Discuss, debate and exchange ideas on latest trends and opportunities in the Business Process Outsourcing (BPO) landscape. Deliberate on adding “business value” to clients, vendors, employees and various other stakeholders to enhance customer satisfaction and sustain long term partnerships.

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May 16, 2014

If outcomes matter the most, who owns the process won't matter as much

Infosys Process Progression Model focuses on creating value, irrespective of scope.

Client-owned. Infosys-managed. Or managed by any other service provider. The Infosys Process Progression Model (PPM) was designed with a "value for all processes" philosophy -- without any bias toward who is delivering a process.

Why did we choose to go this way? Because we believe that the sum of the parts make up the whole. Any change, however localized, however small, impacts global operations on a larger scale. And having handled processes end-to-end in various functions, we at Infosys BPO often have a view of processes that are upstream or downstream to the ones we manage. We can study these process environments - client-owned or service provider-operated, and then recommend changes and provide a framework to effect these that will move clients to global best-in-class. And the evolution happens in three stages: P1 - Noiseless processes, P2 - Process excellence, and P3 - Business outcomes.

While the focus of P1 is typically processes that Infosys BPO manages, P2 and P3 are in higher value realms. Let's say a client wants to move to P2 and P3, but Infosys BPO doesn't manage their end-to-end processes in a function. Does that make P2 and P3 unattainable? The answer is absolutely not. If client organizations are committed to the transformation journey and work closely with us, we can assess their state of operations, define a smooth a smooth roadmap, and then deliver the transformation.

How collaboration makes P2 and P3 attainable
How does one progress to P2 and then P3 levels? Here, a client's active involvement in the transformation journey is essential. The PPM end state (P3) of 'business outcomes' is possible when the transformation roadmap is identified for the client and it covers the upstream and the downstream processes managed by Infosys. And charting this roadmap requires complete collaboration and support from the client.

Can all engagements reach P3? No, it is possible only if the client sees value in maturing to a P3 level. Some clients want us to only meritoriously manage the 'activities' outsourced to us and not the out-of-scope activities. However, this doesn't limit our ability to work with a client in a consultative manner for out-of-scope activities. And many clients today are looking to leverage our consulting services even as they visualize partnering with us in transforming or achieving the end-to-end business outcomes of their organization. In such scenarios, we take on the role of a consultative transformation partner for all processes while continuing to deliver the ones in scope. 

Two cases in point
Consider a typical F&A engagement where the scope of work is Accounts Payable (AP). What will it take to get to P3? Here, true transformation is not just about processing an invoice or making a payment 'accurately' and 'on-time'. The true transformation is possible when we work with a client in improving vendor compliance, having standard vendor management process (including the scope of activities managed by client's procurement and sourcing teams), automating the process by leveraging an e-invoicing solution (by Infosys or any third party) and digitization of invoices, automatic invoice data capture, assisted two/three-way matching, workflow for approvals/clarification and reporting as per client requirements. All the above mentioned scope of sub activities may or may not be within the scope of Infosys. However, it impacts the end-to-end AP process of the client. The PPM model details how a client can attain P3 stage in effectively managing the AP process and impacting the relevant business metrics like reducing the cost of processing of an invoice, working capital improvement, etc.

You may say, "P3 seems far away. What kind of success is possible at the P2 stage?"One case study is that of a client for whom we are handling the customer service and industry solutions processes (including search engine operation and display advertising). The engagement today is at P2 stage and we have been able impact customer's business metrics and delivered savings of more than 13 million USD in less than 3 years. This impact was possible with the close collaboration and support of the client business owner and their operations team.

What clients and analysts are saying
As we are onboarding more and more of our clients on PPM, we are observing them to be open and enthusiastic about leveraging PPM. They are enthusiastic in defining transformation roadmaps for attaining P3 stage at the earliest. They are keen on developing the path of transformation and PPM is making this journey transparent and open for them.We also have clients were the client processes are completely automated and such engagements are already at P3 stage.For such clients,PPM is enabling them to definetheir vision of future transformation and evolving new milestones of process maturity, leveraging best practices of the industry and benchmarking the processes against industry standards.

Our clients are excited about the fact that PPM is quantifiable based on 30+ different parameters, comes with a complete dashboard during various stages of the engagement, and clearly traces the impact of processes to quality, people and business outcomes.

Recently John Willmott, CEO of NelsonHall blogged about PPM. He mentioned PPM is acting as a 'high level dashboard and common reference model for communicating with clients'. He also said, 'Infosys is aiming to use PPM to judge processes on an "end" basis across both client-operated and Infosys-operated processes and establish a common reference model for assessing process maturity and identifying future process transformation'.

The best part about PPM is: it is process owner-agnostic. Who's handling the process is not as important as much as how the process will be transformed? And PPM provides a clear, transparent framework to make it happen. Some would say that's as good as process transformation gets. What about you?

May 5, 2014

Buy Side Offshoring - has it finally arrived?

When we look at the over-all cost benefit analysis, we see that 3rd party service providers do bring in unique advantages to a partnership which is not available with pure-play asset servicers.


Background

With Buy-side firms (asset managers, wealth managers and hedge fund managers) facing competitive pressures, asset servicers (which primarily includes the custodians, record keepers, fund accountants, transfer agents) witnessed rapid growth in their business during the 70's and 80's of last millennium. Over the last decade and half, business pressures forced these asset servicers in turn to explore near-shoring (Ireland, Canada etc.) and offshoring (India, Philippines etc.).

However, the Asset management industry esp. the buy-side firms are yet to consider embracing offshoring directly to 3rd party IT / BPO service providers  as a means to stay competitive in the market. While some of the requirements to provide these services are indeed technical, e.g. legal eligibility (licenses and charters as per the local government regulations) and financial capabilities (liquidity requirements), a lot of this also has to do with the risk averseness and conservative mindset of these buy-side firms. 
 
Trends & Challenges across Asset Management industry
Asset management industry is witnessing some sharp trends over the last few years. First of all, financial regulations across US and EU are now past the deliberation stage and have entered the implementation stage. As per our discussion with clients in capital markets industry, we find that more than 50% of our clients view meeting new regulatory requirements as one of their top challenges.

Secondly, the customers of buy-side firms are demanding a wider range of products, as they want to participate in economic growth in non-domestic markets. They are asking for better trade execution management systems, better geographic coverage, superior performance reporting services and insightful analytics services, all delivered through multiple channels including mobile devices.

Thirdly, Central Clearing and Straight-Through Processing is the new focus area. News around OTC to CCP, Tripartite Collateral Highways etc. has dominated business press in 2013 and will be in focus in 2014 as well. There will be greater focus on straight through processing (STP) from front to middle to back office, esp. among the US based buy-side firms.

Fourthly, uncertain business environment coupled with modest portfolio performance and rock-bottom portfolio management fees, has resulted in narrow margins for the asset managers.

Lastly, new delivery options are being experimented with. Asset management firms are exploring non-traditional newer delivery options. Firms that are yet to adopt and new to outsourcing journey prefer proven locations like India and Philippines, while other firms that are already present in India (through their captive model operations) prefer to venture out in newer geographies beyond India and Philippines like Poland, Sri Lanka, South Africa etc. Almost a 3rd of our capital markets clients feel that reducing cost is one of the top 3 challenges for year 2014 (improving the cost/income ratio).
 
Considering the challenges, what are the key imperatives for Buy Side firms? 
To tackle the challenges, buy-side firms need to look at newer service models beyond the regular operating models and commercial constructs; which provide bandwidth to buy-side firms to enhance their products offerings at low servicing cost. It's in this journey that the 3rd party IT / BPO service provides an important link in the delivery model and help asset managers achieve their objectives.
 
Key advantages brought in by a 3rd party service provider

  1. Proven Delivery Capabilities - Proven history of delivering service at committed quality and cost (zero defects in critical functions such as trade management, reconciliation, corporate actions etc.). This has helped Buy side firms to focus on portfolio performance and differentiation in terms of types of products, geographic coverage, service timings coverage, enhanced reporting etc.
  2. Willingness to Invest - Service providers are hungry for growth, are willing to invest and take on more risk, as they are financially sound (generally sitting on large pile of cash). They are keen to partner with clients, are open to make investments including Asset Monetization and joint development of delivery capabilities. Having gained fair insight into the industry, service providers are able to create Centers of Excellence which focus on creating sufficient supply of trained resources, develop deep domain competencies, create industry leading view points,  build tools etc. This adds real value to any engagement.
  3. Significant presence across IT & BPO - the large service providers are able to offer better deals to their customers in terms of Utility pricing models / Platform + BPO / SaaS etc. Generally, service providers are technology agnostic, they act as one stop shop and have the right capabilities to service multiple platforms like TLM, Intellimach, Golden Source, Asset Control, Eagle Star etc.
  4. Automation and Transformation - As an example, usage of Automation as a Wrap Layer to enhance efficiencies i.e. artificially improve the STP rates, improve controls and thereby reduce risks with minimal additional investments by the client organization
  5. Flexibility - Service providers are willing to demonstrate flexibility in engagement in terms of Pricing, Operating models, Governance models etc. They are also flexible in terms of Deal scope, size and duration. Vendors are willing to take up small pieces of work for durations ranging from 2 to 5 years, unlike 5+ years as is the case with asset servicers.

Conclusion
When we look at the over-all cost benefit analysis, we see that 3rd party service providers do bring in unique advantages to a partnership which is not available with pure-play asset servicers. 3rd party service providers have gained deeper understanding of domain and business processes within the industry, which was not available a decade ago. So much so, now many of these service providers are seen winning business consulting assignments from the Big 4 in the consulting space. Hence, Buy side organizations have an opportunity to take advantage of these new capabilities of the service providers and move their business to the next level.

"When you're finished changing, you're finished." - Benjamin Franklin (1706-1790) American statesman, scientist and philosopher.

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