A lot has changed over the last five years in the outsourcing business. Has it really? I hear you cry. OK – you may have a point, but one thing is evolving – the emergence of some of the major Indian service providers as credible HR delivery firms.
When Indian service providers were originally mentioned as budding HRO providers, many HR executives would respond “we couldn’t possibly entrust such sensitive HR processes with offshore firms”. Since then, many Indian service providers – and other global organizations with large Indian captive organizations, have become exemplars of how to develop, manage and motivate talent.
Nissan liked Genpact so much, they bought their HR…
One US C-suite executive even recently broached the topic of bringing Indian service provider leadership over to the US to help educate US firms on how to develop a competitive talent development culture.
Genpact has been working with Nissan for more than six years, providing finance and accounting, procurement, customer service, supply chain and analytics services. So adding HR services seems a natural extension of these services – even though Genpact has limited client experience of multi-process HRO. Moreover, this is also the reemergence of what we started to see in the pre-Recession days – increased bundling of business processes with a single provider which has a developing knowledge of a client’s institutional processes. Once they have lived their clients’ quirks, challenges, ideals and best-practices, surely the opportunity to broaden into new process areas is a natural extension of the relationship? So let’s hand over to our own HRO provocateur, Keith Strodtman to elaborate further…
Why Genpact has some serious chops to do well at HR Outsourcing
Genpact may not be a well-recognized name in HR circles but in the business process outsourcing (BPO) world they are a premier BPO provider, especially in finance and accounting (F&A), procurement, IT, and other process areas. That said; the company’s recent acquisition of the HR services subsidiary of Nissan Motors in Japan is a significant statement about its ambition in the HR BPO market. According to Anju Talwar, Head of HR services at Genpact, we should expect to see Genpact sign several more strategic HRO customers in the next couple of years. Talwar says Genpact plans utilize the capability gained in the Nissan deal to offer HR services to other customers in Japan and other Asian countries.
Nissan, who had a previous F&A and procurement BPO relationship with Genpact, has expanded the relationship to include HR services to 54,000 employees in more than 20 offices in Japan and other parts of Asia. In all there are about 200 Genpact staff supporting the HR processes. Many of the staff are located in Japan but some work is also processed from a Genpact center in Dalian, China. Genpact has more than 3,000 employees in China. The scope fo the Nissan deal includes: payroll, benefits administration, career development, portions of recruiting, an employee call center, and other HR processes.
Genpact got its start in the 1997 as the internal shared services arm of GE Capital. Know then as GECIS, the Indian captive shared service center served as the back office for many divisions of GE. In 2004, GE sold a share of GECIS to two private equity firms and it became independent in January 2005. This enabled the company to diversify its customer base beyond GE. It changed its name to Genpact and the company went public in 2007. Many of it early non-GE customers hired Genpact to manage finance and accounting transactions like accounts payable, account reconciliations, and payroll. The company now has more than 51,000 employees, $1.26 billion in revenue, and offers a broad range of BPO services.
Payroll was the process the got me talking to Genpact when I was leading the HR outsourcing business at Ceridian. I was looking to increase the efficiency of our managed payroll business and sought a partner to support several payroll processes from an off-shore location. This occurred in 2006 and even then it was clear to me that Genpact wanted to expand into other HR BPO services. In fact, had it not been for the “great recession” we might have seen several more HR BPO contracts signed by Genpact in the last few years.
Payroll is not the only credential that Genpact has built upon to develop its HR BPO business. Its GE heritage has left a deep and innovative HR culture at the company. Talwar points out that many of their HR service engagements begin with a conversation with customers who are interested in emulating some of Genpact’s internal HR programs. This comes as no surprise to me. When I was traveling around India in 2006 talking to several Indian BPO providers, I recall being very impressed with the Genpact’s talent management practices.
HfS Research's HRO Maxima, Keith Strodtman (click for bio)
Its recruiting, performance management, and training processes rivaled the best I had seen anywhere in the world. The GE heritage also embedded a vast Six Sigma competency that is not only used to increase operating efficiency in the outsourcing centers, but is also used extensively in client process improvement engagements.
The outcome of this deal could have a significant impact how much progress Indian outsourcers make in the HR BPO space. In addition to Genpact, Infosys, Wipro, Caliber Point, TCS, and some smaller Indian providers have active HR BPO practices. Each has customers in the North American market but none have experienced rapid growth here. If Genpact has success with the country/ regional model that it has with Nissan, we may see others follow with similar approaches.
Genpact certainly has a lot of skills to employ in the HR BPO market. The Nissan engagement could very well be a significant proof-point that will help propel the company to higher prominence in the HR services marketplace. We should see in the next couple of years if Genpact does indeed continue to “drive” its HRO business to significant growth.
Posted in : Business Process Outsourcing (BPO), Finance and Accounting, HR Outsourcing, HR Strategy, kpo-analytics, Procurement and Supply Chain, Sourcing Best Practises, Sourcing Locations
It’s interesting how some companies like Nissan which gained experience outsourcing processes such as finance, procurement etc are now looking at HR. Looking back, it makes perfect sense that HR is a later candidate for adding to a broader back office engagement, once the client has become well acclimatized to a BPO environment. I expect several more of these “HR add-ons” to come – especially with organized providers such as Genpact with a strong operational delivery culture.
Andrew Wagoner
Insightful post. I would also add to Andrew’s comments that HRO should not be all about labor arbitrage, and more about operational improvement. Adding HR processes should be like procurement and other business functions where operational improvements and transformation provide the incentive for clients, not simply labor savings,
Len
Great observation regarding the telent development skills of the Indian firms. US firms can learn a thing or two from them. There’s a reason why many Indian firms have more motivated workforces!
Randall
Keith- Thanks for this insightful article. Yes, it would be interesting to see how Genpact grows in this segment. I agree that talent management practices in Genpact are impressive, although it continues to struggle with more than 20% attrition level, which is more of an industry characteristic these days rather than a reflection of its HR practices.
Also, I think this deal is significant for two reasons:
1. This is another example of how Indian companies have successfully been able to move into newer domains by expanding accounts of existing clients
2. As you pointed out, this is like the market entry of Genpact into Multi-process HRO. However, I don’t think (not sure) Genpact will be servicing UK/ US employees of Nissan out of its centre in Yokohama. So it will still need to do a lot more to expand business into North America/ Europe, where the majority of the demand comes from
Andrew,
We are indeed seeing a pick-up in HR BPO activity. It’s not always the large multi-process deals but often key processes like payroll, benefits, or aspects of recruiting or learning. Many buyers are also looking to HR BPO to help manage global HR processes.
Keith
Len,
Agree. There are many operational, technical, and strategic benefits derived from HR BPO. Economic benefits are always important but enabling HR staff to focus on strategic HR programs and supporting the business is a more important business outcome in many cases.
Keith
Sudhanshu,
Thanks for the comments. You are correct, Genpact is not servicing US or UK employees in this deal. In speaking with the company, they have prioritized Asia and Latin America as important growth markets for the HR BPO offering. That’s not to say they won’t pursue deals in Europe or North America, but the other markets are viewed as more strategic in their current plans.
Keith
Perhaps I am alone in this view but buying one’s way into the market by way of lifting and shiftin the client’s HR department feels very 1999 to me.
Lisa,
While I agree that we don’t see much of this approach in North America, the Indian firms have been successful with “lift and shift”, especially in non-HR processes and especially outside of North America. Another difference here is the amount of other BPO work that Genpact was doing for Nissan prior to the HRO engagement. Building on an existing relationship is certainly an advantage over a greenfield “lift and shift”. I guess we will have to wait to see the outcome here.
Keith
Keith,
TCS did this with Nielsen yet I am not aware of any other clients on the ‘normalized’ platform, are you?
I concur that Genpact has leg up with prior Nissan relationships but am contending that it may end there.
Lisa
Hi keith
Would like to discuss more about HR BPO business in india and its market penetration? Can I have your contact details so that i can drop an email
Thanks & Regards
Arun
Arun,
My contact info can be found here. http://www.hfsresearch.com/the-team/keith-strodtman
Keith