer interventions.

This is changing the skills required of agents, with a much greater requirement for agents to be able to build empathy with customers.

Accordingly, the increasing requirement from offshore customer service locations is to be able to offer “onshore-equivalent” customer service or even “onshore-exceeding” customer service at a lower cost of service. In this scenario, South Africa is worthy of consideration for “BPO” delivery whether via a captive or offshoring approach, since it offers an alternative to onshore services for delivery of high levels of customer experience and empathy and the ability to handle relatively complex processes. In particular, organizations seeking new BPO delivery centers whether for captives or outsourced service delivery should evaluate South Africa as: • An “onshore-equivalent” for contact center services • A location with strong revenue-generating capability in support of online businesses • A GDN Center for financial industry-specific services and for delivery of “Africa-to-Africa” shared services.

Analysis of South Africa as a BPO Delivery Location 3

Analysis of South Africa as a BPO Delivery Location 2015

A. Evaluate as “Onshore-Equivalent” for Contact Center Services The profile of customer service delivered from South Africa does not lend itself to lowest-cost offshoring where low-cost scripted call-handling rather than the quality of the customer experience is the main consideration for the client organization. The type of international customer service being delivered from South Africa is best suited to organizations seeking onshore-equivalent levels of customer experience based on metrics such as net promoter scores and high first contact resolution rates at a lower price point than onshore service delivery.

Amazon for example is ramping up its customer service from South Africa and is recruiting “free-thinking” agents with the remit to focus on solving the customer’s problem. The agents are not scripted, which is typical of South African contact center services, and are authorized to take whatever action they feel is appropriate to achieve resolution and a high level of customer experience.

Accordingly, it is most appropriate for organizations to establish customer service delivery from South Africa where they are seeking an onshore level of customer experience either at a significantly lower cost point than is available onshore or to complement existing onshore capability where recruitment onshore is proving challenging. The benefits currently achieved by organizations using contact center services for International customer service, typically to the U.K. and Australia, are, again in order of number of mentions: • Equal or better customer experience (CSAT or NPS) relative to onshore delivery.

The majority of organizations are matching onshore delivered customer experience at a lower price point, though approximately a third of organizations reported that their South African delivery was outperforming their onshore delivery • Cost savings (averaging 40% and typically in the range 30% to 50%) compared to onshore service delivery from the U.K. and Australia • High first call resolution rates • Ability to deliver more complex end-to-end processes than from other offshore delivery locations • Matching and frequently outperforming onshore delivery in sales and debt collection • Ease of management due to time zone compatibility.

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In terms of type of service delivered, the emphasis is typically on end-to-end customer service across a range of customer query types. The profile of services delivered from South Africa in support of international customer service is shown in Exhibit II-1. Exhibit II-1 Services Delivered from South African Contact Centers by Sector In terms of volume, the dominant sectors at present are telecoms/ISPs and online retailing/home shopping, though the level of International contact center activity in the energy & utilities sector has increased significantly in recent years and South Africa has strong financial services domain expertise and provides contact center expertise in addition to industry-specific services to international banks and insurance companies.

In addition to English-language work, which currently accounts for approximately 90% of international contact center services from South Africa, South Africa also provides European language customer service, with for example Amazon and an airline both providing German language customer service from South Africa. Sector Examples of Services Supported Telecoms/ISPs - - Inbound customer service including billing support - - Outbound sales & cross-selling including contract renewals, welcome calls & health checks - - Provisioning & fault management Online retailing/home shopping - - Inbound customer service including delivery support and credit card processing in support of online orders - - Outbound revenue protection, including out-of-date cards & out-of-stock handling - - Customer recovery operating off-process Insurance - - Inbound customer service - - Inbound & outbound sales including courtesy calling - - Customer validation, fraud-checking and policy activation Energy & utilities - - Inbound customer service in support of billing, meter issues, & outages - - Debt collection - - Up-selling & cross-selling Airlines - - Reservations handling and flight changes - - Loyalty program support - - Travel agent support services Banking - - Customer service - - Collections - - Application processing Media - - Outbound renewals & cross-selling 5 Analysis of South Africa as a BPO Delivery Location

B. Evaluate for Revenue-Generating Capability in Support of Online Businesses South Africa has a strong capability in supporting revenue generation and revenue protection within International contact center services. Reasons why organizations have chosen South Africa in preference to other offshore locations for International contact center services include: • High level of cultural affinity between South Africa and U.K., Europe, and Australia • The ability of South African agents to have a greater level of dialogue with, and develop greater empathy with, customers than agents in other offshore locations • The ability of South African agents to handle complex calls and to negotiate and do deals, for example, in support of collections.

These latter two factors, combined with the ability of South African agents often to outperform existing onshore centers in terms of the customer experience, are critical to revenue-generation. South African delivery has traditionally been used in support of collections because of these skills and more recently the industry has developed greater capability in areas such welcome calls, health checks, and other soft-sales approaches. To complement this, South African delivery has a particular strength in outbound calls in support of these types of activity with approximately 27% of the International contact center activity outbound-based.

Examples of existing “revenue-generating” services include: • Outbound subscription renewals on behalf of a leading legal publications business • Health checks in support of a major utility • Health checks and contract renewals in support of a major ISP • Cross-sales to existing mobile telecoms customers • Support for group bookings for major airline • Outbound revenue protection calling for major retailer • Deployment of customer recovery team for major online retailer • Order taking for major energy company.

C. Evaluate as GDN Center within Financial Industry-Specific & for Africa-to-Africa Back-Office Services While much of current international BPO service delivery from South Africa comprises contact center services, there is also a significant level of international service delivery around financial industry-specific and back-office services.

The majority of these services are banking and insurance industry-specific services, though South Africa should also be considered as a potential location within an organization’s global delivery network for back-office shared services in areas such as finance & accounting and human resources for “Africa-to-Africa” support, with organizations increasingly using South Africa as the basis for their African shared services hubs.

Examples of services delivered from South Africa in support of financial industry- specific services and back-office services are shown in Exhibit II-2. 6

In general, South Africa remains suited to the more complex handling of processes and customers within these domains, rather than the more basic transaction processing, which is increasingly being automated. The benefits achieved by organizations using South Africa for financial industry-specific services are: • Cultural match with clients and clients’ clients and ability to be accepted and build relationships • Ability to handle complex and specialized processing work that cannot easily be handled out of other highly standardized offshore processing centers • Time zone benefits for complex tasks where frequent communication with the client is required • Cost reductions compared to onshore delivery of approximately 45% • Presence of high-caliber financial services workforce for non-voice services • Staff more productive than alternative offshore locations for complex processing tasks • Customers more amenable to service delivery from South Africa than from other offshore locations such as India • Accent neutrality & cultural affinity.

Within back-office services such as finance & accounting and human resources, South Africa is increasingly being used as a location for Africa-to- Africa shared services. The principal reasons for choosing South Africa are: • Its relatively high level of political stability compared to other countries in the region • The relative maturity of transactional SSC skills in South Africa. Sector Profile of Services Supported Life insurance - - New business capture - - Premium collections - - Policy administration - - Claims processing - - Commission handling Fund administration - - Investment & portfolio administration - - Client reporting - - Finance Asset management - - Fund accounting - - Business analysis - - Client services EXHIBIT II-2 Financial Industry-Specific Services Delivered from South African by Sector 7 Analysis of South Africa as a BPO Delivery Location

International Contact Center Services A. Business Challenges Faced & Drivers for Offshoring to South Africa While many major organizations wish to reduce their cost of customer service, they are typically no longer prepared to do so at the expense of their customer experience. A more typical current requirement is for organizations to seek to initially maintain their current levels of CSAT while reducing their customer service volumes and costs, and then to subsequently look to increase their CSAT at this lower cost point.

At the same time, there is considerable and increasing emphasis on enhancing sales and on revenue protection, with organizations doing this for example by introducing services such as welcome and check-up calls or dealing proactively with customer issues regarding card payment.

Accordingly, organizations offshoring contact center services to South Africa are not doing so in order to achieve maximum customer service cost reduction. Instead, they are typically looking initially for an “onshore-equivalent” customer service to address their lack of onshore capacity, and/or are endeavoring to achieve onshore-equivalence at a significantly lower price point. Typically these organizations are “moving” service delivery from onshore to South Africa but in other instances they are reacting against the standard of customer service from other offshore locations and looking for a higher standard of customer empathy than that currently achieved from those locations.

The principal business challenges faced by these organizations and their drivers for considering offshoring to South Africa are: • Need to scale to support business growth • Lack of onshore capacity/difficulty in recruiting onshore • Need to match onshore customer experience at lower price point • Need for brand protection at lower price point • Disillusion with customer service delivery from another offshore location • Experiencing high attrition onshore. The principal reasons for then choosing South Africa in preference to other offshore locations for International contact center services are (in order of number of mentions): • The ability of agents to deliver the same quality of service as onshore much more cost-effectively • Cost-effectiveness of service • High level of cultural affinity between South Africa and U.K., Europe, and Australia • The high acceptability/familiarity of the South African accent in the U.K.

Other significant factors mentioned included: • The ability of South African agents to handle complex calls and to negotiate and do deals, for example, in support of collections • The ability of South African agents to have a greater level of dialogue with, and develop greater empathy with, customers than agents in other offshore locations • The existence of a population of second-generation Europeans with native European language skills • Availability of financial services skills • Prior familiarity with South Africa and ease of access to client management.

The three main locations for delivery of International contact center services from South Africa are: • Cape Town (approximately 66% of FTEs) • Durban (approximately 22% of FTEs) • Johannesburg (approximately 12% of FTEs).

Cape Town remains the key location for delivery of international contact center services, though Johannesburg and Durban are increasing in importance. In addition, the organizations interviewed for this study were increasingly reviewing additional locations such as Port Elizabeth, and both Johannesburg and Pretoria already figure strongly in the delivery of “Africa for Africa” financial services customer service. Although approximately 90% of International contact center activity takes place in English, South Africa also provides European language customer service, with for example Amazon and an airline both providing German language customer service from South Africa, and customer services being provided in a wide range of European languages.

The breakdown of countries served by number of FTEs for non-African International contact center services is: • U.K. 70% • Australia 19% • Continental Europe 11%. In terms of call type, South African delivery has a particular strength in outbound calls in support of welcome calls, sales, and collections with approximately 27% of the International contact center activity outbound and 73% of activity inbound. The main channel used in support of international contact center services is still overwhelmingly voice. However, non-voice services particularly around email handling and web chat are increasing in importance, with for example both Merchants and WNS estimating that a fifth or more of their activity is non-voice.

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Sector Proportion of Organizations (%) Telecoms/ISPs 37 Financial services 16 Online retailing/home shopping 13 Airlines 13 Energy & utilities 13 Other, including media & high-tech 8 Sector Proportion (%) Telecoms/ISPs 40 Online retailing/home shopping 23 Energy & utilities 16 Financial services 11 Airlines 7 Other 3 B. Sectors Served and Services Delivered from South Africa Exhibit III-1 shows, on the basis of the organizations interviewed by NelsonHall, the current profile of organizations using South African contact center services for international customer service by industry sector.

EXHIBIT III-1 Profile of Organizations Using South African Contact Center Services by Sector This latter exhibit excludes a major financial services firm’s use of South Africa for “Africa to Africa” customer contact services, which would increase the proportion of FTEs within the financial services sector significantly.

South African delivery continues to be used strongly in support of the telecoms/ ISP sector by both Australian and U.K. organizations, with the adoption of South African delivery by U.K. telecoms operators continuing to develop significantly in recent years. At the same time, the mix of services provided in support of telecoms operators has begun to become more sophisticated with an increasing emphasis on soft-selling via welcome calls, health checks, and cross-selling. Exhibit III-2 shows the profile of sectors using South Africa for international customer service by current number of call center FTEs.

EXHIBIT III-2 Profile of Sectors Using South African Contact Center Services by Number of Call Center FTEs 9 Analysis of South Africa as a BPO Delivery Location

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11 Analysis of South Africa as a BPO Delivery Location

Similarly, in the online retailing sector, Amazon continues to add to its capability in South Africa, and other online retailers have moved beyond simple customer service and inbound sales to incorporate outbound revenue protection services and customer recovery teams.

While, customer service delivery from South Africa in support of both the telecoms/ISP and online retailing sectors has been well-established for some time, and in terms of volume the telecoms/ ISP and online retailing/home shopping In line with the “onshore-equivalence” of South African contact center services, the range of customer service delivered from South Africa typically goes beyond simple queries to handling the full range of customer services, including complex queries in unscripted form.

EXHIBIT III-3 Services Delivered from South African Contact Centers by Sector sectors continue to be dominant, a sector which has adopted South African delivery more recently is the utilities sector. Here U.K. utilities are increasingly using South Africa for inbound customer service to provide support for billing, meter issues, and outages, together with debt collection. One constant theme is the ability of South Africa to largely match, or exceed, onshore delivery in the delivery of complex services where unscripted customer interaction is required. Here, for example, a number of airlines use Sector Examples of Services Supported Telecoms/ISPs - - Inbound customer service including billing support - - Outbound sales & cross-selling including contract renewals, welcome calls & health checks - - Provisioning & fault management Online retailing/home shopping - - Inbound customer service including delivery support and credit card processing in support of online orders - - Outbound revenue protection, including out-of-date cards & out-of-stock handling - - Customer recovery operating off-process Insurance - - Inbound customer service - - Inbound & outbound sales including courtesy calling - - Customer validation, fraud-checking and policy activation Energy & utilities Inbound customer service in support of billing, meter issues, & outages Debt collection Up-selling & cross-selling Airlines Reservations handling and flight changes Loyalty program support Travel agent support services Banking Customer service Collections Application processing Media Outbound renewals & cross-selling South African delivery in support areas such as flight changes and complex itinerary booking in support of frequent flyers, while in the banking sector, card companies continue to use South Africa for application support and for collections, and the insurance sector uses South African delivery for inbound and outbound sales.

The profile of services delivered from South Africa in support of international customer service is shown by sector in Exhibit III-3. 12

C. Benefits Achieved from South African Service Delivery Organizations using South Africa for contact center services are typically not looking for the lowest cost location globally. Typically they are seeking onshore levels of customer experience at a reduced cost. These benefits are currently being delivered. The benefits achieved by organizations using contact center services for International customer service, typically to the U.K.

and Australia, are, again in order of number of mentions: • Equal or better customer experience (CSAT or NPS) relative to onshore delivery. The majority of organizations are matching onshore delivered customer experience at a lower price point, though approximately a third of organizations reported that their South African delivery was outperforming their onshore delivery • Cost savings (averaging 40% and typically in the range 30% to 50%) compared to onshore service delivery from the U.K. and Australia • High first call resolution rates • Ability to deliver more complex end-to-end processes than from other offshore delivery locations • Matching and frequently outperforming onshore delivery in sales and debt collection • Ease of management due to time zone compatibility.

The emphasis on effectiveness rather than absolute cost reduction is indicated by the measures currently being used to manage contact center services in South Africa, with organizations typically placing reduced emphasis on measures such as average handling time (AHT) and increasingly emphasizing performance against measures such as: • Net promoter score (NPS) • Other forms of CSAT • First contact resolution rates (FCR) • Sales conversion rates • Collection success. In line with this high emphasis on effectiveness, South African agents are frequently handling calls unscripted, with organizations aiming for high levels of natural communication in order to achieve high NPS scores.

Attrition varies by type of activity being undertaken but is generally perceived to be lower than other offshore locations with several of the organizations interviewed citing attrition rates significantly below 20%. D.  Contact Center Services Delivery Cost Structure The cost of a contact center agent in Cape Town averages approximately £635 per month (£1=ZAR18.9 at June 2015). Telecoms & facilities costs add approximately 40% to this cost per agent for international service delivery to the U.K.

This gives a total cost per FTE for contact center services from Cape Town starting at approximately £11,000 per annum before government incentives.

13 Analysis of South Africa as a BPO Delivery Location

Financial Industry-Specific Services EXHIBIT IV-1 Financial Industry-Specific Services Delivered from South African by Sector Sector Profile of Services Supported Life insurance - - New business capture - - Premium collections - - Policy administration - - Claims processing - - Commission handling Fund administration - - Investment & portfolio administration - - Client reporting - - Finance Asset management - - Fund accounting - - Business analysis - - Client services A. Business Challenges Faced & Drivers for Offshoring to South Africa The principal business challenges faced by organizations using South African service delivery for financial industry- specific services from South Africa were the need to address difficulties in scaling onshore delivery, and to support local clients and begin to extend the organization’s presence both in South Africa in particular and Africa in general.

“Africa to Africa” delivery is becoming a major factor in the financial services sector.

Accordingly, the reasons for organizations using South African service delivery for industry-specific services were: • Time zone compatibility • The high cultural fit with the U.K. • To generate South African business. Cost-effectiveness was frequently not an initial factor in moving work to South Africa but became increasingly important after the financial downturn. In financial services, as in contact center services, South Africa is typically being used for more complex processing tasks, requiring high levels of expertise and frequently higher levels of customer engagement. For example, a major global asset manager uses South Africa to handle specialized financial processing that isn’t easily handled from other offshore locations while CSC uses South Africa as a staging post for the roll-out of life BPO services to its Indian operations in support of its U.S.

life BPO clients and to handle complex parts of the value chain. Similarly both Old Mutual and Discovery are seeking to build global financial services shared service centers in South Africa, with both new financial services product development and processing being concentrated in South Africa, while Kleinwort Benson encourages its South African fund administration personnel to build relationships with clients in Europe. Overall NelsonHall estimates that at present approximately 50% of financial industry- specific and back-offices services delivered from South Africa are English language based with the remaining 50% being German, Dutch, and French- based.

While it is likely that the proportion of English- language within this mix will increase as the industry scales, South Africa remains a viable consideration for Continental European back-office services within a company’s global delivery network.

International Services Delivered & Why Examples of services delivered from South Africa in support of financial industry- specific services are shown in Exhibit IV-1. In general, South Africa remains suited to the more complex handling of processes and customers within these domains, rather than the more basic transaction processing, which is increasingly being automated. 14

Experience of Companies with Financial Industry- Specific & Back-Office Services from South Africa Benefits Sought and Achieved The benefits achieved by organizations using South Africa for financial industry- specific services, were stated to be: • Cultural match with clients and clients’ clients and ability to be accepted and build relationships • Ability to handle complex and specialized processing work that cannot easily be handled out of other highly standardized offshore processing centers • Time zone benefits for complex tasks where frequent communication with the client is required • Cost reductions compared to onshore delivery of approximately 45% • Presence of high-caliber financial services workforce for non-voice services • Staff more productive than alternative offshore locations for complex processing tasks • Customers more amenable to service delivery from South Africa than from other offshore locations such as India • Accent neutrality & cultural affinity.

As with contact center services, it is apparent that South Africa is most appropriate for handling complex financial industry-specific task, often involving a high level of customer intimacy as part of a global delivery network for industry-specific services such as investment administration.

Analysis of South Africa as a BPO Delivery Location 15

Skills Availability & Government Incentives A. Skills Availability South Africa has approximately 5m English speakers with 160,000 graduates per annum emerging from its universities. However, the contact center industry in South Africa typically employs first-time agents from the high school population rather than from the graduate population, with organizations stating that approximately 1 in 4 applicants are of a suitable standard to become customer service agents. The matriculating and non-degree tertiary pool of personnel consists of approximately 250,000 personnel per annum.

Overall it is estimated that 410,000 personnel with potential to work in the BPO industry enter the workforce annually. South Africa also has an established body of personnel with accounting and financial services expertise, including approximately 36,000 chartered accountants, 1,260 CFA charter holders, and 920 qualified actuaries. In terms of physical infrastructure, the standard of buildings and roads in cities such as Cape Town are comparable with those in Western Europe. In addition the cost of living is relatively low with the cost of living in Johannesburg estimated to be 56% lower than that in London, Cape Town 62% lower than London, and Durban 67% lower than London.

One of the attractions of South Africa, and in particular Cape Town, is that it is a location where executives from the U.K., Europe, and Australia will feel relatively at home culturally, and where they will be willing to visit, even for extended periods. Short visits are facilitated from the U.K. by the availability of overnight flights in both directions, so that working time lost due to travel is minimized. The telecoms infrastructure is now robust. However, although the cost of telecoms has fallen considerably in recent years, it remains high relative to other potential offshore locations, with a 2Mbps line costing approximately ZAR 300,000 per annum.

In addition to the BPS Incentives scheme, the South African government provides financial support for talent development programs, through: • The Monyetia Work Readiness program, whereby employers lead consortia to recruit and train entry level staff, and the government provides approximately ZAR 23,500 per unemployed person trained. The scheme is aimed at young employed South Africans, focused on individuals from previously disadvantaged communities • Sector Education and Training Programs, covering key sectors such as banking, insurance, services, finance & accounting, and IT, whereby employers can claim up to 75% of levies paid under the National Skills Fund.

The Monyetia Work Readiness Program aims to increase the pool of entry-level employable people, while SETA aims to accelerate the development of home- grown supervisors and managers. So far, approximately 10,000 learners have qualified from the Monyetia program with a fourth phase covering 3,000 learners now underway. In general, organizations, particularly service providers, using South African delivery should look to get involved in talent development initiatives such as these, both from a corporate responsibility perspective and also for access to trained personnel. Services are also available to assist organizations in testing the viability of captive and outsourced international service delivery from South Africa and in gaining access to local knowledge, with, for example, KPMG assisting organizations in feasibility studies and establishing shared service center hubs, EOH offering recruitment and “learnership” services, and the Rockefeller Foundation providing “work readiness” support.

As part of a national effort to build on the existing talent base, BPESA, the BPO industry association in South Africa, are in the process of launching a new skills based learning initiative that will use game mechanics to educate and assess talent for the industry. The initiative is funded by the Rockefeller Foundation and will be focused on school leaver talent. The assessment will focus on various contact center specific skills and will be targeted at previously disadvantaged communities where youth unemployment is highest. B. Government Support & Incentives for BPO The initial Business Process Services (BPS) incentive scheme was implemented in January 2011, since then the South African dti estimates that approximately 9,000 offshoring jobs have been created.

This initial scheme has now been replaced by a revised Business Process Services (BPS) Incentive, effective between October 1, 2014 and March 31, 2019.

In order to qualify for the scheme, applicants need to put forward “projects that meet the strategic objectives of the dti”. In addition, approval of applications is subject to the availability of funds and compliance with the relevant provisions of the Public Finance Management Act (PFMA). The primary objective of the incentive is to create employment in South Africa through servicing offshore activities. The secondary objectives of the program include: • Creating youth employment opportunities • Contributing to the country’s export revenue from offshoring services.

The Business Process Services Incentive consists of two components: • A base incentive • A graduated bonus incentive, dependent on the applicant exceeding certain annual offshore job creation targets.

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EXHIBIT V-1 BPS Incentive Qualification: dti Evaluation Criteria Evaluation Criteria Category weights (%) Parameters measured Sub- category weight (%) Credibility of the company/parent 40 Company/Parent Revenues 33 Number of years since inception 33 Company/Parent Net Profit (PAT) 33 BPO/Shared services credentials 20 Shared services scale or total number of BPO delivery FTEs globally 50 Offshore scale of BPO delivery FTEs/shared services 50 Scale of operations in South Africa 20 SA entity scale 50 Current scale of offshore BPO jobs in SA 50 Soundness of the application under review 20 Contract duration 25 Revenue of buyer (end-users) 25 Strength of contract (Transition plan, processes, timelines, termination clause) 50 The key eligibility criteria to qualify for BPS Incentives are: • Be a registered legal entity in South Africa as a going concern and with a valid tax clearance certificate • Be involved in starting a new operation or expanding an existing operation • Submitting an application for BPS Incentives prior to the engagement of qualifying jobs but having already secured a contract for offshore BPS activities • Comply with the requirements for Broad Based Black Economic Empowerment (B-BBEE) as issued in the Government Gazette 11 October 2013 in terms of the Codes of Good Practice.

This entails applicants: − Achieving at least level 6 B-BBEE contributor status or submitting a plan showing how this will be achieved from twelve months to end of twenty-four months from the date of incentive grant approval − Achieving level 5 B-BBEE contributor status from 24-months to 36-months from the date of incentive grant approval − Achieving level 4 from 36 months to end of the incentive period • The project must employ at least 80% youth, defined as people between the ages of 18 and 35 • The project must by the end of three years from the start of the operation, or the expansion, create and maintain at least 50 new offshore jobs in South Africa • In a joint venture, at least one of the parties must be registered as a legal entity in South Africa.

Assuming the above conditions are met, to qualify for BPS Incentive, a project must achieve at least sixty percent (60%) against the evaluation criteria shown in Exhibit V-1. The project must at least score a minimum of five percent (5%) category weight for each above-mentioned evaluation criteria. The base incentive is calculated on projected offshore jobs to be created based on a tapering scale and is awarded on actual offshore jobs created as per the definition of full-time equivalents. The base incentive offers a differential (two-tier structure) incentive for non-complex jobs and complex jobs, based on a fully loaded operating cost per job and is paid for a period of five years (60 months) from the date at which offshore jobs are created.

The base incentive will be determined at application stage depending on the fully loaded operating costs. 17 Analysis of South Africa as a BPO Delivery Location

Number of offshore jobs 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Up to 400 R 32 000 R 24 000 R 24 000 R 24 000 R 20 000 R 20 000 R 20 000 R 16 000 R 16 000 R 92 000* R 100 000* R 108 000* R 112 000* R 124 000* Number of offshore jobs 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Up to 200 R 40 000 R 40 000 R 40 000 R 32 000 R 32 000 R 32 000 R 24 000 R 24 000 R 24 000 R 136 000* R 144 000* R 160 000* R 176 000* R 184 000* * Total grant per job created and maintained over 5 years “Non-complex jobs” are jobs where the fully loaded operating cost is less than or equal to R300 000 per annum with wages contributing at least 65% of the operating cost base for a steady state of operation.

“Complex jobs” are jobs where the fully loaded operating cost is greater than R300 000 per annum per job with wages contributing at least 65% of the operating cost base for a steady state of operation.

Complex Jobs Non-complex Jobs The base incentives for non-complex jobs and for complex jobs are as follows: 18

The bonus incentive is paid at the end of year five. The bonus incentive for non-complex jobs is available to applicants that create and maintain more than 400 offshore jobs over a 5-year period and it is structured into the two components shown in Exhibit V-2. Source: the dti EXHIBIT V-2 BPS Incentive Bonus Scheme: Non-Complex Jobs Number of offshore jobs Bonus Incentive Illustration Greater than 400 but less than or equal to 800 20% once-off Bonus calculated for each job created and maintained between 401 and 800 Illustration: If an investor creates 420 actual offshore jobs in 2014/15, 430 jobs in 2015/16, 440 jobs in 2016/17, 450 jobs in 2017/18 and 460 jobs in 2018/19.

Given that an investor created and maintain more than 400 jobs over a five year period, the bonus incentive amount at the end of the fifth year (2018/19) is calculated as follows: • Bonus: R 32,000*20%*20 = R 128,000 Greater than 800 30% once-off bonus Bonus calculated for each job created and maintained in excess of 800 Illustration: If an investor creates 850 actual offshore jobs in 2014/15, 865 jobs in 2015/16, 875 jobs in 2016/17, 880 jobs in 2017/18 and 900 jobs in 2018/19. Given that an investor created and maintain more than 800 jobs over a five year period, the bonus incentive amount at the end of the fifth year (2018/19) is calculated as: • Bonus: R 32,000*30%*50 = R 480,000 19 Analysis of South Africa as a BPO Delivery Location

The bonus incentive for complex jobs is available to applicants that create and maintain more than 200 offshore jobs and it is structured into the two components shown in Exhibit 3. EXHIBIT V-3 BPS Incentive Bonus Scheme: Complex Jobs Source: the dti Number of offshore jobs Bonus Incentive Illustration Greater than 200 but less than or equal to 400 20% once-off Bonus calculated for each job created and maintained between 201 and 400 Illustration: If an investor creates 220 actual offshore jobs in 2014/15, 230 jobs in 2015/16, 240 jobs in 2016/17, 250 jobs in 2017/18 and 260 jobs in 2018/19.

Given that an investor created and maintain more than 200 jobs over a five year period, the bonus incentive amount at the end of the fifth year (2018/19) is calculated as: • Bonus: R 40,000*20%*20 = R160,000 Greater than 400 30% once-off bonus Bonus calculated for each job created and maintained in excess of 400 Illustration: If an investor creates 450 actual offshore jobs in 2014/15, 465 jobs in 2015/16, 475 jobs in 2016/17, 480 jobs in 2017/18 and 500 jobs in 2018/19. Given that an investor created and maintain more than 400 jobs over a five year period, the bonus incentive amount for the fifth year (2018/19) is calculated as: • Bonus: R 40,000*30%*50 = R 600,000 20

The potentially challenging element in directly accessing the BPS Incentive program for International organizations looking to establish own operations, or captives, is the necessity to achieve B-BBEE Contributor status. The award of points within the scorecard is shown in Exhibit V-4. EXHIBIT V-4 B-BBEE Generic Scorecard This requires organizations to achieve: • B-BBEE Level 6 contributor status within 12- 24months (>=70 points) • B-BBEE Level 5 contributor status from end 24-months to 36-months (>= 75 points) • B-BBEE Level 4 contributor status from end 36-months to end of incentive period (>= 80 points) Element Weighting (points) Ownership 25 Management Control 15 Skills Development 20 Enterprise & Supplier Development 40 Socio-Economic Development 5 Analysis of South Africa as a BPO Delivery Location 21

22

Companies Delivering Services from South Africa Contact Center Services A. Aegis Aegis currently employs approximately 1,300 FTEs in South Africa: 3/4 in Johannesburg and 1/4 in Durban, and is expecting to add a further 250 people across these 2 locations shortly. In addition, Aegis is potentially looking to add Port Elizabeth as a delivery location in 2015. The current breakdown of Aegis’ activity in South Africa is 70:30 (domestic to international). All “international” activity is currently in support of U.K.-based organizations, but Aegis South Africa is increasingly targeting the Australian market.

Aegis currently has two “international” clients, namely a leader in legal and business research and a U.K. based energy and home services company. In both cases the major reasons for choosing South Africa were the combination of high cultural affinity and cost- effectiveness. The high cultural affinity is perceived by Aegis to lead to a high quality of service resulting in a high first call resolution rate. In particular, Aegis provides outbound sales calls in support of renewals and up-/cross-selling of a client’s legal publications subscription business. In its last campaign of this type for this organization, Aegis achieved a conversion rate that was 19% higher than target.

The cost differential relative to providing these services from the U.K. was approximately 30%-35%.

Aegis estimates that it recruits approximately 1 in 8 of candidates interviewed and the training program in support of the client takes three weeks covering all soft skills, systems, sales skills, and product knowledge. Aegis supports pay-as-you go energy customer service for the UK based energy & home services company, covering all inbound customer service queries around billing, meter issues and outages. The service is delivered via 230 FTEs based in Johannesburg. South Africa was again selected on the basis of service quality and cultural affinity. The training for agents to support the client takes 6-7 weeks, due to the complexity of the pay-as-you-go product.

This included training with the temperature turned down to provide an appreciation for agents of U.K. temperatures. In terms of benefits, Aegis has recently achieved a score of 7.9 against a target of 7.6 on this organization’s client loyalty barometer, which is a composite measure of customer satisfaction. In terms of NPS, Aegis has delivered above target for the past six months on this account. Overall Aegis services from South Africa are 85% inbound and 15% outbound, the latter in support of customer retention and outbound sales. The majority of the outbound activity carried out by Aegis from South Africa is in support of the domestic market.

In addition, Aegis is looking to get into early stage collections.

By industry sector, approximately 60% of Aegis’ South African services are in support of the financial services and telecoms sectors, with a further 20% of activity in support of the utilities sector. Beyond these sectors, Aegis has a number of clients in the leisure/travel sector, plus a government contract, and a lottery contract. 23 Analysis of South Africa as a BPO Delivery Location

B. Amazon The business challenges faced by Amazon and hence the need for offshoring: “Amazon’s mission is to be the most customer centric company on earth, providing our customers with low prices, broad selection and fast delivery.

This requires that Amazon is able to provide services on a 24/7 basis. Geographic locations such as Cape Town provide the infrastructure and ability to enable this service.” The services being offshored and why this portfolio of services was chosen for delivery from South Africa: “Amazon has had a development center in Cape Town since 2005. We opened the development center in Cape Town to tap into the great local talent available in this area, and more generally in South Africa. The Center has played, and continues to play, an instrumental role as a contributor to the worldwide Amazon Web Services group, and in particular in building and operating the Amazon Elastic Compute Cloud.

Amazon Web Services allow software developers anywhere in the world to make use of Amazon’s world class global infrastructure under a simple, cost- effective pay-for-what-you-use model. The services get rid of the muck, allowing our customers to focus on innovating and differentiating themselves.

Customer Services: We took our first customer service call into Cape Town in October 2010 and today we have 1,000 employees working with us to provide support to Amazon customers around the world. The employees at our Cape Town customer service center are an important part of that team. Twenty-four hours a day, this team works hard to provide German, English and 7 other languages support for Amazon customers, as well as support for our Digital customers.” Amazon’s location selection criteria and how South Africa met these criteria: “Cape Town has the infrastructure, telecoms and technologies, cost advantages, English language skills as well as being well positioned time zone wise to be able to provide a 24/7 service experience.” The benefits that Amazon was seeking from South African delivery and the actual profile of benefits delivered “Amazon has been able to service its customers, as planned via the Cape Town operation.” Your satisfaction with delivery from South Africa, overall and with skills availability, infrastructure, incentives, and delivery cost structure “Amazon is satisfied with the operational and business results obtained by its Cape Town based operations.” Your plans to expand current service delivery from South Africa “Yes, Amazon is expanding its foot print in South Africa and has launched 2 new operations in Cape Town over the last 18 months.” C.

Barclays Africa Group Limited “Like many of the major financial institutions, Barclays established their shared services operations in India in the mid-2000s which has now grown to a business of 9,000 employees. As a bank they had to de-risk the business by finding alternative locations.

South Africa is regarded as a strategic location for Barclays as Barclays Africa Group Ltd (BAGL, inclusive of Absa) forms almost a third of Barclays PLC. Barclays Shared Services Africa was established in 2012 with the aim of supporting the 12 African countries in terms of infrastructure, talent development and business expansion. South Africa was an easy choice for Barclays due to the availability of English neutral language capability, financial services skills, political stability, and the existing infrastructure.

To date, Barclays Shared Services Africa has hubs in the following cities: • Pretoria: 3,300 seats • Johannesburg: 3,000 seats • Cape Town: 1,000 seats • Kempton Park: 700 seats This footprint combines the two largest shared services hubs in South Africa with an ‘active-active’ capability for business continuity.

The Pretoria campus which is the largest hub is well located and close to the university and various educational institutions. Its proximity to a large pool of talent provides a definite advantage, and employee benefits include an open environment, health and wellness facilities. The scale of the operation further provides opportunities for vertical and lateral career development. The following services are at present delivered by the shared services hubs: • Customer contact operations, including all call center activities, both voice and multi-channel, across customer service, and sales • Business processing, covering all high volume middle and back office processes such as account opening, account maintenance and document management 24

• Specialist services, covering for example verification of customer details and anti-money laundering, along with emerging activity in legal process outsourcing • Credit collections and recoveries. Apart from supporting Absa in South Africa, Barclays Shared Services Africa performs the following functions in support of the broader Africa region: • Business processing support for seven countries including Zambia, Ghana, Botswana, Tanzania, and Uganda • 24/7 contact center support for Zambia and Zimbabwe • Processing services including payment processing in support of Mauritius and the Seychelles • Collections in support of Zambia and Botswana Most of the work currently done out of South Africa is conducted in English, as this is the primary business language, however work is underway to expand the language services to the Africa regions, for example Swahili.

The benefits achieved by the scale of Barclays Africa Shared Services operation include an improved customer satisfaction rating by 24% year on year, multi skilling of staff, and the ability to absorb 23% more volume without increasing the number of people. The biggest challenge faced by Barclays is the absence of a 24/7 culture in South Africa.

Barclays is expanding its shared services capabilities from high-volume rules based activities to also include lower- volume and complex processes. From a cost perspective, the differential relative to other offshore destinations has reduced considerably over the past two years. Barclays also participates in the dti incentive scheme to enhance employability in South Africa and to develop more offshore job opportunities.” D.Capita Capita has been present in South Africa for more than 2 years and currently employs approximately 1,500 personnel across two sites in Cape Town. The company supports seven clients using South African delivery, with a strong presence in supporting the telecoms sector.

Capita South Africa has added to Capita’s existing capability with their presence in the BPO sector providing customer service with fully hosted contact center solutions trusted by global leading ‘brands’ to transform their customer experience. In addition to customer management services, Capita SA also provides back-office services both in support of the telecoms sector and including recruitment and compliance for a nursing sector client. The breakdown of Capita’s South African delivery by service type is approximately: • Customer service 80% • Collections 15% • Back-office 5%. Capita SA currently services O2 with approximately 1,000 FTEs.

The service started initially with a “proof-of-concept” for O2 with 170 agents providing customer service in support of pay-monthly customers and has now grown to cover three O2 businesses: pay monthly, pay-as-you-go, and SMB.

These businesses are supported across a diverse range of customer service queries from upgrades to problem solving to billing queries, and assisting customers in selecting more appropriate or affordable packages. Capita supports two shifts with the later shift ending around 11pm, and also provides support for Saturdays and Sundays. All customer service delivery is currently voice, but Capita expects to introduce web chat from South Africa for several clients in the near future. First call resolution is an important metric within the contract and here South African FCR rates are equal to or higher than those delivered from the UK with South African delivery matching that from the UK in terms of CSAT.

The initial move of elements of customer service delivery to South Africa was driven by Capita with one condition being that the move would not lead to adverse impact on the O2 brand. Speed-to-competence was an important criterion with the initial target of 6-months being achieved in 3-months.

In addition to high FCR rates, South African delivery has achieved cost savings relative to the UK of approximately 40%-45%. Back-office work being carried out for telecoms operators by Capita from South Africa includes document indexing and distribution. In terms of recruitment, Capita is targeting personnel with experience of customer service in the hospitality, retail, and nursing sectors. Induction and initial training takes 4 weeks with agents then going into an environment which involves calling for part of the day combined with further training for up to a month – additional quality and leadership support provided outside of the training and development environment.

25 Analysis of South Africa as a BPO Delivery Location

E. Coracall Coracall is a contact center services company with facilities in the U.K. and South Africa, where the company opened a 500-seat center in Durban in 2012. The company has approximately 10 clients across the telecoms, energy, and financial services sectors. One of these is EE for whom Coracall provides contact center services on behalf of its U.K. operations. EE initially began with a trial in Durban supporting its sales activities, and Coracall now provides approximately 130 FTEs to EE handling three campaigns covering: • Sales of additional lines to existing mobile customers, mining the potential to add further devices such as tablets and support additional family members • Cross-selling broadband to existing mobile customer base • Carrying out proactive welcome calls to customers transferring from competitors.

The company is measured against a range of metrics including: • Gross sales per day • A quality score to ensure each call is compliant • NPS • The level of cancellations & returns. Coracall estimates that it achieves savings of approximately 50% compared to onshore delivery in the U.K. However, Durban was chosen as the delivery location due the high level of capability of agents there: • To negotiate and do deals • Have a greater level of dialog with customers. The initial training period is typically up to six weeks. Coracall currently has 350 seats active in South Africa and expects to reach 450 seats by mid-2015.

The company focuses solely on outbound calls essentially sales and welcome calls.

The bulk of the company’s current business is in support of telecoms operators, though the company also has clients in the banking, energy & utilities, and retail sectors. In addition to the U.K. market, Coracall is looking at extending its presence to serve the Australian market. F. Merchants Merchants has a strong South African connection, having been acquired by Dimension Data in 1997 and subsequently establishing its own South African operations in 1999. In addition to BPO services, Merchants offers customer management consultancy and managed IT contact center services to assist organizations in establishing contact center operations in South Africa, Bahrain, Australia & the U.K.

26

Merchants serves both the International market and the domestic South African market in roughly equal measures, with the company’s international activity principally in support of the U.K. and Australian markets. The principal industry sectors served by Merchants are: • Telecoms • Retail • Financial services • Travel. Merchants carries out full customer life-cycle services for telecoms companies including sales, retention, upgrades, customer service, technical support, and provisioning. Merchants has 4,000 seats in South Africa, with International markets principally being served from Cape Town and the South African domestic market from Johannesburg.

In addition, Merchants has a center in Durban.

While voice-based service delivery dominates, approximately 35% is non-voice, principally in the areas of web chat, email handling, and management of customer accounts online. English is the main language supported internationally with a wide range of South African languages offered in support of the domestic market. In general, Cape Town offers a highly acceptable accent to Europeans and is European in feel to visiting executives. iiNet One Merchants’ client is the Australian broadband company iiNet. Partly in order to enhance staff retention, iiNet aims to have as few of their staff working beyond 8pm across the globe as possible.

Accordingly, the company needed a center outside Australia to support its Australian customers in the evenings. iiNet executives spent a week in Cape Town in January 2008, and by May 2008 had recruited 50 staff. By September 2008 iiNet had recruited agents to fill 169 seats in Cape Town. Merchants and South Africa were perceived to be appropriate delivery partners since iiNet wanted this new contact center to perform in exactly the same way as its other centers and form part of a wider delivery network within a virtual contact center operation.

iiNet perceived that the company achieved a good cultural alignment with Merchants and South Africa, and the initial approach envisaged was to use a design, build, operate and transfer model with ownership and management of the South African contact center being subsequently transferred to iiNet. Merchants’ Cape Town center is one of six centers used by iiNet with the others in Perth, Sydney, Melbourne, and Auckland. The main metric used by the Australian ISP across all four contact centers is Net Promoter Score (NPS). The Cape Town center is currently achieving a NPS score of 58% and is targeting 60%.

To achieve this, Merchants has made a number of structural changes to the service to enhance service quality, including separating service delivery into six units, including: • Sales, provisioning, and fault management • Multiple customer service & billing teams. Customer service representatives have been multi-skilled with the aim of enabling these agents to achieve first call resolution across a wide range of customer queries. Attrition is currently running at 2% per month and absenteeism at 4% per month. This level of engagement is reflected in a NPS score of 58%.

In addition, Merchants has trained its South African personnel in NPS methodologies and perceives that its South African personnel have responded positively to the competitive challenge inherent in the use of NPS to deliver high scores relative to other delivery centers.

iiNet achieves a 40% cost saving from South Africa compared to use of onshore services from Australia. Staff costs are approximately 50% lower. However, telecoms constitutes approximately 10% of the cost base for the South Africa center while it is substantially lower to iiNet in its Perth, Sydney, Melbourne and Auckland centers, and there are additional costs to take into account such as travel. Limited options and competition for connectivity between Perth and Cape Town, coupled with significant distance, resulted in a disproportionate telecommunication cost for the South African contact center.

In addition to this, iiNet leverages existing customer facing network facilities for Australian based contact centers, which offsets those costs.

For iiNet, Merchants recruits personnel with matriculation and with a strong customer service focus. A technical qualification is a bonus but not a necessity as the training provides a solid technical foundation. The intent is for all agents to be multi-skilled and handle all types of customer query including email & voice however an agent will start their career on the less technical skill sets and gain further areas of expertise as their competence and tenure grows. Each agent is driven solely by their NPS score, with every piece of customer feedback going back to the individual agent, and approximately 15% of each agent’s salary is driven by their NPS scores.

Where a customer query is identified to not be resolved as a result of verbatim comments on the NPS survey 27 Analysis of South Africa as a BPO Delivery Location

feedback, the customer is phoned by the agent responsible or the agent’s manager to ensure that the issue is resolved. The focus on NPS is facilitated by iiNet and Merchants maintaining a very flat management structure within the South African contact center. The scheduling carried out within the center is done as part of a global WFM team on a follow the sun basis. Reporting structure consists of teams of 12 CSRs (each with one senior CSRs) reporting to customer service managers, who report to the single contact center manager.

In general there is a high level of similarity between Australia and South Africa at a cultural level, with South Africa aligning well with Australia and New Zealand from iiNet’s perspective.

The main areas where “cultural” training was required to ensure the best customer experience: • The dependency on the internet and an expectation that it is always on • Understanding the geography of Australia and, in particular, location of Australian towns. South African agents typically do not have broadband at home, unlike Australians, and so required familiarization with the product. iiNet and Merchants have developed increased familiarity by providing an internet zone & free broadband access within the South African contact center. iiNet takes care to involve its contact center personnel in South Africa on a similar basis to contact center personnel in Australia.

For example, the South African contact center is heavily iiNet branded and South Africa personnel have the opportunity to travel and visit other sites. South African staff participate in the overall iiNet secondee program which sees them visit the sites in Australia and New Zealand.

Merchants’ involvement with iiNet has grown from the initial 169 in 2008 to the current 1,000 FTEs. The services provided for iiNet include: • Broadband technical support for B2C customers • Technical support for IPTV and mobile telecoms • Provisioning support • Fault management • Cross-selling and sales support • Billing support. Major U.K. Retailer Merchants also has a 10-year relationship with a major U.K. retailer, supporting its multi-channel operations. The principal driver within the retailer for considering South African service delivery was establishing an offshore site that could cater for a quality proposition coupled with cost benefit.

The other benefits of South African service delivery perceived by the retailer are: • The ease of management with a time zone difference of only 1-2 hours • The high cultural alignment between South Africa and the U.K.

India was evaluated and was not considered for quality reasons. The move of the services from the U.K. to South Africa was a 2-stage process with reengineering of the existing customer service taking place in Milton Keynes in the U.K. to ensure compliance before transferring service delivery to South Africa. The service transferred was initially a pilot of 65 FTEs which has now grown to approximately 600 FTEs. The retailer faced the challenge that the number of agents in its contact centers was growing rapidly driven by its online shopping initiatives. Accordingly, one emphasis for Merchants has been to work with the company to reduce the level of activity by proactively identifying why customers were calling and why agents were unable to answer particular queries and to reduce the level of voice calls.

Overall Merchants supports for this retailer: • Voice customer service (approximately 450 FTEs) • Back Office queries (approximately 150 FTEs) • Depending on seasonality Merchants also offer outbound calling, primarily around revenue protection, specifically looking at registered not purchased customers and lapsed customers Merchants supports the retailer with a specialist store support teams, outbound teams, e-mail teams, escalation teams, the grad bay’s and voice support. Merchants also offers a full training solution in delivery and design, management information functions, end to end work force management, Business Improvement/PMO services, Quality Analysis and full HR support.

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29 Analysis of South Africa as a BPO Delivery Location

G.Mindpearl In the period 1998-2000, two European airlines were looking to set up captives as low cost alternatives to their Western European operations. The airlines had already consolidated their existing centers with one airline moving from 220 call centers to seven and the other moving from approximately 400 call centers to eight. Some of the prior call centers ranged from 3 personnel to 100. However, the locations chosen for the new consolidated call centers included relatively high cost locations such as Berlin, Dublin, London, Frankfurt, and Milan.

At the end of the 1990s, the airlines evaluated a number of locations in South Africa and chose Cape Town since the location was home to a large population of second- generation Europeans with native language skills and the Cape Town accent was typically familiar to European and U.K. callers. Accordingly, a call center in Cape Town was opened in 2001, shortly after which economic circumstances led to many of the European call centers being downsized or closed. Cape Town consequently grew rapidly and moved into 24/7 mode. The only call center location retained in Europe was Barcelona.

A management buy-out then took place in 2005, which enabled Mindpearl to approach other airlines without the impediment of a parent company that was a competitor.

The center in Cape Town continued to grow driven by a high-level of cultural affinity and time zone compatibility, even though the Philippines and India continued to deliver services in areas such as directory enquiries and highly scripted calls. Accordingly, Mindpearl supported airline customers from South Africa with complex unscripted enquiries in areas such as their frequent flyer miles, complex itineraries, sales, reservations, ticketing, consumer relations and disruption management. In 2009, Mindpearl opened a complimentary center in Fiji offering English on a 24x7 basis. This allowed them to balance their calls between the two centers, minimizing the overnight shifts in Cape Town.

The tangible results included staff retention, workforce optimization, retention of key skills, and lower attrition rates. Mindpearl now has approximately 400 personnel in Cape Town, predominantly serving the airline sector (approximately 75% of activity). Clients include five major airlines. Other clients include a weight management program, and Lebara Mobile in support of its registration and pay-as-you-go services.

The services supported by Mindpearl for airlines from Cape Town include: • Reservations handling • Frequent Flyer Loyalty programs • Consumer relations • Ticketing • General sales and sales support • Disruption management (flight control, monitoring aircraft throughout the journey to assist customers likely to miss flight connections by re-arranging and rebooking flights) The first three of these activities are supported by Mindpearl via voice, email, and social media channels. The weight management program initially conducted a 10-person pilot in Barcelona with Mindpearl which subsequently grew to support several major European markets from Cape Town.

The weight management program had call centers in multiple locations in Western Europe and needed to consolidate and standardize their customer experience delivery.

Mindpearl now deploys +/-150 personnel in support of the weight management organization. Having started with relatively simple calls covering identification of meeting locations and subscription management, the service then evolved into more complex calls such as support for weight loss programs in conjunction with medical needs, technical support, escalations, social media management and proof of concept projects. The organization selected Cape Town because of its cultural synergies and English and European language capability. The overall profile of languages supported by Mindpearl from Cape Town is approximately 30% English and 70% other European languages, principally German, French, Italian, Spanish and Dutch.

H.OUTsurance OUTsurance is serving an insurance company within its parent group of companies from South Africa. Six years ago, the group, OUTsurance International Holdings Pty Limited, launched Youi, a general insurance company in Australia. Youi had reached the point of employing 800 personnel near Brisbane and needed to enhance its service hours and increase its cost-competitiveness to maintain its market momentum, so started to investigate offshore locations such the Philippines, India, and South Africa. However, it was very important to youi for any offshore call centers to be highly compatible with its Australian call 30

centers and to have strong links to the company’s head office. The company was looking to use offshore call centers to extend the company’s customer service hours and also to extend its sales window while maintaining high compatibility with onshore service delivery. South Africa was chosen both for its ease of access to youi management and because of its English language accent neutrality. Accordingly, in January 2013, Out established a call center in South Africa to support the Australian business. The center started with 40 personnel, now employs approximately 340, and is continuing to grow.

The center operates from approximately 6:30a.m. South African time to 4p.m. South African time, in order to serve the West Coast of Australia until late evening local time. This has a cost advantage compared to serving the West Coast of Australia from centers on the East Coast of Australia. The profile of services delivered from South Africa is sales (approximately 60%), and customer care (approximately 40%), with the center also now beginning to support claims.

The center has achieved broad cultural affinity with Australian customers and is narrowing the gap in terms of handling the finer intricacies of for example Australian language, with CSAT for customer service from South Africa now broadly in line with that from onshore in Australia. “Proportion of leads converted to sales” is another key metric for the South African operations and at present the South African performance is within 10% of the Australian onshore performance with the gap continuing to close. In addition to easier access to management and telecoms infrastructure (stability of VoIP is very important to youi), youi is achieving a cost differential relative to its Australian operations.

Youi has recently launched a business in New Zealand and the South African call center is now supporting this business for part of the New Zealand day. In terms of recruiting, youi is looking for a “matric” qualification rather than tertiary education, and on recruitment, personnel undergo a 6-week initial training period covering product, systems, and sales training. Typical age of personnel in the center is 23-29. I. Outworx/GoSkippy Insurance GoSkippy Insurance is a U.K.-based insurance broker, set up approximately two years ago & headquartered in Bristol, which is ultimately part of Southern Rock.

Due to the organization’s early success, it was quickly running out of capacity in the U.K. and consequently conducted a fact-finding tour of South Africa, with various members of the management team investigating Cape Town, Durban, Johannesburg, and Pretoria, with the final choice coming down to Cape Town and Durban, with the decision to choose Durban based on management’s higher level of prior familiarity with this location. The company accordingly decided to outsource to Outworx, a South Africa based provider of contact center and back- office services.

31 Analysis of South Africa as a BPO Delivery Location

GoSkippy Insurance carries out car insurance sales primarily via aggregators, and initially decided to move some of its inbound and outbound sales to South Africa, along with the validation of no-claims bonuses and driving licenses via email. The company initially established 30-40 personnel in Durban, mirroring its sales department in the U.K. with a similar function here. However, having filled this initial site, the company recently moved to a new center with 500-seat capacity. Having established this increased capacity, GoSkippy Insurance moved the whole of its validation department to Durban, so that all validation voice as well as validation- related email is now handled out of South Africa rather than the U.K.

To ensure the smooth running of this wider operation, the company also moved its U.K. validation manager to South Africa on a 12-month secondment, along with a formerly U.K.-based sales manager. Additional functions now moved to South Africa include: • Direct debit default chasing • Courtesy calling within 48-hours of policy purchasing. The company had had to discontinue its courtesy calling service in the U.K. due to lack of capacity, but has now re- introduced this service via delivery from South Africa • Fraud-checking and activation of policies purchased online. GoSkippy Insurance is a relatively new company and so was very keen to maintain a high quality voice service from South Africa, with high accent neutrality, that was a natural extension of the U.K.

service, and the company perceives that this objective has been achieved to a high standard. The company currently employs 300 personnel in South Africa and expects this to increase further to 400-500 by end 2015. The functions that are planned to be transferred to South Africa in the short-term include: • Moving the full sales force to South Africa • Credit control • Transfer of debt chasing for direct debit defaults from a U.K. outsourcer to South Africa • Support of additional affinity groups. • Retentions team • Claims administration support. On establishing the initial capability in South Africa, GoSkippy Insurance brought the U.K.

training team to South Africa and carried out 5-weeks initial training. The company subsequently transferred managers from the U.K. on secondment to work alongside the South African center management in order both to ensure a high level of knowledge of the business in South Africa and also to ensure a high level of acceptability of the service to the FCA via skills transfer over a 12-month period.

The main reason for transferring the service to South Africa was the lack of capacity in the U.K. center. However, the company has achieved cost savings in the range 35%- 40%, and the sales capability in South Africa has proven equal to that in the U.K. enabling GoSkippy Insurance to grow its business. Outworx carries out a stringent recruitment procedure on behalf of its clients, including multi-stage screening and testing, with an acceptance rate of 3.5%. This has resulted in a monthly attrition rate for GoSkippy Insurance of just 1%. J. Sanclare Sanclare, a subsidiary of Digicall Solutions (Pty) Ltd, partners with corporate clients in the consumer finance sector to deliver bespoke call center-based outsourced solutions throughout the customer life cycle.

The wider Sanclare group has approximately 210 personnel in South Africa with: • 140 personnel in Sanclare Financial Services which provides offshore delivery in support of the group’s U.K. business • 50 personnel in Sanclare Financial, providing services within South Africa • A number of personnel in corporate functions such as HR and training. The organization’s first contract was for collections with a U.K. credit card company, with the company choosing South Africa because of the time difference from the U.K. and the quality of English accent neutrality. In addition, it was important for voice-based collections that agents could maintain the quality of voice when placed under pressure by the customer.

Currently, Sanclare principally does work for another U.K. based credit card company carrying out: • Approximately 50% of their early collections (100 personnel) • Application processing, (approximately 40 personnel). The company initially chose to outsource to South Africa due to space limitations in the U.K. combined with relatively high staff turnover. The contract started with a pilot of 26 staff. The service delivery from South Africa equals that from the U.K. against key metrics such as: • £s collected per hour • Impairment saved per hour • Promises per hour • Proportion of promises kept • New information found on customers & data cleansing.

Calls are monitored and scored, largely against the customers’ reactions, with Sanclare required to be with 4% of target on quality monitoring.

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At the same time, Sanclare estimates that it achieves approximately a 50% cost reduction compared to the U.K. on the basis of fully loaded costs. Sanclare operates on a ratio of one team leader to 10 agents. Attrition is approximately 15% per annum. K. Serco/Shop Direct Shop Direct had some years ago conducted a modest amount of offshoring of its contact center operations to India, but had been dissatisfied with the quality of service and had brought this work back onshore in-house. This was then followed by subsequent small scale levels of outsourcing with the result that by 2011, Shop Direct had a series of outsourcing contracts, approximately 150 FTEs with each of The Listening Company, Ventura, and Arise as part of its overall contact center footprint of approximately 2,500 FTES.

Shop Direct then undertook a strategic review, finding that its legacy estate onshore in the U.K. was not aligned to support the huge uptake in online shopping. It identified the need to better help its customers to move to their channel of choice. At this point, Shop Direct supported its customers mainly through voice and email, with a further 5-6 personnel supporting social media. The company had limited experience and capability in webchat, an increasingly important channel for both sales and customer service, and needed access to external expertise to optimize any future technology investment to implement a multi-channel environment.

Accordingly, Shop Direct went out to tender, narrowing its final choice down to two suppliers. The desired outcomes provided by Shop Direct to these suppliers included the importance of maintaining, and subsequently improving, the quality of its voice services but at reduced cost. It was important that outsourcing did not degrade the customer experience in any way. While the company imposed no geographic constraints on its prospective suppliers, both of the suppliers under consideration independently proposed multi-shore delivery. For voice, both suppliers proposed a mixture of U.K. and South African delivery, with India being utilized for non- voice customer support back-office services.

Serco was chosen largely based on two factors: • Its customer journey centric approach, with Serco demonstrating how the previous operations- centric, rather than customer-centric, approach could lead to broken customer journeys and broken customer experience • Cultural and people fit, with a very high level of engagement.

Serco then led Shop Direct’s customer service transformation, which involved closing two U.K. sites and leveraging Serco’s existing capability in India. In South Africa, Serco initially used a third-party to get the operations off the ground while a new facility was created on a green field site on behalf of Shop Direct. Personnel were subsequently transferred over to the final entity in South Africa. Approximately 25% of Shop Direct’s contact center activity is now handled from South Africa (350 FTEs in Cape Town, doubling in peak periods), with the engagement commencing with inbound telephone customer enquiries.

These can be quite complex in the case of Shop Direct which provides a range of financial services to enable its customers’ retail purchasing. Shop Direct then trialed inbound telephone sales, which again can involve warranty and financial services products, achieving comparable performance to that achieved by onshore U.K. delivery.

More recently, Shop Direct has: • Introduced a “customer recovery team” in South Africa, running in parallel with a similar team in the U.K. These are highly empowered teams working off-process to address significant customer issues • Begun to trial email handling from South Africa, with South Africa achieving a higher standard of service delivery than that achieved from India with steps underway to replace the previously heavily scripted approach with a higher proportion of free form response • Begun trialing web chat, with the South African experience also so far positive.

Shop Direct uses post contact surveys to measure customer satisfaction and is finding that support for sales and service from South Africa is as good as that from the U.K.

Relative to India, Serco has found that South Africa offers a higher level of cultural awareness and affinity with the U.K. resulting in a stronger level of first contact resolution. Cape Town was initially chosen on the basis of high accent neutrality. Serco recruited and trained 400 personnel in 14 weeks for Shop Direct. The company carries out talks in schools and colleges in support of recruitment and frequently recruits from the hospitality and retail sectors, recruiting personnel with matric as the basic qualification. The company also extensively uses college graduates in support of peak periods, guaranteeing them a certain number of hours per week and working in conjunction with the University of Western Cape.

Training in South Africa is comparable to that provided in the U.K., but supplemented by additional cultural training, including an introduction to online shopping (which is currently still less prevalent in South Africa than in the U.K.). In addition, Shop Direct targeted a higher level of accent neutrality than the established standard to ensure high acceptability to its U.K. customers. 33 Analysis of South Africa as a BPO Delivery Location

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Shop Direct is likely to continue to develop its capabilities in South Africa including supporting new services and channels from South Africa, since the company perceives that South Africa offers an appropriate balance of quality of service and commercials going forward.

L. Shell Services Delivered from South Africa Shell provides customer service in support of its “offer-to- cash” business from its captive operations in South Africa. In particular, this involves supporting key account, commercial fleet, and domestic retail customers.

Customer service in support of key accounts covers order taking for bulk fuel orders, and answering queries, for example, on delivery timescales and destinations. Customer service in support of commercial fleet cards is provided in support of Shell’s businesses in Belgium, France, and the Netherlands and also in support of Canada. Typical queries here could be card not working, ordering cards for fleet additions, and queries around card incentive and membership programs. In addition, customer service is provided for Shell retail customers in South Africa. These queries can be quite complex and for example involve a customer reporting possible contamination at a pump.

In total, Shell employs approximately 300 personnel in its center in Cape Town. In addition to running a day shift on normal business hours in support of Belgium, France, and Netherlands, Shell runs two night shifts in support of Canada one from 2pm to 11pm South Africa time and one from 6pm to 3am South Africa time. These night shifts employ approximately 60 personnel. In terms of languages, Shell employs 38 FTEs for English, 34 FTEs for French, and 28 FTEs for Dutch. In addition, Shell provides some assistance in Flemish when the need arises. Drivers and Benefits of South African Delivery Shell perceives that South Africa’s competitive advantage is its language skills, together with its ability to manage night shift work.

For example, Shell has been able to employ personnel with Canadian French accents in support of its Canadian customer service by utilizing the West African refugee community in Cape Town. In support of its Dutch customer service, Shell employs both Dutch native speakers and Afrikaans speakers.

In terms of customer service metrics, South Africa performs at the same level as other geographies in terms of Shell’s customer service metric, while offering a considerable cost advantage over onshore centers such as Glasgow. Future Service Extension from South Africa In addition to playing a major role in providing voice customer service in support of French and Dutch-speaking geographies, Shell is also investigating the possibility of providing legal processing services from its center in Cape Town. There are four universities producing legal talent in Cape Town, which Shell perceives will provide the necessary talent and number of personnel.

35 Analysis of South Africa as a BPO Delivery Location

M. Teleperformance Teleperformance is the world’s largest provider of multichannel customer experience management services. The company employs 800 FTEs in South Africa: 680 in Cape Town and 120 in Johannesburg. Clients supported from South Africa include: • South Africa’s leading cellular network, providing domestic support from Johannesburg • The world’s 3rd largest mobile telecoms company, providing international support from Cape Town • The world’s largest PC manufacturer, providing domestic customer support for laptops and printers.

In addition, Teleperformance will begin voice support globally in English for a major software company from South Africa in Q1 2015. This activity is being driven by the client’s desire to optimize and de-risk its off shore operations and by its wish to adopt impact sourcing and Teleperformance will be working with Harambee to recruit personnel in support of this contract. Teleperformance provides data support covering smart phones and domestic routers for South Africa’s largest cellular network in support of the domestic market, providing 24x7 coverage.

Teleperformance also has a global relationship with the world’s 3rd largest mobile telecoms company, supported by approximately 2,500 seats world-wide.

Recently part of the client requirement involved the de-risking of one of their centers in Egypt. In response, Teleperformance established a 200-FTE capability for the client in South Africa within five weeks. This service has subsequently focused on billing and charging support and has grown to approximately 400 FTEs. The service is delivered on a two shift basis, operating up to 11pm South Africa time. The key KPI used is TNPS (transactional NPS), where the performance from South Africa is in line with that of other centers, with AHT used primarily for capacity planning.

Onboarding of advisors for this contract is typically three weeks, with advisors given a second tranche of training on soft skills after a month of live activity to assist in establishing their ability to create client customer advocacy. Overall, Teleperformance perceives that South African delivery offers “a genuinely empathetic experience with good advisors as good as those available in the U.K.”. N. WNS WNS SA has 3,500 seat capacity in South Africa, currently housing 2,600 FTEs. These seats are distributed across two locations: • Cape Town (3 centers): 2,200 FTEs handling International work • Johannesburg (1 center): 400 FTEs covering the South African domestic market.

In addition, WNS SA is in the process of opening centers in Durban and Port Elizabeth. The bulk of activity carried out from South Africa by WNS is contact center related, though the company is beginning to deliver finance & accounting outsourcing, and research & analytics outsourcing from South Africa. The main sectors supported within the International business are: • Utilities • Retail • Travel • Financial Services • Telecoms. The principal country served by WNS SA within its International business is the U.K. though WNS SA also supports market entry into other African countries. One client who has recently gone live selected South Africa on the basis of: • Quality of skills/English voice • Cost-effectiveness/grants • Cultural affinity and compatibility of time zone.

The service being introduced to South Africa was previously delivered from the U.K. and delivery from South Africa produced costs savings in the range 35%-40%.

The types of activity being supported for international clients include: • Customer service (all channels) • Debt collection (moving towards multi-channel integration) • Sales through service, soft up-selling and cross-selling. In general the profile of services provided by WNS in support of International clients from South Africa is: • Customer service 80% • Collections 20%. While 80% of activity is voice-based, approximately 20% is in support of correspondence handling, web chat, and multi-media.

In terms of KPIs, WNS finds that South African delivery tends to outperform onshore delivery in sales & debt collection, with cross-selling on par with onshore delivery.

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WNS is also seeing International clients place greater emphasis on: • Improving customer service processes through reducing hand-offs and back office integration. Here, WNS has assisted clients in resolving billing queries within the customer service environment rather than as a separate back office activity • Moving to non-voice channels, where WNS offers non-voice channels, including Social Media as a customer service channel • Deriving product or industry specific information and insight into client behavior, through the analysis done on customer data, interaction analytics and customer feedback surveys.

• Improving customer interaction metrics (NPS etc.), balanced by efficiency metrics such as Average Handle Time and productivity measures • The quality and authenticity of customer conversations, while being compliance conscious. Levels of attrition are broadly on par with those from onshore delivery but are highly dependent on the nature of the customer campaign and client approach. In the domestic South African market, WNS is handling cross-sell & up-sell and outbound lead generation in addition to customer service and is seeing increasing levels of activity in the B2B space. At the same time, there is increasing activity in support of multinationals in helping them use South Africa as a gateway into Africa through centralization of other horizontal BPO services such as finance & accounting, procurement, and research & analytics services in South Africa to serve the African continent.

O.Webhelp Webhelp is a global, customer experience provider, founded in 2000. The company has grown substantially since inception driven by a transformational approach to outsourcing leveraging voice of the customer insight and analytics to reduce customer effort and associated contact demand, resulting in improved NPS scores. Within South Africa, Webhelp operates out of two sites in South Africa, in Cape Town and Johannesburg, serving large scale U.K.-based telecoms companies from Cape Town and Johannesburg.

The services to these organizations are part of wider multi-shore delivery provided by Webhelp, with South African delivery being used where compliant delivery and a high standard of customer interaction is required, comparable with that achievable onshore.

The company currently employs 1,200 FTEs in South Africa and is aiming to achieve 5,000 seats by 2017. Webhelp has found South African delivery to be on a par or better in terms of UK onshore NPS metrics and better than India and the Philippines , while achieving cost-savings relative to onshore U.K. delivery of 35%-40%. The company is also moving beyond front-office voice provision into webchat and social media contact management in addition to commencing pilots in areas including legal process outsourcing and claims management. In addition to supporting the International market, Webhelp is also targeting the South African domestic market, largely in the telecoms sector.

This involves assisting organizations in transforming their customer management organizations. 37 Analysis of South Africa as a BPO Delivery Location

Financial Services Industry-Specific BPO P. Kleinwort Benson In 2005 & 2006, Close Brothers was delivering services out of Jersey & Guernsey in the Channel Islands, but was finding it difficult to scale its services from those locations. Accordingly, the company set out to investigate offshoring destinations, considering a range of delivery locations including India and the Philippines. The company was initially considering either buying an established outsourcing business or contracting with an established outsourcing vendor. However, the company finally decided to go a different route and to establish a full South African subsidiary and captive delivery capability in Cape Town in 2007.

The company then started moving fund accounting and administration work from Jersey & Guernsey. The principal reasons for selecting South Africa were: • Time zone compatibility • The high cultural fit with the U.K. and the Channel Islands • The fact that a number of South African organizations were already clients of Close Brothers. In addition, Cape Town offered scalability and access to skills, particularly as it was already an established financial services hub employing asset managers and fund accounting personnel.

Initially, cost-effectiveness was not a major factor in the location selection, with the main drivers being scalability and the opportunity to service existing local clients.

However once the subsequent downturn took place then cost-effectiveness also became of major importance. In 2011, Kleinwort Benson then acquired the Close Offshore Group including the Channel Islands businesses and South African business of Close Brothers. At this point, Kleinwort Benson had its own fund administration business with all work being carried out in-house from Jersey & Guernsey. However, on the merger with Close Offshore Group, all Kleinwort Benson’s legacy fund administration was transferred onto the Close Brothers’ platform.

Today, Kleinwort Benson South Africa operations is part of Kleinwort Benson’s Fund Administration unit that primarily services third party asset managers and corporate clients in the U.K. and Europe, with $18bn of assets under administration split across 260 investment funds. The fund accounting and financial reporting services to these clients are primarily serviced from South Africa, as is client relationship management, with oversight and additional services provided by the Kleinwort Benson Group in London, Guernsey, and Jersey.

Kleinwort Benson currently employs approximately 85 personnel in Cape Town, all professionals with approximately 25% of personnel being qualified accountants and a high proportion of personnel having masters’ degrees or being part-qualified accountants.

Many have some experience of working in the U.K. Kleinwort Benson perceives that the quality and caliber of its staff in South Africa combined with a strong work ethic enables the company to deliver a high quality service and value add to its International clients. This combined with a strong cultural match enables Kleinwort Benson to build strong relationships with its clients from South Africa. Indeed Kleinwort Benson actively encourages its South African personnel to build relationships and to interact with clients daily to add value, whereas its operations in India tend to have no direct interaction with the company’s clients.

Kleinwort Benson South Africa is currently operating at approximately 55% of the equivalent cost for U.K.-based services, giving fully-loaded cost savings of around 45%. For data protection and business continuity, no data is held in South Africa with Citrix being used to access data held in the U.S. and Europe. Kleinwort Benson’s South African operations operates in conjunction with other parts of the Kleinwort Benson Group as a revenue-generating entity with its own business development personnel, and not just as a cost center, and for example provides in conjunction with the wider Kleinwort Benson Group: • Support for a third-party asset manager, supporting 17 of their investment funds • The entire finance function for a U.K.-based wealth manager.

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Future growth is likely to come from external business of this type with Kleinwort Benson South Africa delivering services in conjunction with other Kleinwort Benson units. However, Kleinwort Benson is also looking at the possibility of transferring elements of other services, such as company secretarial services including assembling board packs, from Kleinwort Benson Group into South Africa. Offshoring Support Services Q.EOH EOH is a South African based ICT services firm. In 2007, the company started a HR BPO business serving the South African market.

Two years ago, EOH started a new youth job creation initiative, and the company is now looking to create at least 28,000 jobs by 2016 within EOH and its BPO customers. The company works with three types of intake: matriculation, diploma or university students. The company began its youth job creation initiative with EOH internally in 2011, starting with 600 learners. EOH carried out its “learnership” approach with this intake whereby over a 12-month period, personnel spend 40-days in the classroom and the remainder in specific entry-level positions. The aim is to take people into full time positions within the business at the end of this “learnership” period and so far EOH has taken on approximately 80% of the personnel who have been through its “learnership” programs, taking on 1,250 personnel using this approach over the past two years.

In addition, EOH has now placed approximately 7,000 personnel with its clients using this approach. Ninety-five per cent of these personnel are “disadvantaged youth” typically around 25-years old, with some qualification, but never having worked. The “learnership” programs in support of this activity are either 12-months or a multiple of 12-months. These learnership programs are partly subsidized by the South African government and partly by other funding partners such as Rockefeller Foundation, which last year provided $1m to support placement of 1,750 personnel. Specifically, the Rockefeller Foundation funds the “work readiness” program, which assists personnel in developing the soft skills and social skills required for adapting to basic work protocols such communication with employers and fellow staff and use of email.

To further this job creation initiative, EOH has now signed a MoU with BPESA, whereby both organizations will now promote EOH’s “learnership” programs to the wider market in support of International BPO. EOH has already achieved placement of personnel with large IT vendors such as Oracle, SAP, and CA, and is increasingly targeting BPO opportunities. for example in International call centers. EOH operates two models of employment within its job creation initiative: • Retaining personnel on EOH payroll (approximately 25%), and placing these with the third-party • Transferring personnel to the company payroll, and just providing training and project management (approximately 75%).

In addition, EOH has a recruitment & placement business that can be used for deployment of personnel. The training provided by EOH includes: • Accredited certification in a particular discipline (e.g. call center or programming) • Work readiness program • Job-specific training modules, relevant to future employer. Out of the 40-days training typically provided, approximately 80% is delivered via classroom learning and 20% e-Learning. The accredited certification training consists of a 12-month program of which approximately 25% is classroom-based training and the remainder of the training takes place on-the-job.

The “work readiness” program is a 2-month program, consisting of 7-days classroom learning, with the remainder being “on-the-job” learning. In the workplace environment, EOH provides personnel to manage the relationship between placed “learners” and the client’s business and supervisors, which is crucial in assisting previously unemployed personnel to adapt to be successful in the workplace environment. 39 Analysis of South Africa as a BPO Delivery Location

R. KPMG KPMG assists organizations in setting up shared service center hubs across functions such as finance & accounting, HR, procurement, and supply chain management.

For example, KPMG is currently assisting a company in establishing a SSC hub covering transaction processing in support of finance, HR, and supply chain for 22 countries across Africa and the Middle East. KPMG initially conducted a feasibility study to determine the feasibility of the project and the optimum location for the hub, followed by a detailed design to finalize the processes and worked in conjunction with the technology partner in support of the Oracle ERP implementation. The processes being implemented were supported by a single platform across all entities in Africa and the Middle East.

KPMG also addressed the tax and regulatory implications of the roll-out, for example, to identify which processes needed to remain in-country for each African country and which could be centralized in the hub. There were two locations in the final selection, one Johannesburg in South Africa and the other outside the country. Johannesburg was selected on the basis of its strong English language capability and its compatible time zone. The hub in Johannesburg is expected to employ 500- 550 personnel when the roll-out is complete, with the 22 countries being brought on-stream over a period of 2-3 years.

At present, the hub has gone live with a single country, South Africa, supported by approximately 50 personnel. The language supported from the center is predominantly English.

In addition, KPMG is assisting an oil & gas company in establishing a SAP-based finance shared service center in Cape Town in support of 12 countries in Africa. So far the service has been rolled out across four countries with 120 FTEs supporting. In both these cases, the benefits of South Africa-based delivery include: • Using South Africa as a gateway to drive into emerging geographies across Africa • The relative maturity of transactional SSC skills in South Africa, providing the skills and scale of personnel to allow controls and segregation of duties to be implemented to give strong compliance • Cost-competitiveness.

KPMG is increasingly assisting companies that are looking to develop their businesses in Africa to establish servicing hubs by providing feasibility studies, including location analysis and benchmarking, tax and legal governance advice, and design and implementation support.

KPMG advises the organizations on their Global Business Services options with the aim of ensuring effective and efficient operating modes of service delivery. This includes both captives and outsourcing options. 40

41 Analysis of South Africa as a BPO Delivery Location

42 T +27 (0) 21 427 2900 www.bpesa.org.za Cape Town - Workshop 17, Watershed, 17 Dock Road, V&A Waterfront, Cape Town, 8001 Durban - Synergy House, 58 Chelsea Drive, 4051 Pretoria - Riverwalk Office Park, Block B, 41 Matroosberg Road, Ashlea Gardens, 0081 BPESA, BPESACT, BPESAKZN BPESA – BPO South Africa BPESA BPO BPESA

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