SSON Excellence Awards: Best New Outsourced Services Delivery

SSON News and Analysis
Posted: 07/09/2012

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Strategic Framework
Infosys BPO has been providing services to McClatchy since April 2008 and has been supporting back office functions that support McClatchy's Finance & Accounting processes. McClatchy owns 30 daily newspapers operating in 29 US markets. Prior to BPO, the processes were performed separately at each newspaper site.

The vision and strategic framework for BPO was defined to deliver benefits to McClatchy over 3 different stages :

  1. Reduce costs through BPO - primarily through labor arbitrage and consolidation in one location
  2. Gain efficiencies through standardization of processes across various newspaper locations
  3. Gain efficencies through process transformation

ERP
While McClatchy used PeopleSoft 8.8 for consolidated instance of Accounts Payable, e-Procurement, General Ledger, Asset Management and T&E, each of the newspapers used a local instance of advertising and circulation applications that drove the entire O2C process. Furthermore, the applications used to support advertising and circulation systems varied from location to location (both in terms of application providers as well as versions of the applications).

Economic Threshold
The initial economic threshold was defined as the Targeted Cost reduction and has been met for the first stage of BPO. Currently, we are into the stage of achieving efficiencies through process standardization.

To achieve this vision, McClatchy and Infosys created a transition plan that attempted to maximize benefits to McClatchy while balancing speed with risk. As work was transitioned from each individual newspaper location, a location-specific transition plan was developed and executed.

The first phase of transition transferred work to Infosys from six initial newspaper locations. These locations were chosen on the basis of size of: headcount to be transferred; applications used at the location and how they fit in overall McClatchy applications landscape; and geographical spread. These early transitions helped develop a more standardized target operating model for the smaller locations, which were transferred in a phased manner.

Governance
To manage the complexities of delivery to a widely dispersed McClatchy organization a tiered governance mechanism was instituted. This governance is executed at three levels:

  1. Location Specific - dedicated to each location to oversee the location-specific activities that have been outsourced
  2. Program Level - dedicated PMO team on both sides to ensure that the program timelines are met for transfer of processes to Infosys as well as to review the performance of the engagement as whole and address any issues requiring intervention.
  3. Strategic Level - Steering Committee on both sides meets at regular intervals to ensure the BPO objectives are met and identify areas where both organizations can work together.

A testimony to the success of this engagement and the governance model is the concept of Newspaper In A Box (NIAB) that Infosys BPO developed for McClatchy. In NIAB, Infosys has developed a hosted platform and services for the advertising processes with pre-configured standard processes and functionality. This helps McClatchy to move to a standard advertising O2C platform across locations and helps it leverage its BPO to drive higher productivity improvements and cost savings.

People Management, Culture, Change Management

People management strategy
Infosys follows global best-in-class practices for recruitment, training, development and retention of talent. Infosys recruits key talent in advance based on forecast resource requirements and all recruits are trained and certified at Infosys's Corporate University at Mysore, India before they are eligible to work on the McClatchy operations. 
Retention practices include global best-in-class rewards and recognition, internal job rotations, skill development and higher education opportunities.

Culture
Infosys follows a very open and transparent culture that is focussed on merit and rewards performance.  The guiding values of Infosys — CLIFE — ensure that every employee, from the most junior to the highest level, is focussed on performance and delivering value to the customer. 
For McClatchy operations, Infosys has a dedicated area that is branded "McClatchy" whose staff are familiarized with McClatchy, its newspapers and its culture as part of an onboarding program.

Rewards
Infosys has an extensive Rewards and Recognition program that awards employees for superior performance and for adding value to the customer.  This includes various categories of cash and non-cash awards ranging from on-the-spot recognition or monthly, quarterly and annual awards designed to recognise individual as well as team contribution.  The magnitude of the award depends on the value added to the client.

Change management
McClatchy and Infosys have instituted a well-defined change management process with regard to changes in scope, process, SLA, or approving authority on both sides. Changes can be requested by either party and are discussed at the appropriate governance forum for impact analysis and decision. This is particularly important in McClatchy's context as the newspaper industry is operating under a constantly evolving business environment, which has resulted in changes from workforce reduction to system and process changes.

One example of the collaborative culture between McClatchy and Infosys is reflected in the handling of an incident in October 2009, which led to a disruption in delivery. A petroleum storage depot situated about half a mile from the Infosys facility suffered a major leak and an explosion. The shock waves from the explosion resulted in some damage to the Infosys facility.  As a precautionary measure, the building had to be shut down until the fire in the nearby depot was contained and the Infosys building could be completely assessed for damage and declared safe for occupancy. Infosys immediately made McClatchy aware of the situation and both parties activated the Business Continuity Procedures. Although the contract does not provide for a dedicated backup site, Infosys restored the entire McClatchy operations at another Infosys site, 25 miles away, within 36 hours — with critical functions being restored within 24 hours. Although the disaster period overlapped with the month-end period Infosys worked closely with the client (including working over the weekend) to ensure there was no impact on month-end processing.

Innovation and Automation

Innovation
Infosys recognises innovation through awards and recognition programs as well as through programs targeted specifically at unearthing and recognizing innovation. Infosys has created an Innovation Co-creation Platform (ICCP) in order to constantly innovate across areas including: people capability; cutting edge technology and business capability; a culture that fosters innovation; and an integrated innovation process and technology infrastructure that can support the entire innovation lifecycle. Innovation practices include, but are not limited to, enabling end-to-end innovation processes that start with inspiring individuals and teams to innovate, and then facilitate the capture, generate and develop ideas and problems in collaboration with community members, enable key internal and external stakeholders to collaboratively select innovative projects (products, services, solutions, tools, etc.) for incubation, and finally derive value by implementing / commercializing.

Automation
Point automation and other productivity improvements have already helped Infosys cut 10% billable headcount for McClatchy at the end of one year of contracted service.  Additionally, as the team moves up the learning curve and becomes more productive, Infosys takes on more work without adding extra billable effort; in effect, this has resulted in 5-10% additional benefit to McClatchy year-on-year.

Infosys is also working with McClatchy to implement Newspaper In A Box (NIAB), which is a Platform Solution to consolidate the enterprise applications landscape and migrate to an in-house single instance implementation. This platform solution is provided as a "managed service" on a standardized "business platform," which is based on a best-of-breed ERP solution hosted, managed and maintained by Infosys. It involves implementing and managing an end-to-end process that converges ownership of the outsourced process, people and technology. This bundling of technology, consulting and BPO supports synergistic value creation and delivers transformational value and additional cost-savings using strategies such as global sourcing, technology innovation, process optimization, scale, and centralization.

As McClatchy and Infosys move forward with this relationship the level of automation is expected to increase, which will benefit McClatchy through productivity improvements and gaining share based savings.


Customer Relationship Management and Customer Service

Customer relationship
The service management model between Infosys and McClatchy is based on SLAs defined at two levels:

  1. Transaction Metrics – defined in terms of Accuracy & Turnaround Times, which have SLA penalties in case of failure
  2. Business Metrics – defined in terms of Effectiveness and Value Impact, which has a Gain Sharing Mechanism for Value delivered

These SLAs are established for each of the newspaper locations serviced by Infosys. Metrics are reviewed against the targets agreed between Infosys and the respective McClatchy teams, on a weekly basis. Metrics are also consolidated across locations and are discussed at the PMO level. Business Metrics are reviewed on a monthly basis with the respective location CFOs and also as part of the quarterly business review.

Standardization
The strategic imperative of delivering process standardization starts with ensuring that local newspaper organizations buy-in and identify the impact of the proposed change. Any standardization initiatives are evaluated and adjusted as required, to ensure customer service is not impacted during implementation and that service levels do not deteriorate as a result of standardization.

Feedback
Feedback is sought through daily/weekly/monthly conference calls, as part of the SLA review process. The focus of these calls is to get feedback on performance and proactively identify any issues. Additionally, Infosys conducts Customer Satisfaction (CSAT) surveys for McClatchy, to measure the strength of the relationship. The survey is conducted annually and administered by an independent agency. It covers all facets of the business cycle (sales, discovery, transition, steady state and people related) through critical parameters, which include: satisfaction, loyalty, value for money, seamlessness of delivery, risk mitigation and integral partnership. The culture of "Customer Focus" is promoted from top to bottom in the organization. At each layer, a certain percentage of Variable Pay of Infosys employees is based on customer feedback. This ensures customer centricity across the organization.

Pricing
Infosys and McClatchy have deployed a pricing structure that aims to maximize value for both parties. The entire NIAB implementation is based on an outcome based pricing, whereby McClatchy pays on a "user basis" and only when the user is onboarded. Hence, Infosys carries not only the "ownership" but also the risk of completing the entire project on time and within budget; and any cost over-runs or cost impact on account of a delay in implementation is borne by Infosys. Additionally, there is a gain share mechanism for the traditional processes, whereby both Infosys and McClatchy are incentivized for improving the processes and driving better efficiency.

Control
Infosys has a dedicated Risk team that is focused on managing the risk from McClatchy's standpoint. This team periodically reviews the performance of the team delivering services to McClatchy and identifies any potential issues – such as backlogs, service level shortfalls, controls risk, and people related issues. This team also reviews the internal controls within the process and benchmarks these against the repository of best-in-class controls that it maintains. Any controls deficiencies or opportunities for improvement are highlighted to McClatchy during the performance reviews, along with a recommended action.
Infosys has replicated and maintains the McClatchy Sarbanes-Oxley environment. Every year, Infosys provides McClatchy with a SAS 70 report that reviews the effectiveness of the Infosys controls and any deficiencies.
Infosys also maintains a dedicated Quality team that works with McClatchy to measure and monitor the processes. The team audits a random sample of the transactions to review them for accuracy and completeness. The data collected is used to identify Six Sigma- and lean-based improvement initiatives.

Business continuity
Infosys has a comprehensive BCP Plan for McClatchy, which has three main components:

  1. Site Recovery Plan
  2. Process Recovery Plan (based on Recovery objectives of each location)
  3. Technology (Connectivity) Recovery Plan

Because of this plan Infosys was in a position to recover operations within 24 hours, during the disaster that befell Jaipur in October 2009.

Future Direction
The initial BPO contract between McClatchy and Infosys BPO laid out a phased approach to transfer work from 30 McClatchy newspaper properties. The larger sites were transitioned first, processes were standardized, and then smaller sites were transitioned, before the processes across McClatchy were harmonized. The methodology adopted for transferring these processes was based on a collaborative approach, whereby the local newspaper buy-in was sought before the transfer, and any required adjustments made before the processes were transferred. 

McClatchy and Infosys have extended this methodology to work together in identifying new business opportunities within McClatchy, by analyzing McClatchy’s key business needs and Infosys’s capabilities. Infosys then works collaboratively with McClatchy to create a solution addressing those needs. This approach has enabled Infosys to support multiple business groups within McClatchy. Infosys started by providing F&A services and now supports Human Resources, the Advertisement Production Group, and also IT services. Infosys has also been able to move up the value chain in F&A services, where it is now supporting high-end processes like ABC reporting, commissions computation, and other high-end analytical support to the CFO's office.

The Future
In the next five years we see Infosys continuing as a trusted partner to McClatchy, driving the platform implementation across circulation and other business areas, and moving McClatchy from a fixed cost structure to a more variable cost structure.
Infosys also believes that it will continue to take value propositions to McClatchy in customer service, online, and in other business areas where it will be able to make a difference not only on the cost side but also on raising revenue and plugging leakages.

Through NIAB, both McClatchy and Infosys are creating a value proposition that will benefit the entire newspaper industry.

 

SSON News and Analysis
Posted: 07/09/2012

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