Industry Research

Publication Date: 18 July 2008 ID Number: G00159114

BPO for Mortgage Origination and Servicing

Peter Redshaw

This report provides information for end users about some of the key providers of mortgage process outsourcing (MPO) services: who the providers are; what services they offer; how much of the mortgage process life cycle they cover; which regions they serve; where they have offshore capability; and who their major clients are. It complements the report, "User Survey Analysis: Mortgage Process Outsourcing Clients Report High Levels of Savings," which examines the same market but is based on responses from users (demand side) rather than providers (supply side). Key Findings
There is considerable variety in this market in terms of the MPO services offered by each vendor; the size of deals; the number of staff; the locations that the services are delivered from; the track record of the providers; and their heritage in IT and outsourcing. MPO is especially popular in North America much more so than Europe, the Middle East and Africa (EMEA) and Asia/Pacific. Different strategic approaches, such as offshoring and out-tasking, are increasingly part of MPO deals.

Recommendations
End users of MPO should: Evaluate the full benefits (such as total value of operations) and cultural fit of a potential deal. MPO is a prime example of an area that may be driven by the need for cost savings, but to succeed, it must include factors such as the provider's location, solution scalability and the required extent of automation. Define the software platform that is needed by your firm. Is it important that the MPO provider adopts your current systems, or is it vital for you to move off home-built or vendor proprietary systems and migrate to new, industry-standard platforms? Plan ahead for the likely consolidation and expansion of MPO providers. Ensure that you have the flexibility to add new services, or to exit current providers and move to new suppliers.

2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

TABLE OF CONTENTS
Analysis ............................................................................................................................................. 3 1.0 Introduction to the Survey............................................................................................... 3 2.0 Survey Results ............................................................................................................... 4 2.1 Support for Mortgage Origination ...................................................................... 4 2.2 Support for Mortgage Servicing......................................................................... 6 2.3 The Number of Live Clients for MPO by Region ............................................... 8 2.4 Top Three MPO Clients by Vendor ................................................................... 9 2.5 Software Used by Vendors.............................................................................. 13 2.6 Key Metrics for MPO ....................................................................................... 16 2.7 Vendor Facility Locations ................................................................................ 18 2.8 Staff Numbers for MPO ................................................................................... 19 3.0 Summary ...................................................................................................................... 20 Recommended Reading.................................................................................................................. 21

LIST OF TABLES
Table 1. Number of Live Clients for Mortgage BPO by Region......................................................... 8 Table 2. Top Three Mortgage BPO Clients by Vendor...................................................................... 9 Table 3. Software Used by Vendors................................................................................................ 14 Table 4. Key Metrics for Mortgage BPO.......................................................................................... 16 Table 5. Contact Centers and Data Centers ................................................................................... 18 Table 6. Staff Numbers for Mortgage BPO ..................................................................................... 19

LIST OF FIGURES
Figure 1. Support for Mortgage Origination....................................................................................... 5 Figure 2. Support for Mortgage Servicing ......................................................................................... 7

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 2 of 22

ANALYSIS

1.0 Introduction to the Survey

Mortgage origination and mortgage servicing are two core business lines for many retail banks, credit unions, building societies and other financial services institutions (FSIs), and they have been under intense scrutiny since the subprime mortgage crisis and the credit crunch that followed in mid-2007. The logical and primary approaches for FSIs that are addressing any issues with these crises should be to look at the whole business strategy for the mortgage market and then to tackle specific items, such as risk management and reporting. Of course, not all FSIs act in ways that are entirely rational, and there may be more-tactical responses, such rushing to make cuts, securing emergency funding or simply quitting troublesome businesses. Nonetheless, business process outsourcing (BPO) is in theory, at least only a secondary approach, because it does not solve any of the core problems that led to or arose from these financial crises. But it can help to deal with the aftermath, for example, by releasing a bank's key personnel to work on the primary issues, while the BPO provider gets on with the mundane, day-to-day operations. It also helps to deliver cost savings (perhaps through offshoring or economies of scale) that may be needed to run profitable mortgage operations at a time of tougher market conditions. Then there are the benefits beyond cost savings, such as improved process discipline and compliance for MPO (through service-level agreements), variable pricing and resources (ramp up and down), more-modern platforms (without bearing all the capital cost), superior technical expertise, and so on. Gartner has seen an increase in the number of inquiries from clients asking about BPO for mortgages during the past 12 months. Questions include: Who are the providers; what services do they offer; how much of the mortgage process life cycle do they cover; which regions can they serve; where are they located and do they have offshore capability; what software do they use; how many staffers do they have; and who are their major clients? Gartner conducted a short survey of MPO service providers to answer these questions, and the results are presented here. There is no comparative analysis here, and this is not one of Gartner's more-formal Magic Quadrants or a MarketScopes. However, it highlights some of the main players on the supply side, along with their experience and their capabilities. In this way, this research complements "User Survey Analysis: Mortgage Process Outsourcing Clients Report High Levels of Savings," which examines the same market but is based on users' responses (that is, it reviews the demand side). At the start of the survey, Gartner contacted 81 of the key IT providers around the world in the financial services and BPO markets to check if they were actively marketing or running BPO for mortgage origination or mortgage servicing. The guidance that Gartner gave was that, in this instance, we were only interested in companies that offer BPO as a back-office service for mortgages and that get the majority of their MPO revenue from services rather than software. We did not include companies that predominantly provide software tools that facilitate the automation of mortgage origination or mortgage servicing (for more information on these, see "A Survey of Mortgage Servicing Solutions"). In other words, our criterion excluded many IT firms that have a major involvement in mortgage services through software but not through BPO. Out of the 81 firms contacted, we received detailed responses from a core set of 24 firms. These firms provided comprehensive answers to our questions, while respecting client confidentiality.

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Twenty-three respondents were active providers of MPO services, and one (Satyam) was negotiating to start new MPO deals.

2.0 Survey Results

2.1 Support for Mortgage Origination
As Figure 1 shows, the picture for the support of the different processes in mortgage origination is varied. Some vendors (such as Genpact, IBM, ISGN, Lydian, Oracle Financial Services, Quatrro BPO Solutions and Zenta) support all, or nearly all, the elements of mortgage origination. Other vendors (such as TietoEnator and Wolters Kluwer Financial Services) support only a few. There is also variation between the processes themselves. Mortgage acquisition and funding are supported by only about half of the vendors here, while application processing and document management are supported by nearly all the vendors.

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 4 of 22

Figure 1. Support for Mortgage Origination

iGATE Global Solutions Lydian Data Services Quatrro BPO Solutions

Ness Technologies

Headstrong Svcs

Oracle Financial Services (i-flex)

Fiserv Lending Solutions

Firstsource

TietoEnator

Accenture

Genpact

Satyam

Wolters Kluwer FS

Optimus (Polaris)

Infosys BPO

UST Global

Synechron

Ordina

EDS

Mortgage Acquisition Yes Yes No No Yes Yes Yes No Yes Yes No No Yes Yes Yes Yes No Yes No No No No No No Application Processing Yes Yes Yes Yes Yes No Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Underwriting/Preunderwriting Yes No Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes No No Yes Yes Yes Yes No No Yes No Yes Document Imaging Yes No Yes No No Yes Yes Yes Yes Yes No Yes Yes Yes No Yes Yes Yes Yes Yes No Yes No Yes Document Management (Procurement, Verification) Yes Yes Yes Yes No Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Closing/Preclosing Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes No No Yes No Yes Funding No No Yes No Yes Yes Yes Yes Yes Yes No Yes Yes No No Yes No Yes Yes No No No No Yes Post-closing Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes Yes Yes Yes No Yes No Yes Rate Lock Management No Yes No Yes No Yes Yes No Yes No Yes Yes Yes No No Yes Yes Yes No Yes No No Yes Yes Credit Review No Yes Yes No Yes Yes Yes No Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes No Yes No Yes Loan Process Indexing Yes No Yes Yes Yes No Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes No Yes No Yes
Source: Gartner (July 2008)

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 5 of 22

Zenta

EXL

e4e

ISGN

IBM

The support variation shown in Figure 1 is often an indication of the heritage of the vendor: whether the vendor's background is BPO or financial services software; if its customers have been based among realtors or banks; the extent of its vertical domain knowledge; its expertise in skills complementary to BPO such as system integration; and so on. Understanding the heritage of a vendor in this way can be important for the cultural fit and, therefore, the relationship between BPO vendor and client. For example, a client that is most interested in augmenting its staff from offshore locations will be more inclined to go to a "pure" BPO provider, whereas those that need to migrate software applications may be more inclined to find an expert in specific financial services packages.

2.2 Support for Mortgage Servicing

As Figure 2 shows, the support for mortgage servicing is just as varied as it was for mortgage origination, but the details are different. For example, at the process level, warehouse management is less widely supported than more-popular processes, such as default management or collateral management. At the vendor level, Genpact, ISGN, Oracle Financial Services, UST Global and Zenta still all have wide support of all, or nearly all, the processes in this space. Most of the vendors support about one-half of the processes across mortgage origination and mortgage servicing combined, but there are some niche suppliers or specialists, such as e4e, TietoEnator and Wolters Kluwer Financial Services, that support only a very few. That isn't necessarily a problem. As more FSIs move toward service-oriented architectures (SOAs) and implement business process management (BPM) tools and methods, the potential and demand for out-tasking in general are likely to increase in the near future. Systems and processes are no longer the monoliths they were, and as they become more modular and "chunkable," it's possible and sometimes even desirable to outsource only very specific parts of the mortgage process life cycle, not the entire end-to-end process. Where the difficulty with more specialized vendors may arise, given the lack of standards in the mortgage area, is for users that want to consolidate on a limited set of MPO providers or to mix-and-match across MPO providers. Note that "decisioning" (for example, for mortgage underwriting) must be owned and performed by the bank/client rather than by the MPO provider. There may be categories that the MPO provider can approve, but in most cases, banks must maintain control of it.

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 6 of 22

Figure 2. Support for Mortgage Servicing

iGATE Global Solutions Quatrro BPO Solutions

Lydian Data Services

Ness Technologiess

TietoEnator

UST Global

Synechron

Satyam

Wolters Kluwer FS

Optimus (Polaris)

Headstrong Svcs

Oracle FS (i-flex)

Fiserv Lending Solutions

Infosys BPO

Firstsource

Accenture

Genpact

Ordina

Payoffs Processing Default Management Financial Management and Administration Risk Management Collateral Management Relationship Management Warehouse Management Loan Account Set-up
Source: Gartner (July 2008)

Yes No Yes Yes Yes Yes Yes No No No

No Yes Yes Yes No Yes No Yes Yes Yes No Yes No Yes No Yes

No Yes No Yes Yes No Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes No Yes No Yes No No Yes Yes No Yes No Yes Yes No Yes No Yes No Yes No Yes No Yes No No Yes No No Yes No

Yes No Yes Yes Yes No Yes No Yes Yes Yes Yes No No No No No Yes Yes Yes Yes No No No Yes No

No Yes Yes No Yes Yes Yes Yes Yes Yes No Yes No Yes Yes No No Yes Yes Yes Yes No Yes Yes Yes No Yes Yes No Yes No No Yes No Yes Yes Yes No No Yes Yes No No No No No No Yes No Yes No

Yes No Yes No Yes No Yes No Yes No No Yes Yes No Yes No Yes Yes No

No Yes No

No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes No Yes No Yes

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 7 of 22

Zenta

ISGN

EDS

EXL

IBM

e4e

2.3 The Number of Live Clients for MPO by Region

Table 1 shows that the majority of live clients for MPO are in North America (351), with no clients in Latin America, just 14 in EMEA and 11 in Asia/Pacific. Note that the number of clients doesn't necessarily correlate with the volume of business handled. Some vendors have only a few very big clients rather than many small ones. Tables 2 and 3 will make this clearer. Although the rest of the world lags behind North America in adoption, the opportunities may be brighter in other regions. For example, Australian banks and building societies have been developing innovative mortgage products such as top-up loans, reverse mortgages, offset accounts and so on. Hence, mortgage-servicing may have greater future traction in the AustraliaNew Zealand market. Table 1. Number of Live Clients for Mortgage BPO by Region
North America Accenture e4e EDS EXL Firstsource Fiserv Lending Solutions Genpact Headstrong Services IBM iGATE Global Solutions Infosys BPO ISGN Lydian Data Services Ness Technologies Optimus (Polaris) Oracle Financial Services (i-flex) Ordina Quatrro BPO Solutions Satyam Synechron TietoEnator UST Global Wolters Kluwer Financial Services Zenta
Source: Gartner (July 2008)

Latin America 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N/A 0 0 0

EMEA 2 0 4 0 1 0 1 1 0 0 0 0 0 2 0 0 2 0 0 1 N/A 0 0 0

Asia/Pacific 0 0 2 0 0 0 2 0 1 0 1 0 0 0 5 0 0 0 0 0 N/A 0 0 0

1 20 1 2 0 50 6 2 2 3 5 50 40 5 1 8 0 8 0 2 N/A 8 87 50+

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 8 of 22

2.4 Top Three MPO Clients by Vendor

Table 2 shows the top three clients for each vendor: the client name or type, where the BPO work is delivered from (it may be the client site, onshore or offshore), where it is delivered to (usually, at the client site), the volume of work handled and the duration of the contract (an average length of 48 months). Most respondents to this question were unable to supply the actual name of the clients for reasons of confidentiality. In some cases, they were also unable to disclose the volume of work done as that is also confidential (shown as "not applicable"). Some vendors do not have three current clients, and Satyam hopes to acquire its first clients in 2008, but they are not live yet. What it shows, yet again, is that there is considerable diversity in the business model here (such as whether offshore resources are used) and the volume of the work handled. That is important for clients and the different priorities they assign to cost savings, vendor track record, being in the same time zone, scalability and so on. The degree of customization and transformation that clients expect will also be a strong selection criterion (that is, whether clients expect a "lift-and-drop" approach to outsourcing, stressing seamless operations), or migration to a utility offering (stressing economies of scale), or a more customized, one-off deal (stressing transformation). These approaches are not mutually exclusive lift-and-drop may be the first phase that is followed later by a more collaborative approach between provider and user for transformation programs. Table 2. Top Three Mortgage BPO Clients by Vendor
BPO Is Delivered From (Location) Bangalore, India Bangalore, India Australia, India Noida and Pune, India Mumbai and Kolkata, India Rocky Hill, CT Volume of Mortgages Handled per Year (Loans/Files) 1,189,000 360,000 Duration of Contract (Months) 60 60

Client Type/Name No. 1 Client Accenture e4e Top 10 U.S. lender Fortune 5 global financial services company A top five AustraliaNew Zealand bank U.S. mortgage bank A top 5 U.K. bank A top 10 credit union A top 10 U.S. mortgage lender A leading investment bank in U.S.

BPO Is Delivered to (Location) U.S. location U.S. nationwide Australia North America Gloucester, U.K. Client site (North America) U.S. U.K.

EDS EXL Firstsource Fiserv Lending Solutions Genpact Headstrong Services

800,000 2,000,000 N/A >15,500

120 Perpetual >36 N/A

Irvine, CA and Gurgaon, India India

175,000 ($2 billion)

60 12

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 9 of 22

Client Type/Name IBM iGATE Global Solutions Infosys BPO ISGN Lydian Data Services Top national lender A top 5 nonprime lender in North America A top five U.S. retail and mortgage bank A top five mortgage servicer A leading U.S. financial institution

BPO Is Delivered From (Location) Gurgaon (NCR), India Bangalore, Noida India India Atlanta, GA; Boca Raton, FL; Haddon Township, NJ U.S. India N/A India

BPO Is Delivered to (Location) North America North America U.S. U.S. North U.S.

Volume of Mortgages Handled per Year (Loans/Files) N/A 400,000

Duration of Contract (Months) Ongoing 60

2,700,000 N/A N/A

24 36 36

Ness Technologies Optimus (Polaris) Oracle FS (i-flex) Ordina Quatrro BPO Solutions

Large superregional retail bank Confidential Top five mortgage servicer company in U.S. Insurance company Leading mortgage bankers

North America N/A U.S.

($25 billion) N/A N/A

36 N/A 60

Zoetermeer, Netherlands Gurgaon (India) and Burlingame, CA (U.S.) N/A N/A Client site (remotely) Chennai, India Tempe, AZ and St. Cloud, MN U.S./India Spain

Alkmaar, Netherlands Throughout U.S.

60,000 15,000

84 60

Satyam Synechron TietoEnator UST Global Wolters Kluwer Financial Services Zenta No. 2 Client Accenture

N/A A mortgage brokerage firm Lehman Brothers, U.K. A major lender services provider Servicer

N/A N/A London and S.E. of U.K. North America U.S.

N/A N/A N/A 200,000 24,000

N/A N/A 36-60 36 12

Top 10 U.S. FSI Large European financial services institution

U.S. Spain

>50,000 20,000

36 60

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 10 of 22

Client Type/Name e4e Leading residential mortgage wholesale lender in U.S. A top 10 AustraliaNew Zealand bank A U.S. mortgage company A leading U.K. Building Society A top 10 originator A top U.K. mortgage lender A top due diligence firm A top national lender A top five investment bank subsidiary A leading subprime residential mortgage servicer A top three title underwriter A leading U.S. financial institution A global investment management company with an extensive real estate portfolio Confidential A top 5 wholesale and retail originator in U.S. A pension fund Leading foreclosure management law firm N/A

BPO Is Delivered From (Location) Bangalore, India Australia Noida, India Mumbai, India Rocky Hill, CT Jaipur, India India Bangalore, India Bangalore

BPO Is Delivered to (Location) U.S. nationwide Australia North America U.K. Client Site (N. America) U.K. U.S. Australia North America U.S.

Volume of Mortgages Handled per Year (Loans/Files) 7,000

Duration of Contract (Months) 36

EDS EXL Firstsource Fiserv Lending Solutions Genpact Headstrong Services IBM iGATE Global Solutions Infosys BPO

75,000 1,000,000 N/A >20,000 420,622 ($5 billion) N/A 500,000

144 Perpetual Past client N/A 36 12 Ongoing 36

India

355,000

60

ISGN Lydian Data Services Ness Technologies

India N/A India

U.S. N/A Europe

N/A N/A (20 billion)

36 36 36

Optimus (Polaris) Oracle Financial Services (i-flex) Ordina Quatrro BPO Solutions Satyam

N/A India

N/A U.S.

N/A N/A

N/A 36

Eindhoven, Netherlands Gurgaon (India)

Eindhoven, Netherlands East Coast (U.S.) N/A

8,000 12,000

48 60

N/A

N/A

N/A

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Client Type/Name Synechron TietoEnator UST Global Wolters Kluwer Financial Services Zenta Mortgage subsidiary of investment bank Merrill Lynch A major settlement services provider A lender

BPO Is Delivered From (Location) N/A Client site (remotely) Chennai, India St. Cloud, MN

BPO Is Delivered to (Location) N/A London and Scotland North America U.S.

Volume of Mortgages Handled per Year (Loans/Files) N/A N/A 120,000 180,000

Duration of Contract (Months) N/A 36-60 36 36

A top 10 U.S. mortgage lender/servicer A large European financial services institution A midsize residential mortgage lender in U.S. A midtier savings bank in Spain N/A A leading U.S. mortgage lender A top 10 servicer

India

U.S.

>75,000

36

No. 3 Client Accenture Portugal Portugal 24,000 42

e4e

Bangalore, India Spain N/A Bangalore, India Rocky Hill, CT

U.S. nationwide Spain N/A U.S. Client site (North America) Australia N/A North America North America U.S. U.S.

18,000

48

EDS EXL Firstsource Fiserv Lending

N/A N/A N/A >100,000

N/A N/A Past client N/A

Genpact Headstrong Services IBM iGATE Global Solutions Infosys BPO ISGN

A top Australian mortgage lender N/A A midtier credit union A top 20 bank worldwide A leading mortgage provider A top three MI company

Jaipur, India N/A Charlotte, NC Bangalore, Noida, India India India

29,661 N/A N/A 500,000 277,000 N/A

36 N/A Ongoing 60 96 36

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 12 of 22

Client Type/Name Lydian Data Services A leading U.S. mortgage bank

BPO Is Delivered From (Location) Atlanta, GA; Boca Raton, FL; Haddon Township, NJ U.S. India

BPO Is Delivered to (Location) N/A

Volume of Mortgages Handled per Year (Loans/Files) N/A

Duration of Contract (Months) 36

Ness Technologies

A leading U.S. provider of banking products and home mortgages Confidential A top five investment management and mortgage servicer in U.S. N/A Leading mortgage originators N/A A mortgage LOS product company Cooperative financial services A top 10 mortgage lender A lender

North America

($30 billion)

24

Optimus (Polaris) Oracle Financial Services (i-flex)

N/A India

N/A U.S.

N/A N/A

N/A 36

Ordina Quatrro BPO Solutions Satyam Synechron TietoEnator UST Global Wolters Kluwer Financial Services Zenta

N/A Gurgaon, India and Burlingame, CA N/A N/A Client site (remotely) Austin, TX Tempe, AZ and St. Cloud, MN India, U.S.

N/A Los Angeles, CA N/A N/A Northwest of U.K. North America U.S.

N/A 6,000

N/A 60

N/A N/A N/A 120,000 21,600

N/A N/A 60 36 36

A top 20 U.S. mortgage lender/servicer (a division of a large commercial bank)

U.S.

>75,000

36

LOS = loan origin system Source: Gartner (July 2008)

2.5 Software Used by Vendors

Table 3 lists the principal software applications and tools used by the vendors for MPO. This covers the vendor's own, proprietary software systems, those it runs on behalf of a client (which may be built and owned by the client), and commercial, third-party systems (acquired by either the vendor or the client). There are some clear differences in the approaches that Table 3 shows. For example:
Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 13 of 22

Vendors, such as IBM and Wolters Kluwer, tend to use their own, proprietary software. Vendors, such as Infosys BPO and Zenta, tend to connect via Citrix to the industrystandard applications that are owned by the client. Vendors, such as EDS (including its subsidiary MphasiS) and e4e, may use a combination of all three types of application (proprietary vendor systems, client-owned systems and commercial off-the-shelf systems).

The last case is the most common and is typically dictated by the user's situation as well as its drivers. Regardless of the software provenance and who owns the intellectual property, there is a shift toward direct delivery of services through secure Internet sessions and browsers, with no additional client software required. Table 3. Software Used by Vendors
Software Accenture Imaging and workflow solution, which can include both Accenture's own and third-party software. Accenture also can use the Accenture Enterprise Data and Document Management solution based in its own Global Delivery Center in San Antonio, TX. A combination of in-house and third-party software. CRMs RightNow LOS Encompass, Point, PcLender Dialer EPRO Ecommerce Platform Elasticpath BPM Tools Intalio, Tanzax Recording Tools Verint Client Dashboard. A combination of client-owned, third-party and EDS-developed. Selection depends on client situation and key business drivers. EXL works on client systems through remote Citrix connectivity. Key software systems are: Firstsource Fiserv Lending Solutions Genpact Headstrong Services RightFax Symposium Speedpay Early Resolution Fidelity WebXtender Interlinq Empower Fastrieve CODAR Main Frame AWD Automated Workflow Distributor Imaging software UFSS Graphical user interface, which is used primarily in servicing Mortgage Sales Credit scoring

e4e

EDS EXL

Firstsource uses third-party and client software systems, including:

Fiserv uses many third-party systems. For origination, it uses Fiserv's own UniFi system. Clients can opt to use their own system or leverage Genpact's proprietary origination software. Proprietary collateral management software as well as client software.

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 14 of 22

Software IBM IBM uses its own software, leveraging the Impact suite in combination with IBM components, including FileNet, WebSphere, DB2, Cognos and other industry-leading software. VLS (own software from iGATE), Fidelity MSP, Fuego (BPM), Empower, Loan Production System, ValuNet. Infosys BPO typically connects to the client's applications via Citrix to perform BPO operations. Some of the platforms Infosys BPO uses include Fidelity Empower!, Fidelity MSP (including Director), Rekon2000, FileNet and New Invoice. In the default management area, Infosys BPO uses F-Laws and New Invoice apart from the FNMA and FHIMC Web sites. Infosys BPO uses inhouse-developed applications in areas like workflow management and reporting. Own and third party. Proprietary SOA: Web-based, multilender platform for integration, point of sale and loan origination. Uses combination of third-party software and proprietary for imaging, classification, workflow and loan virtualization. Also leverages connectivity. Combination of own software and third-party software to support mortgage BPO operations. ACS, FileNet, Calyx, El Dorado, CSC, i-flex, Fidelity MSP, Director, Empower!, Rekon2000, Capture Professional are the third-party software used. Also leverages Ness's own tools, such as workflow management, imaging and exception management. Depending on client's requirements, Optimus can either use its own software or work with the client's software. Depending on client (iGPM business process management, document management system). Ordina's own software or the internal supplier at Ordina's client. Quatrro's own software systems used to support mortgage BPO operations are an advanced loan operating system, and an imaging and workflow management application. The third-party software systems used for mortgage operations are a foreclosure management application and a bankruptcy management system. Satyam BPO has a workflow and imaging platform built for back-office processes. This platform is based on industry-leading best-in-class packages. This platform will be leveraged for mortgage origination and servicing prospects. TietoEnator UST Global Wolters Kluwer Financial Services For connectivity: Citrix Client applications used via Citrix-based remote connectivity/secure VPN/terminal services/Web-based connectivity. For loan origination: Integra. For digital document repository: Onbase. For automated underwriting: Desktop Underwriter, Loan Prospector.

iGATE Global Solutions Infosys BPO

ISGN Lydian Data Services

Ness Technologies

Optimus (Polaris) Oracle Financial Services (i-flex) Ordina Quatrro BPO Solutions

Satyam

Synechron

Both in-house developed and owned, third-party software. Some are developed in-house, and the rest are customers' systems. Wolters Kluwer provides document generation, compliance, delivery and fulfillment BPO options using several of its own platforms, including Desert Document Services, secure document exchange, a data-processing operation in Tempe, AZ and a large print fulfillment operation in St. Cloud, MN.

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Software Zenta Primary service delivery is typically through client applications. Zenta has enterprise process and quality management tools that are Zentaowned/operated. Zenta delivers ITO work where it supports its clients' service needs, but not necessarily as a core sales/marketing practice.

Source: Gartner (July 2008)

Using the client's software minimizes disruption (for the client) during the transition to BPO and maintains (but does not enhance) any competitive differentiation that may be embedded there. In the short run, providers may be able to maximize the value of current systems. But it often fails to achieve any economy of scale or standardization and, in the longer run, that can inhibit innovation and differentiation. The variation here may be that the client's software is not proprietary but an industry-standard package that it has purchased and now wants the BPO provider to run on its behalf. In that case, users should find out if the MPO provider has other clients using the same software, if they are being run centrally or remotely, and the degree of package customization. With popular, industry-standard packages, it may be possible to achieve economies of scale and to exploit centers of excellence at a vendor. But, because they are widely used packages, there is little chance to achieve differentiation through them or to re-engineer the process in any way. Using the vendor's software may be more disruptive during transition (because the user is not familiar with them and must migrate to them), but the vendor is best experienced in these systems, because it built them and does not have to complete a learning curve to understand them. Clients may lose some differentiation if the system is shared across many clients, but there may be economies of scale and greater flexibility in re-engineering the overlying process. Potential clients should pay attention to how a new MPO deal will embed innovation and differentiation something that is often forgotten or neglected at the planning and negotiation stages.

2.6 Key Metrics for MPO

What stands out in Table 4 is the strong contrast between vendors: Vendors, such as e4e, Quatrro BPO Solutions and Wolters Kluwer, are more focused on origination than on servicing. Vendors, such as Accenture, iGATE and Infosys BPO, handle many more mortgages for servicing than for origination (by a factor of 10 or even 100). Vendors, such as Ness Technologies and TietoEnator, handle roughly equal amounts of mortgages for origination and servicing.

Table 4. Key Metrics for Mortgage BPO

Number of Mortgages Originated in Past 12 Months Accenture e4e EDS 113,000 200,000 225,000 Number of Mortgages Serviced in Past 12 Months 1,145,000 0 1,000,000

Average Cost Saving for Your Clients >35% 35% N/A

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Number of Mortgages Originated in Past 12 Months EXL Firstsource Fiserv Lending Solutions Genpact Headstrong Services IBM iGATE Global Solutions Infosys BPO ISGN Lydian Data Services Ness Techs Optimus (Polaris) Oracle Financial Services (i-flex) Ordina Quatrro BPO Solutions Satyam Synechron TietoEnator UST Global Wolters Kluwer Financial Services Zenta
Source: Gartner (July 2008)

Number of Mortgages Serviced in Past 12 Months 2,300,000 4,500,000 N/A 250,000 7,500 N/A 750,000 10,622,116 N/A 0 200,000 N/A 1,020,000 70,000 8,000 files N/A N/A 50,000 100,000 0 200,000+

Average Cost Saving for Your Clients 45% N/A N/A 40% 25% N/A 30% 45% 40% 45% 35% to 45% N/A 40% 30% 60% N/A 60% 10% 50% 32% N/A

700,000 300,000 N/A 413,500 N/A N/A 3,000 136,370 N/A N/A 250,000 N/A 36,000 6,000 1,500 loans N/A 2934 50,000 320,000 230,000 N/A

There are also big variations in the absolute numbers of mortgages processed from a few thousand to tens of millions in one case. Biggest is not necessarily best, of course. Large clients may value small vendors' attention to detail, more-personal service and perhaps their greater flexibility. In comparison, bigger vendors can offer more in the way of software, economies of scale, multiple sites for processing and delivery, and so on. The two are not mutually exclusive big vendors also have the resources to (potentially) invest in the processes and technologies that improve quality, flexibility and handling of detail. The rise of application service provider (ASP) and SaaS delivery models will also erode the differences between large and small MPO providers. These factors, in turn, will influence the magnitude of the cost savings that using MPO can offer. It is impossible to say exactly what the savings will be. That depends on the current status of the customer, its size, its outsourcing model (for example the software it uses, whether its own, a vendor's or a third party's), the processes covered and where those services are delivered from (whether offshore or onshore). But a typical, gross figure for offshore, high-volume, transaction-based BPO services is around 30% (see "User Survey Analysis: Mortgage Process Outsourcing Clients Report High Levels of
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Savings" and "The Offshore Outsourcing Journey Goes Beyond Labor Arbitrage"). This is before management overheads and other costs are factored in that tend to diminish the net cost savings. The average here for MPO is around 38%, which is better than the average for most BPO services. But the bottom-line result is likely to be less, because all BPO deals take a lot of management and do involve some risk that must be offset. Clients should conduct careful cost-benefit analyses before engaging to do MPO and also consider factors (such as whether they want to go offshore) and how else they will benefit from BPO beyond the immediate savings (such as migrating to a better platform, variable pricing, staff augmentation and so on).

2.7 Vendor Facility Locations

Table 5 shows where each vendor has its main contact centers and its main data centers. This is partly dictated by the location of its clients (some insist on keeping contact centers local) and partly by of the vendor's business model and the extent of its globalization. So, for example, Fiserv Lending Solutions has both its contact and its data centers in Rocky Hill, Connecticut, whereas Infosys BPO and Ness Technologies have all their main centers in India. Then there are companies, such as Quatrro, using a dual-shore model where, for example, the front-end customer interactions are handled in the U.S., while the back office is located in India. Furthermore, the data center can be kept in the U.S. but managed and run remotely by IT resources in India. Many of the queries that Gartner receives have wondered if wage inflation in India means that it is as competitive as it used to be as an offshoring location? The answer is that all BPO vendors are acutely aware of this issue and are themselves looking at achieving greater economies of scale in their existing operations and/or expanding into new countries themselves (such as China, Indonesia, the Philippines, Sri Lanka and so on). The recommended reading section includes Gartner research on the viability of alternative offshoring locations, but often, these are complementary locations for a major outsourcing provider, so that it delivers from multiple locations, not just one. Potential users of MPO should also consider the systemic risk in moving operations to new geographies (see "Managing Risk in Offshore Outsourcing for Investment Banks"). Table 5. Contact Centers and Data Centers
Data Centers Accenture e4e EDS EXL Firstsource Fiserv Lending Solutions Genpact Headstrong Services IBM Spain, U.S., Portugal New Jersey, U.S. Australia, Spain, India, U.K. Sunnyvale, U.S. N/A Rocky Hill, CT Cincinnati, OH; El Paso, TX; Gurgaon, India India, Manila (the Philippines) Sterling, VA (disaster recovery: Tempe AZ) Contact Centers Spain, India, Portugal Bangalore, India Australia, Spain, India Noida, Gurgaon and Pune, India; Manila, the Philippines Mumbai and Kolkata, India Rocky Hill, CT Irvine, CA; Juarez, Mexico; Jaipur, India; Gurgaon, India India, Manila (the Philippines) Charlotte, NC and Gurgaon (NCR), India and the Philippines

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Data Centers iGATE Global Solutions Infosys BPO ISGN Lydian Data Services Ness Technologies Optimus (Polaris) Oracle Financial Services (i-flex) Ordina Quatrro BPO Solutions Satyam Synechron TietoEnator UST Global Wolters Kluwer Financial Services Zenta Bangalore and Noida, India Bangalore, Pune, Jaipur, India Atlanta, U.S.; Bangalore, India Atlanta, GA and Miami, FL India Chennai, India U.S., India Zoetermeer and Zeist, Netherlands Gurgaon, India and Burlingame, CA Hyderabad and Bangalore, India Pune, India Dunstable, Sheffield and Leeds in U.K. Also client sites in U.K. Chennai, Trivandrum (both in India) and Austin, TX Texas, Arizona and Maryland Mumbai, India; Chennai, India; Charlotte, NC; Florence, NC; and New York, NY

Contact Centers Bangalore and Noida, India Bangalore, Jaipur, India Philadelphia, U.S.; Bangalore, India Atlanta, GA; Boca Raton, FL; Haddon Township, NJ India Chennai, India U.S., India, Latin America Zoetermeer and Eindhoven, Netherlands Gurgaon, India and Burlingame, CA Hyderabad and Bangalore, India Pune, India N/A Chennai St. Cloud, MN and Tempe, AZ Mumbai, India and Philadelphia, PA

Source: Gartner (July 2008)

2.8 Staff Numbers for MPO

It should be no surprise by now that Table 6 also indicates significant differences in the number of staff devoted to MPO between the rival vendors. What may be surprising is that it isn't only the big names (such as IBM and EDS, with its BPO subsidiary, MphasiS) that have more than 1,000 staff dedicated to this service, as do less familiar names in the world of outsourcing, such as Zenta and Optimus (the BPO division of Polaris). At the opposite end of the scale are vendors that, although they may be big overall, have a much smaller number of staff dedicated to this service (for example, Ordina, Headstrong, Synechron and Wolters Kluwer Financial Services). However, be wary of the conclusion that these are "lesser" providers. The specific processes they support may be fewer in number (for instance, Wolters Kluwer only supports three processes in origination and none in servicing), but they may be more heavily automated and possibly more easily scaled up. Table 6. Staff Numbers for Mortgage BPO
Staff Numbers for Mortgage BPO Accenture e4e EDS 218 Origination 475 Origination 400; Servicing 900

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Staff Numbers for Mortgage BPO EXL Firstsource Fiserv Lending Solutions Genpact Headstrong Services IBM iGATE Global Solutions Infosys BPO ISGN Lydian Data Services Ness Techs Optimus (Polaris) Oracle Financial Services (i-flex) Ordina Quatrro BPO Solutions Satyam Synechron TietoEnator UST Global Wolters Kluwer Financial Services Zenta
Source: Gartner (July 2008)

Origination 147; Servicing 269 >700 Origination 200; Servicing 60 Origination 257; Servicing 150 Origination 55; Servicing 15 >1,000 750 700 Origination 150; Servicing 350 Origination 178; Servicing 50 500 Origination 30; Servicing 2,000 Origination 500; Servicing 700 22 >150 N/A Origination 15 Origination 200; Servicing 200 Origination 120; Servicing 65 Origination 22; Servicing 25 >1,200

3.0 Summary
MPO is a relatively mature form of industry-specific BPO, compared to many of the newer and more-novel offerings now available, and it is especially popular in North America. That lack of symmetry is reflected in the rest of this survey. What stands out in the responses is the great variety, and consequent lack of uniformity, in the offerings from this set of vendors. There are big differences in the portfolio of MPO services offered, the size of deals, the number of staff, the locations the services are delivered from, the track record of the providers, and their heritage in IT and outsourcing. This diversity is no bad thing. Cost savings are always a primary driver for BPO, but there are many other costs and benefits that should be evaluated, not least the cultural fit between provider and user. The greater the choice and the variety, the better the chance of getting close to the ideal fit. This also resonates with the trend among large enterprises to use the more flexible option of "outtasking" discrete parts or chunks of processes, rather than the more monolithic end-to-end outsourcing deals. Simultaneously, small and midsize enterprises that eschewed outsourcing in the past, because they lacked the scale or technology for such initiatives, can now follow this route, because of the platform-based, end-to-end solutions offered by many MPO providers.

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Users will also want to evaluate the fit in terms of their appetite for offshoring and the software requirements (use their own systems, or the vendors proprietary systems, or an industrystandard, commercial third party's systems). Close attention should also be paid to the level of automation that is included for a specific service in MPO for origination or servicing. A frustrating issue for many users of BPO in general is that the providers often don't provide any business level advice or consulting as part of the transition to outsourcing. The providers just want to come in and outsource without supporting the business, or improving business efficiency, or doing future planning, and so on. Potential users of MPO should do the due diligence to avoid these pitfalls on the supply side. On the demand side of the due diligence issue, users of MPO should put in place a governance model that will help in vendor and contract management. Most buyers fail to set aside sufficient resources for governance or to do this early enough. It is particularly important to try and ensure that the transition to the third-party supplier is as smooth and seamless as possible, and that the vision and road map for the transformation to the future state is planned in advance of the transition. "Offshore Delivery of BPO for Investment Services Firms" provides advice about how BPM methods and tools can facilitate transitions and re-engineering of processes. Finally, users should also anticipate that this market is likely to see some consolidation and some expansion of services, and the mechanisms for delivering them as MPO utilities and SaaS matures. MPO providers may also be looking to take over captive offshore operations currently run by banks. MPO users need to monitor the deals they have and keep exit strategies and refresh plans up-to-date.

RECOMMENDED READING
"User Survey Analysis: Mortgage Process Outsourcing Clients Report High Levels of Savings" "Seven Initiatives That Will Improve Mortgage Servicing" "The Mortgage Servicing Divide: Functionality vs. Architectural Flexibility" "A Survey of Mortgage Servicing Solutions" "Offshore Delivery of BPO for Investment Services Firms" "The Offshore Outsourcing Journey Goes Beyond Labor Arbitrage" "Managing Risk in Offshore Outsourcing for Investment Banks" "Gartner's 30 Leading Locations for Offshore Services"

Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Publication Date: 18 July 2008/ID Number: G00159114 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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