EXL on Technology Platforms and Tools That Drive Value

Sarah Clayton, Global Head of SSON interviews Rohit Kapoor, Vice Chairman & CEO at EXL The provider market will tell you that the best results accrue where client and provider collaborate on end-to-end processes. That naturally requires trust, but as we see more and more relationships standing the test of time, we also see more of the kind of collaborations that Rohit Kapoor describes, where EXL is able to deliver a return that is 200 to 300% higher than when only managing a part of the process. In addition, the advent of data analytics is helping EXL craft go-to-market strategies that are 2.5 times more effective than customers’ own inhouse recommendations. All this helped EXL gain a ROI, last year, above and beyond labour arbitrage, of 19% over their client revenue base. Not a bad result for the "adolescent" on the block. SC: Where do you see EXL positioned in the landscape of providers right now? RK: EXL is a Business Process Solutions company focused very sharply on serving our clients in key industries and functional areas. That has been our philosophy right since conception, and we really try to be experts in the areas where we can add value to our clients, understand their business as well as they do, and be able to create business impact for them that is meaningful and sustainable. I think EXL is still going through an evolutionary phase as we grow our business. We would think of ourselves as being a company that is going through adolescence and is continuing a growth spurt, while remaining focused on what we want to do. SC: Where would you say your biggest challenges are right now, in terms of execution of client work? RK: We have had a great run over the past 13 years since inception. I think today we find ourselves in the middle ground where we are neither a small player nor a large, impersonal company. Our challenge is to continue to differentiate ourselves in this crowded market and continue to build on the client relationships we have and be much more visible and present elsewhere in the market place. We think of ourselves as being the world’s best kept secret. Those that know about us do really love us – so the challenge is to broaden our reach to catch many more customers and certainly scale up in size and scale. SC: What kind of challenges in execution does EXL face? RK: I think there are two broad themes emerging in terms of the path that a pure-play business process outsourcing company can take. One is the use of technology along with the processing capability and the other is the use of data analytics and the combination of that with our business. Both of those are challenges, but at the same time EXL is well positioned for each. Our view is a little bit different from other service providers in this space. On technology, we have a strong belief that it is not the combination of IT services and BPO services that creates the synergy and the value but rather the combination of IT platforms and tools that will create that value for our customers. So, three years ago we started to make investments in platforms. Since then we acquired a life insurance policy administration platform, a subjugation platform and a healthcare platform. We have also been making conscious investments in proprietary tools, technologies and performance enhancement applications that can improve the effect of our software on clients operations. On a separate track, our view on analytics is that it is not good enough to run analytics independently of operations but essential rather to embed analytics into the operations. That is a journey that we have been on for several years now and I think that creates a much greater stability for our clients than running these pieces independently. SC: What is your focus internally in leading EXL? RK: Well, internally for us it is all about growth, and how we can scale to be a billion-dollar revenue company. Today our revenue is close to half a billion dollars and the challenge is how do we expand geographically, how we expand within our domains, and how do we become a scale player that is going to matter in the long term. SC: Which parts of your skill base do you think you have yet to capitalise on? RK: Clearly there are a couple of industrial verticals that I feel we are very strong in already. Insurance is an area where we lead and we continue to build and grow. But, there are other industries that we are building capabilities in more aggressively, specifically Healthcare and Banking and Financial Services. They are crucial areas for us. The practice that holds a lot of opportunity for us is Analytics. The good news is that there isn’t any clear leader in Analytical Services and we believe that the our capability and positioning we have already actually lend themselves very well for us to play very aggressively in that space. So we have been making some conscious investments in that area. SC: On the buyer side what kind of skill attributes do you see that lend themselves to partnerships being successful? RK: On the buyer side we find successful partnerships are those where the buyer is a lot more understanding of what a partnership really means, a lot more sophisticated and adept in terms of their governance strategy and where they make a conscious investment in terms of making sure that the partnership succeeds. Other buyers, who basically throw the work up and over the wall and expect the service providers to do everything and to be a financier to all of their problems, most likely those partnerships don’t work out too well. The skills buyers really need are to understand how you manage, govern and run a network of providers and capabilities and how do you leverage that network and bring the most to the organisation. The ability to choose the correct partner, the ability to manage, to network and to engage with the partner, I think are critical skill sets for any buyer and there is a fair amount of investment that they need to make partnerships successful. SC: How often do you turn work down? RK: We get requests quite often from companies outside our industry verticals or in areas where we don’t want to develop, for example, if you get work from an industry like manufacturing or retail for doing operational work that doesn’t really work well for us. If the work was related to Data Analytics or Finance & Accounting and specialised skills, we would participate in that. So I would say we would turn down work perhaps 25% of the time where a particular client or prospect may not meet the qualification criteria that we set for ourselves and that is the hardest decision to make but the right one. SC: Which are your clients' most common blind spots? RK: Clients generally tend to downplay the governance aspect of a relationship and particularly after the transition and the work is being stabilised. I think that many clients think that the governance of client relationship management is an unnecessary investment. This can lead to client expectations starting to differ to the providers and with no ongoing governance program in place you can easily end up in hot water. Making sure that both sides stay on top of things is critical in our business, which is a real time, day-to-day operating business. You can’t really afford to do without basic essential processes like governance. SC: How much would you expect a client to invest in the governance structure and relationship management? Can you put a figure on it? RK: Let me talk to you about the areas of investment and then try to quantify them. So I think the areas of investment include having a program management officer or a governance officer that is tasked with the responsibility of making sure that the program is successful on a day-to-day basis. There are various types of business meetings and trips that need to be had, that could be onshore or offshore. We encourage our clients to visit where the actual operations are taking place. Then there is an investment in terms of keeping abreast of developments. Typically we think that the investment would be about 5% of the value of the relationship. Obviously as you scale up that is something that you would get some leverage on, not that every relationship requires that kind of investment and for a much smaller relationship, the investment maybe greater It really depends on the size and scale – I would think that a median of about 5% would be a reasonable level. SC: Is that something that most of your clients have an expectation of? They’ve been around the block; they’ve worked on both sides, so they understand that 5% is… RK: So they do have an estimate of that and they factor it into the business case that they have. SC: Where is EXL focusing its technology money? RK: There are two key areas. One is to continue to build and develop the platforms that we have acquired, keep them ‘state of the art’ and make sure they are competitive in the market place. Number two is for us to develop our own in-house applications giving us performance enhancement tools that we can layer on top of the platforms as well as on top of the work that we do for our clients. We are also investing in technology in creating internal tools allowing us to support the growth of the organisation. So we have a number of proprietary tools for performance management for talent, for employee career development and for us just to be able to manage our workforce as we scale up the organisation. SC: Can you give me a couple of specific examples of the technology that you are excited about? RK: For products that we have not launched it will be tough for me to talk about that, but for the products that are out there I can certainly talk about them. We have an internal process management tool that we have developed, called B-Prompt, a business performance management and performance-tracking tool. This is a dashboard we provide to every single client about the health of their business. It has a very comprehensive database of the performance of every single process and the service level metrics. It will provide alerts if a process is trending negatively. It has a drill-down analysis so you can really go down to the transactional level and see what happened and where, and it has an audit history review whether a particular person performed an error and what corrective action was taken. Finally it has a compliance manual built in so it ensures all processes that we follow are within the control parameters. It is a very, very robust performance management and tracking tool with a huge amount of analytics to help us manage and govern the processes that we run for our clients. The other example I can give you is the tool that we have developed in Analytics, called Micro-Analytics, a composite tool that has about 300 algorithms in a component format. When we are engaged by a client to develop an analytical business model for them we can leverage some of these components making our development time at least 50% quicker and cost much less. We’ve used this tool in several situations where we have gone in with a champion-challenger model, and consistently because we can leverage on this tool, our performance is much better than the competition. SC: Rohit, can you give us some examples of what you’ve learned in hindsight? RK: I think one of the main areas we’ve learned about is to make sure that the process that we are taking on is a process that can be managed by us. We once took on a process for a client where the kind of skill set and the contextual knowledge one needed to have in order to be able to work on that process was just not available. It would have been much better for us to start with some basic processes and then some intermediate processes before getting into the most complex process and that experience didn’t turn out too well. The learning for us is two-fold – one, to build up the capability in the terms of the complexity of the processes that we can handle; and two, to be able to have the confidence to say no and actually guide the client towards not taking on work that will not succeed. It is much better to have that conversation up front than have it at the back end because clearly that leads to confidence being eroded. SC: What about the work that you are proudest of? What are the phone calls that you most look forward to getting? RK: The work that we are really proud of are actually with some of our largest client relationships and I think the reason for that is, first: we handle work for these clients on an end-to-end basis; second: the trust factor that these clients have with us is extreme and therefore they have given us not only the work, they have also given us the quality control and compliance; and they have given us the supervision of these processes; they basically use us to be able to make any changes to their product lines based on the operations that we run for them. I think the value that we generate for them and the impact that we create for them is also so high because our ability to manage a comprehensive process allows us to deliver a return which is 200 to 300% higher than when we are only managing a part of the process. SC: Give me some examples of EXL’s more innovative relationships where you are mapping more closely to their revenue streams. RK: We have a relationship with a large utility company focused on the introduction of smart metering so we’re helping them design the back-end operations associated with that. That is an example where a new technology or product is going to be leveraged in the market place and helps them get prepared. Another is that when we work with clients on the analytics side their ‘go to’ market strategies are determined by how we advise them to use analytics on their data. We recently helped a large global bank looking at how to approach their business in Asia and we helped them figure out their ‘go to’ market strategy in about 13 different countries, and the effectiveness of our recommendation was about 2 ½ times better than their own in house recommendations associated with the project. One of the things that we have started to measure is the return on outsourcing, what we are trying to do is quantify and measure in an objective way the impact that we have on a client’s business. In all five parameters: the growth of their revenue, their cost base, their working capital, their capital expenditure and the risk. Based on these five parameters we quantify the impact we have made and we get our clients to validate and certify the number. Last year, our return on outsourcing, and again this is above and beyond the labour arbitrage, was 19% over the revenue base that we had in terms of all of our clients. The year previous to that it was about 17%. So that is the level of incremental value that we generated and provided to our clients on an on-going basis. SC: Why would you take the labour arbitrage piece out? RK: If you think about it as a basic tenant of them thinking about outsourcing, it is really the benefit they get on top of arbitrage that creates the differentiation. SC: So, do you think those new metrics are impacting shareholder value? RK: Currently not. We started tracking these metrics about 2 ½ years ago and we discussed them with clients and got them to acknowledge them and confirm the numbers were accurate and something that they would agree with. We want to see a little bit more of that. SC: What do you think of the usefulness, and this is a presumption on my part, of the clients' focus on innovation? RK: I think our clients should be focused on innovation and we should be focused on innovation. At the end of the day if the client has outsourced a piece of work to us and we don’t make improvements upon it and we don’t make changes to it, it is not going to be meaningful after a period of time. So there has to be a constant effort on our part and on the clients’ part to do that. Candidly we can’t make too many changes or improvements to our clients processes if our clients don’t partner with us or engage with us and that is why the governance model and their investment in making sure that we can make these changes is so important. SC: How willing are they to spend? RK: I think they are cautious and obviously they want to understand the business case better before they make the investment. In many cases we will make the investment for them, demonstrate the benefit to them and get into a gain sharing engagement so we can derive a benefit from that gain. We have also worked with some clients where we have developed new technologies and new platforms on their processes and then regained the IP so we can market it to other clients and are able to benefit from that. SC: Will cost always be the number one goal of any engagement? RK: I think being competitive will always be a big issue I am not sure that cost alone will be the single most important driver. Particularly as the market starts to mature I think our clients are quickly finding out that it is the overall value creation that is more important than just the price point at which a provider does work for them. That is a very, very good development and I think it plays really well for EXL because our focus is to work on the total value we offer to our clients and not just to work on the lowest price. SC: What single issue galvanises you more than any other? RK: For me the pursuit of a deal and the winning of a deal are always very exciting, and I think it is the focus on trying to add value to that relationship that is exciting. Taking a look at opportunities, pursuing them and getting them to closure so that it benefits the client and us, that is exciting. SC: What is the single most important thing you have learned in the last 15 or so years? RK: Single most important learning – wow. I think the biggest thing that amazes me still is the fact that there is still so much work to be done in terms of improving the efficiency and effectiveness of client operations. How under invested that area is in many organisations. When there is growth taking place everybody defocuses on the back office operations in the last five years or so given the economy slowing down, everyone has started to focus on that aspect again. What we have learned is that it is about the partnership and relationship with each one of these clients that matters a lot, and the ability to look clients in the eye and for them to look providers in the eye is a critical element of this. It is a people driven business, very much relationship orientated and the kind of relationships that I have built up with some of our clients are just like the relationships that you build up with friends. I think creating that trust and rapport becomes really, really important. SC: Rohit thank you! About EXL: EXL is a leading business process solutions company that looks deeper to drive business impact through integrated services and industry knowledge. EXL provides operations management, decision analytics and technology platforms to organizations across multiple industries. [inlinead]

EXL on Technology Platforms and Tools That Drive Value

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