Process management | Back-office service firms’ new profile

Process management | Back-office service firms’ new profile
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First Published: Fri, Jun 12 2009. 12 46 AM IST
Updated: Fri, Jun 12 2009. 12 46 AM IST
Bangalore: For years, they helped clients offshore their processes to locations such as India and then managed these processes at a significantly lower cost.
Now, Indian back-office service firms such as Genpact Ltd and ExlService Holdings Inc. are helping clients re-engineer these processes—without moving them offshore. Irrespective of whether the process is as simple as preparing an invoice, or as complex as opening a bank branch, the back-office service firms promise to do this cheaper, better, and faster.
“It is not consulting. They (consultants) come with a recommendation, the work we do is implement the revised process and achieve set metrics,” said Harpreet Duggal, senior vice-president at Genpact. The company earns around $30 million (Rs142 crore) a year by providing this service.
Process management is the core of the back-office service industry. When Indian firms entered the business they worked hard to prove to their customers that processes could be transferred to India, and actually made more efficient in the process. Genpact, for instance, used a quality management technique called Six Sigma to do this in its early years and continues to do so. Genpact has at least 450 Six Sigma experts, also called black belts, on its rolls.
Apart from Genpact and EXL, the back-office service arm of Wipro Ltd has parlayed its process management expertise into a revenue stream and offers to help customers improve their processes.
Genpact, for instance, has helped a bank shorten the time to open a branch and streamlined inventory management at an auto firm, according to Duggal, who declined to name the customers.
An executive at EXL said such process improvement could help customers save up to 30-40% of what they were spending on a process—without outsourcing.
“Today, we are getting a lot of enquiries from customers saying, ‘I don’t want to outsource; come and take a look at our processes; help me re-engineer it and improve them’,” said Rohit Kapoor, president and chief executive of EXL
Kapoor added that EXL gets around one-fifth of its revenue from what it calls transformation line business, a definition that includes such services. EXL has more customers for its transformation services than it does for its outsourcing one because “these are smaller projects and there is no displacement of employees, making it easier for the customers to decide,” he said. The company ended 2008 with revenue of $181.7 million and a net profit of $14.4 million.
Analysts say firms such as Dell Inc. and American Express have always used the expertise of their Indian back-office service arms to improve process efficiency at the parent organization, but that the current downturn may have forced customers to look for such services from third-party outsourcers.
“In these tough times, they (independent vendors) are getting access. It is also because relationships (between customers and outsourcing specialists) are growing,” said Nikhil Rajpal, principal at consultancy Everest Group. Rajpal doesn’t have an estimate on the size of this business, but said such services could help Indian service providers land more outsourcing contracts.
Wipro’s back-office arm is convinced the process re-engineering work it does for customers will result in more outsourcing work.
“If we can show cost savings by improving their process and then tell them that we adopt the same process at our centres, plus give them the labour arbitrage, it will be compelling reason for them to come back to us,” said Ashutosh Vaidya, head of the back-office service business at Wipro.
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First Published: Fri, Jun 12 2009. 12 46 AM IST