Chinmoy chats about that shift left

This is the age of the mid-size, aggressive, feisty service provider that can scrap for the traditional business but also has the flexible cost-base and freedom from legacy to go after the new stuff.  There are so many exciting opportunities with clients that are simply too small, or too cannibalistic for the traditional services providers… many of whom are still waiting – in denial – for those $200m SAP rollouts that no one wants to do anymore, or those $500m infrastructure deals that will never, ever happen again.  Where better to be that at a service provider which can lead with automation-led offerings, where being disruptive is the business model – where all new opportunities are greenfield… and causing many of the traditional service providers to squirm in their boots, pretending their world isn’t falling apart all around them.

So welcome to HfS to Chinmoy Banerjee (see bio) who heads business process services for Hexaware – whose entire go-to-market strategy is based on disrupting the legacy outsourcing model…

Phil Fersht, Chief Analyst and CEO, HfS Research: So, good morning, Chinmoy. It’s great to get some time with you today. Perhaps you could start by telling us a bit about yourself?

Chinmoy Banerjee, Global Head of Business Process Services, Hexaware Technologies: Sure, Phil. So, I grew up in India and after finishing my MBA in Finance I joined a bank. I spent a few years there and the last job I did was as a Forex trader. I then moved to PwC Consulting for a few years, and in 2004 moved to the US in the BPO sector. Along the way in the US, I completed an Executive MBA from TRIUM as well—which is a combination of NYU Stern, London School of Economics and HEC Paris. I’ve been disrupting the industry for the last three years with Hexaware, running their BPO business.

Chinmoy Banerjee surrounded by members of his Hexaware team

Phil: For those of our readers who might not be that familiar with Hexaware, could you give us a very quick snapshot of the company and what it’s doing today? What are the core areas where you feel that you win against the competition?

Chinmoy: Sure. Hexaware has been around for a while. This is our 26th year of existence, but in 2013 Baring Private Equity acquired about 70% of the company and Keech, our CEO (R Srikrishna or Sri, aka Keech), came in soon after that. Since then we have been going to market in two areas: Shrink IT and Grow Digital. Our view is that the industry is disrupting in a big way, and Shrink IT which is our major go to market as its name suggests, involves shrinking technology and the operations footprint.

It’s largely applicable to full-service lines, including application managed services, which is support, infrastructure management services, testing and, of course, BPO. Essentially, we have seen a lot of success in these areas. In 2015 we saw about 15% growth, which was the highest among Indian-heritage providers. But most importantly for us, we see that disruption is a will issue and not a skill issue. Given our size and our ability to be nimble, we have been able to pivot very quickly over the course of the last few quarters.

For us, cannibalization is not an issue. So we necessarily do not have to put our head in the sand, if you will. Because for us it’s an offensive play. We see that we can gain much more by being disruptive to ourselves, and cannibalizing ourselves as we have much more to gain in terms of acquiring new customers.

Phil: When I met your team recently in Boston, what excited me was that you don’t have all these legacy clients behind you to protect. You can go in with very disruptive offerings, particularly around automation, to win business. Can you talk a bit about that strategy and how is it working for you? And can you share a couple of current examples where you’ve found a way into a client because of the disruptive model you’re pushing?

Chinmoy: Absolutely, Phil. So, as a principle among all these offerings, we’re saying automation first, self-service next and people last. That’s kind of the shift-left strategy we have. Specifically, for BPO, we’ve come up with this offering called Digital Managed Services, which essentially updates automation concepts, largely through using RPA. But also through other disruptors, like OCR and other workflow tools. We’re working with a very large bank that has outsourced thousands of people to India, and we’ve started on a pilot with them. Essentially, we went in, did a quick assessment of about 350 people that they have, and we showed that, by using automation, we can automate about 50% of their headcount.

So what it means is that when we looked at the processes that are being done by the people, almost 50% of those processes could be automated using RPA. More importantly, what we said is we will be able to provide those benefits in a step-change manner from month one of go live. Of course, it’s a financial model construct, but in contrast to a BPO industry that saves 5% year-on-year or 10% year-on-year, this is significant.

These processes have already been outsourced for many, many years out of India and other lower-cost geographies.

The second thing that we say is that we will use best in class technologies. So a client does not have to be constrained by home-grown applications. Many of our larger traditional providers are peddling home-grown platforms. But we believe technology is an enabler. The price of technology, especially in automation, will keep coming down and it’s best left to the product companies to build that.

So we’re kind of using best in class. We’re not constraining the client to say that after three years, if they want to leave and go somewhere else, they won’t get locked into you, because they’re using proprietary technology.

The third point that we’re saying is that automation is real, but it’s also pragmatic. You can’t just automate and think that from tomorrow, everything is going to get better. There are multiple scenarios, multiple variances for complex processes that continuously need learning. The automation implementation itself might take a few months. But to get the bots better is a continuous process, and this is standard RPA. I’m not even talking about cognitive and artificial intelligence here. So all of this, in combination, we’re calling it as a Digital Managed Services offering and primarily our examples today are in the back-end. So by back-end I mean, it is payments processing for banks, reconciliations, settlements—things that do not have a voice component to them.

The other area that we’re working on that we’re very excited about is on the front-end side. We’re talking about customer service, and we’ve tied up with two partners here that we will announce very shortly. We’re taking the digital managed services offering to the front-end, and ultimately the goal is in the next six months to build an end to end model. On the front-end will have a disruptive partner, on the back-end will have a disruptive technology. But how do we integrate the two?

We see a lot of talk around machine learning and artificial intelligence, that is confusing, if you will. Because today there is more automation potential from an RPA perspective, that has really still not happened.. still not penetrated. We’re seeing our DMS offerings really fly a lot with most clients today. Because we’re taking US$30 million or US$35 million in TCV and are reducing that to US$15 million or US$18 million. Now, that US$18 million is still a lot of new work for us, but we’re disrupting the existing incumbents that do US$30 million.

The other component here that we feel is very interesting for our clients, and where we’re seeing a lot of traction, is the fact that we’re doing everything on a transaction pricing basis. Almost all the contracts that we’re disrupting are on a BPO FTE, or time and materials model. But we’re going in and doing it on a transaction pricing model from day one because, given that the data is available, these are all processes that have been outsourced, so we already have the data and we’re able to implement transaction pricing. In fact, 70-75% of all of our BPO contracts today, are on a transactional pricing model.

Phil: In your role, leading the BPO business for Hexaware, where do you see the most opportunity, when you look at the processes and offerings and needs from a client side?

Chinmoy: Disruption is happening in every area. But given our size, we want to be focused on a few areas. Our focus is largely in BFS and in the insurance space. Because here we don’t see too much competition trying to disrupt. As opposed to the traditional F&A and HR worlds, which are exceedingly mature and you see the larger players. Plus, the amount of RPA that is a possible it is good, but it’s not as much bang for the buck—as you can see when you do loans processing or payments processing, or settlements or reconciliations. Because to change those core platforms takes a lot more money—to make it truly disruptive and grow digital—as opposed to changing an F&A platform or an HR platform because you have more as-a-service models available. So we see most bang for the buck in those vertical solutions.

The second area that we are working on, which we’re very close to actually closing our first deal there, is on the customer service side. Traditionally, we have not done too much work in the customer service side simply because there wasn’t too much disruption that we were able to bring to the table. However, now with the virtual assistant platforms available and at least two, three players, we’re able to disrupt. As we speak, we’re doing a due-diligence with the large bank, looking at their call center that is being run by a traditional provider. It’s been run for five, eight years without any disruption, without any automation. We’re trying to implement Digital Managed Services using the front-end technologies.

Phil: That’s interesting that you talk about virtual agents, a scenario that we’re working on with a lot of clients with right now. Can you talk a bit more about how you see that evolving? Because you’ve got a lot of classic call center firms which are offering their own chatbots and that sort of thing. And then at the same time, you’ve got offerings like Amelia from IPsoft, which are focused on being more cognitive in nature. What kind of role can Hexaware play in supporting those types of business models?

Chinmoy: So that’s very interesting. Essentially, chatbots have been around for a very long time–over 10 years for sure. We see two kinds of opportunities and of course I’m talking about it from a BPO perspective, given that’s where my interests are. And both of them are disruptive, they’re Digital Managed Services—exactly the same principles that we use for, let’s say, reconciliation, but on the front office side.

So the first opportunity is a cost play, right. Essentially, if you have 200 people doing the work, using a virtual assistant kind of a tool, how can you reduce the 200 to 120 or a 100? Now, the second opportunity, which is a little bit more transformative, if you will, is to truly shift left.

So the first one is also a shift left, because you’re shifting it left from a person to a virtual agent. But the second one is where that particular customer doesn’t use old channels. They’re probably not using the chat channel as much because chat agents are traditionally more expensive than voice. So they’re not disrupted or they’re not using apps for inbound customer service.

So the second one is a little bit more transformative, to see how they can make this more of a revenue generating opportunity and not just a pure cost play.

So these are the two broad themes that we see as areas of interest for us, Phil. In the first area, we’ll do DMS and it will be more of cost- and risk-reduction play. It’s a huge opportunity because there must be 100 to 200,000 people outsourced today—across India and Manila and much more.

There is a huge play for disruption and unlike the data side, where there is a lot of automation that is already being done, on the voice side, the amount of automation and shift left that has happened, is very minimal. You have the IVR and some chatbots, but apart from that there isn’t much. What I don’t want to do is just go and implement the technology because that’s a very small play for us.

We want to take this as an end-to-end offering and kind of lift out entire pieces of work that some other traditional call center providers are providing, but do it at half the TCV, with probably half the number of people shifting left most of the remainder of the work. I am in the process of actually cannibalizing one of our larger accounts today using this technology, which will enable me to then go to market with a ready case study. This is the same approach that we used when we took RPA, using DMS for the back-office.

Phil: Chinmoy, there are a lot of the traditional BPOs out there right now talking about a big game around RPA and these areas. But ultimately it goes against their business model. Do you think they’re going to make the shift, or do you think some are going to cling onto the old model for as long as they can? How do you see it playing out?

Chinmoy: I definitely think people are clinging on, and the reasons are not hard to decipher. If you look at these large companies, and I’ve worked in a few as well in my past life, the CEOs or the top management are saying the right things. But I am not sure if their KPIs are aligned to the people who will actually execute. So someone who is managing, let’s say, a US$10 million account, has KPIs to grow 10% that year. If they have to cannibalize and take out 30% off its revenues, it just doesn’t add up. It doesn’t make for a perfect execution scenario.

So I think the cling-on phase, the put your head in the sand phase, is going to continue for a while. Honestly, even on the client side, if you look at middle management, that’s a big deal as well. It’s a big issue because people do not want to believe that this is still real. They’re doing pilots that have been going on for a year or two. And still the pilots are on—some of them successful, some not. That’s what I can tell you from the market.

Phil: Final question for you, Chinmoy. If you could change one thing about this industry, what would it be?

Chinmoy: I think I have a few, but if it is just one thing, then I would say, this cultural aspect and training is a big need for the industry. The people who are freshers, or who have been working in the industry for two, three years, I think training them is not a big deal. They’re very interested to change, they’re at the start of their career, and they can quickly learn. That training is not an issue. But the training of the middle management, people who have been around for a while, both on the client’s side and on the vendor side, is a big challenge.

For too long this industry has been recognized by, “How many thousands of people do you manage?” versus, “What innovation have you brought to the table?” So that is something that I’d love to change, because if you want transformation, then you need metrics that will enable you to improvement transformation and assess vendors who are also trying to transform. These are different metrics—both in terms of measurement of people who want to do stuff and actually promoting people who are different, who are more innovative, rather than someone who just has 10,000 people and that’s it. So that is the one thing that I’d love to change, Phil.

Phil: Very good answer! I really appreciate the time today Chinmoy. I know our readers will enjoy it your views!

Posted in : Business Process Outsourcing (BPO), intelligent-automation, Outsourcing Heros