Infosys BPO Analyst Day: A Rounding Success

Although a little late, I wanted to give Infosys kudos for hosting a very informative and engaging BPO Analyst Day in late October, which included presentations by two very satisfied North American based clients.

First, I’d like to highlight the progress Infosys has made:

• From 2006 to 2011, BPO revenue has grown approximately five-fold with the number of clients increasing almost four-fold and global headcount increasing nearly six-fold
• Although I can’t disclose HRO revenues, they are rapidly growing globally, led by North America and followed by Europe
• BPO delivery capability is global from centers across North America, Latin America, South America, Europe, and Asia Pacific.

What particularly impressed me at the event was the lengthy discussion titled “Our people are our biggest assets,” led by managing director and CEO Swami Swaminathan. The topic may sound cliché, but it was from the heart because Infosys truly wants employees to have a career for life that’s achieved by:

• Leadership focus
• Performance-based compensation
• Recognition and reward
• Career planning and development
• Comfort with the working environment
• Pride in being an Infosys employee.

There’s too much good business information to capture in a short blog, but to summarize, Infosys is helping clients build tomorrow’s enterprise by:

• Enabling clients to transform their business
• Moving operations up the value chain, including Centers of Excellence with benchmarking and best practices
• Deploying new engagement models including business process as a service, technology enabled process automation, and cloud-enabled services
• Leveraging technology to create value including dashboards and customer portals.

Client presentations were by a large apparel retailer and a large global telecom.  The retailer outsourced both F&A and HR.  HRO services included platform-based BPO with PeopleSoft 9.0 and modules for core HR including self-service; benefits including annual enrollment; time and attendance; payroll; and components of the HR helpdesk. Its reasons for choosing Infosys included:

• Access to technology and tools to transform
• Quality of resources to support the account and its ability to work with the client to achieve its goal
• Cultural fit and reputation.

The telecom client outsourced to transform, leverage best in class processes, people and technology, and augment its sourcing group with new talent. F&A outsourcing included source to pay.

Concluding the day and joined by clients at the larger colloquium were two successful panel discussions.  The first was titled “Sustaining complex change” and included the buy-side from Montreal, Charming Shoppes Inc., and Cisco.  I had the pleasure of facilitating the second discussion that was titled “What is the defining role of HR in shaping tomorrow’s business: Globalization, convergence, social media, and talent management.  This panel included the buy-side from Charming Shoppes and Transfield Services.

In all, it was a very impressive day to round out numerous analyst events I attended in 2011, and this one will be memorable!

Gary Bragar, HRO Research Director, NelsonHall

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HRO – When Will the Horizontal Go Vertical to Grow?

Most HRO Insight blogs provide commentary on HRO market news. Occasionally, I like to speculate and dream about how HRO can fully become the linchpin in leveraging HR into the strategic business partner the HR profession has long desired – and business has long needed.  This week, I blend a bit of both market news and pondering on the vertical specialization of HRO.

According to the January 2011 NelsonHall BPO Index, 2010 was an uneven year for BPO recovery.  Total contract value (TCV) for HRO declined from $2.3Bn to $1.5Bn largely due to the drop off in Europe.  North America HRO almost held its own with $1.3Bn in 2010 compared to $1.6Bn in 2009.

Which BPO area grew its piece of the smaller BPO pie?  The options include back office, middle office, and front office.  Back office BPO functions are horizontal and include HRO and F&A; middle office BPO functions cover vertical industry-specific services such as mortgage processing or check processing in the banking sector, etc.; and front office BPO includes customer contact and sales centers.  Middle office, or industry-specific BPO, is the winner with the largest area at $13Bn and 69% of 2010 TCV, leaping up from a 40% share in 2009.  Growth in a down market is surely the sign of compelling client interest and savvy vendors meeting their needs.

Horizontal BPO processes cross the enterprise and are part of almost every business.  The problem is mistaking universality for being generic.  HRO is too often marketed on the strengths of cost and process functionality.  Customization is used for adapting to the quirks of client’s prior HR systems and processes.  To fight the costly morass of over-customization, HRO service providers have strengthened the use of preprogrammed selectable parameters – building in cost effective flexibility, but also reinforcing the generic aspect of HRO.

Rajiv Raghunandan, Infosys BPO Strategic Business Practice Head for Sales and Fulfillment, was recently interviewed by SSON and commented on how Infosys is taking an end-to-end process view of the F&A order-to-cash process and expanding its revenue, client relationships, and market opportunities.  Infosys leveraged its internal knowledge and experience from its client base to find areas of critical mass to take what was a horizontal process and verticalize it for a growing list of industry segments.

Vertical specialization can and should be done for HR as well.  As I have previously mentioned, TriNet, a PEO and HRO service provider in the small and mid market, is already offering integrated solutions for software and banking.  TriNet combined its core technology with customized services for hiring, compensation, performance management, and risk mitigation.

Sustainable growth in HRO is dependent on breaking the bounds of cost-driven volume administrative transaction processing and moving up the value chain to strategic business impacting partnerships.  There is a largely untapped HRO gold mine out there.  Just think of what the large HRO service providers could do with a gathering and packing of the knowledge and services already resident in their client bases!

Linda Merritt, Research Director, HRO, NelsonHall

Building a Sustainable Base of HRO Clients

Last week’s Infosys BPO analyst day, which I blogged about the day after I attended, got me thinking about what it takes to build a sustainable base of long-term client relationships. This is important for HRO vendors and clients where contracts are multi-year, and services can be complex, difficult and expensive to transition. Fifty percent or more of an HRO vendor’s organic growth can be from long-term customers.

During analyst day, ADP brought in several clients for us to meet with, and Infosys BPO brought in five customers for group and one-on-one meetings. Sure, clients are carefully selected for such opportunities, but it’s still a nice show of vendor confidence. So let’s use this to cover two elements in building a strong foundation for profitable client relationships.

Provide a consistently high level of services across all customer segments.
Many early HRO clients felt the quality of their service experience relied too much on a particular account manager, service team or location, whether they were a big dog client or not, as well as their own ability to actively “manage” the service provider.

The Infosys customers represented different service lines, including HRO, sizes from small/mid to large market, with both U.S. and global coverage, and ranged from a brand new client still in transition to a client that pre-dated the formation of Infosys BPO in 2002. Think about that for a minute. It is possible to build and sustain a consistently high level of HRO services, service centers and personnel across all services, segments and regions, even given the higher rates of turnover common in many offshore locations. Not easy, but possible.

Be a strategic partner and grow your business without “selling.”
Another common HRO complaint is the lack of innovation once the services are up and running. Regularly bringing the client relevant and knowledgeable suggestions and best practices on how to improve processes and practices keeps the conversation on scale and scope open and ongoing. Even if clients choose not to act on the suggestions, they appreciate the thought. But note I underlined relevant and knowledgeable for emphasis. Every client wants to know you understand and care about its unique business needs, and that you have the domain experience and expertise to be a strategic partner. In a strategic partnership, the client feels it can do more with you than on its own.

HRO buyers, when assessing vendors, consider talking not only to clients most like your company, but also to clients of different services, sizes and geographies. Ask service providers about price, performance, customer satisfaction and what percent of organic growth comes from current clients.

HRO vendors, how consistent is your service experience? How well do you continually build and reinforce your brand as you grow and globalize? Think you’re a strategic partner? Is the evidence present in growth of mature accounts, sole source opportunities and inclusion in business planning? Do your clients bring new projects and service opportunities to you? They will if you are a consistent and trusted strategic partner.

Linda Merritt, Research Director, HRO, NelsonHall

Riding the Winds of Change – Is HRO Ready?

I just attended the Infosys BPO analyst day and part of its client conference, and both were informative and interesting. Not necessarily an easy feat, as meetings of this (or any) type have the ability to be neither. There were ideas and trends a plenty across the two days, and my synapses were firing at a furious pace. 

The first conference presenter was Dr. James Canton, a business futurist and strategic risk forecaster of note. He laid out a few of the big ideas and concepts of The Extreme Future through which run themes of velocity, complexity, innovation and disruption that will increase both risk and opportunity for those agile and bold enough to ride the rough winds of rapid change.

Yikes. HRO has yet to fully overcome an early reputation for complexity and disruption, and has not been seen as a hot bed of velocity or innovation. While as a community we are improving, if Dr. Canton is even partially on target, we had better pick up the pace!

Dr. Canton said he sees outsourcing as a growth engine for business. One of the themes that ran through the two days was that BPO is increasingly moving into arenas that can impact top line revenue growth. And emerging examples and development of more industry vertical solutions were discussed. That’s all great, and it represents a tremendous opportunity for the BPO industry. But let’s not forget that HRO, while too often seen as only a horizontal back-office cost play, is actually one of the largest potential bottom line AND top line generators out there. Well, at least it has the potential to be. What could be more impactful than enhancing the effectiveness of an entire workforce?

But first we must complete the journey to routinely implementing and delivering cost effective and productivity-improving administrative and traditional HRO services. Then the world can be an oyster in partnering with HR in areas that add value and innovation across the business. We need not be chained to the dock of shared service centers; we can also sail the strategic seas of leveraging human capital through workforce development and management.

Another presenter was from Cisco, a very successful company and one that is always looking to how it can improve not only its product lines, but also itself as the business partner of choice. Cisco is using its brand attributes in two ways: its vision for future trends in shaping its new products, and how to better shape the customer experience across all touch and service points. For example, Cisco said that if customers need to contact the company to handle an inquiry or issue, they should be able to do so in their desired manner, be it by phone, email, web, chat, live video or by mobile device.

We are challenged to manage for today and be ready for tomorrow in a cost- constrained environment of uncertainty. To maximize every investment I would advise providers to be sure each initiative aligns with current needs, their own vision of the extreme future and their differentiating brand strategy. This will help them be ready to set sail to expanded opportunities.

Linda Merritt, Research Director, HRO, NelsonHall

BPO Platforms – a Springboard or a Swan Dive?

Last week I attended Infosys BPO’s analyst day and BPO conference in Baltimore, Maryland, overlooking the beautiful Inner Harbor. Platform BPO was one of the big topics, and one of Infosys BPO’s big bets for new avenues of growth. 

Platform BPO is the service delivery model whereby end-to-end processes are offered as managed services on a standardized business platform based on an ERP solution that is hosted, managed and maintained by the BPO provider. Platform as a Service (PaaS) providers bundle operations, integrating management of an end-to-end process with their technology suite and staff. Designed to be configured instead of customized, platform BPO will accelerate mid-market BPO adoption with its lower cost of entry, scalable services, variable pricing and ease and speed of transitions.

Platform BPO service providers will continue to build out their global service delivery footprint with service centers and partnerships, taking advantage of locations with low cost labor and access to skilled talent. These true multi-tenant service platforms will renew the promise of economies of scale the earlier generations of customized client-specialized services did not deliver. It’s an enticing value proposition designed for today’s capital constrained and challenge and change fatigued buyers. If the adoption rate is good, it will be a more economical infrastructure for vendors which can provide a springboard for profitability.

The timing is right. Clients are asking about and for solutions they would have rejected pre-downturn. The advent of new technologies like Service Oriented Architecture (SOA) and the openness of ERP providers like SAP and Oracle to work with service providers are enablers supporting the degree of needed integration.

There will be challenges, especially for the provider community. In return for moving to a configurable platform, the buyer gets to pass some risk and increased expectations over to the service provider. The provider becomes responsible for managing and integrating specified processes, applications and technology, including the investment in development and upgrades, and the selection, management and fit of any third-party applications and delivery partners. Also, accepting accountability for the increased complexity of integrated IT and operations requires a greater level of skilled staff capabilities and coordination across the expanded value chain. 

Hmm…not hearing any HRO platform BPO cannonball splashes yet? It’s a big leap for HR to make and platform BPO is not expected to fit everyone. Yet it is a viable option for many in the mid-market and even some in the large market. PaaS for HR will be especially appealing to those with openness to new solutions, positive experiences with hosted services and point solution SaaS providers, and those pushed by economic realities.

Single service platforms are not new; think payroll or benefits administration as managed services platforms. What is new is the possibility of multi-client and multi-process HRO on a platform that delivers globally for buyers and providers.

There are already some buyer toes in the water. Infosys reports it has several clients up and running on its new Hire-to-Retire HRO business platform which includes talent acquisition, development, retention and management services. At the conference I spoke with an attendee from a borderline mid-market to large-sized company who was thinking about replacing several current separate HRO provider services and wanted to learn more about the new Infosys HRO offering.

Overall, PaaS sounds great and the water is warm, so jump on in! Not ready? Then watch the pool of platform-based services and providers expand, learn about the challenges and successes, and get ready to test the waters.

Linda Merritt, Research Director, HRO, NelsonHall