These transactions include companies outsourcing their horizontal business functions such as HR administration, payroll, finance and accounting and procurement as well as vertical business processes such as customer helpdesk and back office administration. 

This has been the fastest growing area within sourcing over the last five years and has been driven by a number of factors, including the business drive to concentrate on core competencies, the desire to use technology to reduce costs and headcount and the rise of offshore locations such as India.  Although horizontal functions and vertical business processes are grouped together by the market as BPO, they are very different in terms of procurement, implementation and governance.  Horizontal functions are more commoditized in terms of technology, pricing, service delivery and performance whereas business processes are often unique to the customer.  So, for example, the way that one insurance company underwrites its insurance policies and then handles claims is unique to that company, unless the entire business process is re-designed (See Business Transformation.)

Lawyers from our Global Sourcing Group have advised clients on many BPO transactions in recent years, including:

• Abbey Life Assurance Company on its outsourcing to Unisys of life insurance administration processes and the development and maintenance of software applications.
• AIG Europe on a $100 million pan-European 10 year deal with Accenture in connection with the outsourcing to Spain and Romania of certain back-office and insurance intermediary operations across 5 European countries. 
• Bank of America Corporation in a transaction with Alltel for the sourcing of mortgage analysis products and services.
• Bank of America Corporation in a transaction with SunGard for the sourcing of mutual fund and securities processing services.
• Bank of America Corporation, Bank of Hawaii, Bank One (Delaware) and Chemical Bank in their sourcings of credit card processing services from Total System Services, Inc.
• Bank of Hawaii in its transaction with First Data Resources for the sourcing of credit card processing services.
• Exonomy in relation to the restructuring of the client’s China-based Internet trade finance portal assets, intellectual property, and staff into a new special purpose vehicle designed to provide outsourced “white label” portal services to third-party clients, including providing regulatory advice in China, Hong Kong, and 12 other jurisdictions, preparing standard terms of business and other documents under which the company provides outsourced services, and assisting in the negotiation of a £25m customised platform and outsourced service agreement with the Royal Bank of Scotland. 
• Exult (now part of Hewitt Associates) on its contract to provide most of BP Amoco’s US and UK HR functions and services.
• Homestore.com, Inc. in transactions with real estate agents, brokers, and companies involving the sourcing of various systems management and administrative services.
• Imperial Bank and Zions First National Bank in their transactions for the sourcing of merchant credit card processing services from NOVA (formerly PMT Services).
• IndyMac Bank, F.S.B. in a transaction for the sourcing of mortgage loan processing and insurance protection tracking services.
• Jardine Matheson on the cross-border outsourcing of its Pizza Hut telephone call centre in the PRC.
• Oberman, Tivoli, Miller & Pickert dba Media Services, one of the largest entertainment industry payroll service providers, in connection with its services agreements with motion picture studios, television networks and television, music video and commercial production companies’ outsourcing of their payroll.
• Pearl Group Limited, the closed life insurer, on the outsourcing of payment execution services.
• PMI Group, Inc. in a transaction with Infosys to design and develop a technology platform to provide PMI and its customers enhanced policy servicing and claims functionality for primary and supplemental mortgage insurance products for PMI’s domestic and international markets.
• PNC Financial Services Group, Inc. in connection a transaction to outsource credit card processing to Minneapolis-based U.S. Bank. 
• Royal & SunAlliance in outsourcing its general insurance claims handling and ADM IT support to Accenture India, and its life insurance and pensions administration services to Unisys.
• Schwab/U.S. Trust in the outsourcing of end-to-end operations and technology services for a newly-established national retail bank.
• Standard Chartered Bank in connection with the introduction of its new American Express credit card product in Hong Kong and worldwide, including negotiating agreements with Atos Origin for the development and hosting of the associated IT systems.
• Standard Chartered Bank in connection with the sub-contracting of elements of the cash handling services outsourced to the Standard Chartered by the Hong Kong government.
• Thomson Prometric on the $1 billion outsourcing by ETS of testing and assessment processes and services.
• Western States Bankcard Association in its sourcing of credit card issuer and merchant processing services from First Data Resources.

Case Study

Royal & SunAlliance life insurance BPO

Lawyers in our sourcing group advised Royal & Sun Alliance on the outsourcing of its life insurance administration to Unisys.  The company’s life book had been closed to new business and the company wanted to reduce costs over the next 25 years and still meet its regulatory and customer obligations.

We advised on the competitive procurement process, the complex task of devising service levels, defining the scope, which involved looking at each process, and in building a pricing model that could handle the complex mix of policies.  We also advised on some of the regulatory issues imposed by the Financial Services Authority, the transfer of 1500 staff as well as structuring the transaction to minimize tax.