Big brother’s BPO boom
Tuesday, October 1, 2002
OCTOBER 2000: THE HEADS OF HDFC (formerly Housing Development and Finance Corporation), India's housing mortgage major, and Tata Consulting Services (TCS) came together in a joint venture to grab a share of the exploding call center and back-office processing business. They called it Intelenet Global Services Ltd, with HDFC and TCS holding 45 percent share each, and the remaining 10 percent reserved for employee stock options.

Like most other joint ventures, Intelenet was formed to leverage each other's strengths. While HDFC would provide domain expertise in customer relations and back office processing in the banking, finance, and insurance business, TCS would provide the IT and marketing support through its large workforce across the globe.

“TCS brings the technology and process experience and HDFC brings the infrastructure experience,” says Arup Gupta, CEO of TCS's American operations.

TCS has several international banking and finance groups on its client list. HDFC, in turn, is associated with Standard Life Assurance and Chase Manhattan. The joint venture is strategically aimed at targeting the existing customers for back office activities.

Two years later, this strategy seems to be working. In January of this year, Intelenet inked a contract with Standard Life Health Care. The contract would bring $1.5 million in business to the joint venture.

“To begin with, we will be providing document indexing and invoice processing services to Standard Life. However, we will extend this to multiple services including call center support,” says Intelenet CEO Sisir Kumar.

“Our existing customers are a good prospect for us to do BPO as we understand their processes. We have established the relationship with them and can prove that we can handle their business processes,” says Gupta.

Intelenet is not banking on the existing client network alone. Recently, it won a contract from the Illinois-based Household Corporation, which was not a customer of HDFC or TCS. Household provides consumer loan, credit card, auto finance, and credit insurance products in the US, United Kingdom, and Canada. TCS America and Intelenet will provide Household with 100 agents to enable collections from delinquent credit card customers. Going forward, Intelenet will be providing additional services, which include customer acquisition, customer service, telemarketing, analytical, and back-office processes.

“Since we already have a relationship with our existing customers, we will be straightaway getting into handling their mission-critical processes,” says Gupta. He explains that TCS understands the processes of his customers either by doing IT application or strategic consulting. “For non-customers like Household with whom we have no IT relation today, we start with call center. Typically it takes about 12 months to go into their core processes. Once we get into handling the core processes, we will bid for IT outsourcing as well,” says Gupta.

“The venture has been operational for less than 12 months. Apart from Household and Standard Life, we have recently signed up with five to six big financial institutions. TCS has a good understanding with 200 of the Fortune 500 companies. We are in talks with them for BPO,” says Gupta.

Gupta is confident that these talks will be fruitful and he has reasons to be optimistic. “The economic downturn has forced American companies to outsource mission-critical applications. The top-tier Fortune companies are willing to outsource to companies that are financially stable and have good delivery capabilities and a strong business continuity plan. Only the top three or four Indian IT services companies, which includes TCS, have consistent revenue and profit growth coupled with a strong business continuity plan. TCS also has a good track record of delivering large projects across our global delivery. Obviously, we stand a chance to win BPO contracts from the Fortune 500 companies,” says Gupta.

At TCS's BPO center at Missoula in Montana, around 30-50 people handle claims processing for a number of reinsurance companies. These processes have to be handled in real-time. If the claims are not processed in time, legal action could be taken. Proximity to the customer will allow them to understand the criticality involved in handling the processes.

The next step is to migrate processes from the customer's place to an offshore center. It has to be done meticulously in a phased manner. “First we look at customer's current processes and then apply our domain expertise to optimize it. At times, we may need to customize the process. Once the capabilities have been developed, the processes are migrated to offshore centers,” explains Gupta.

Handling these business processes is fairly stressful since they are repetitive. The same process, say a credit card processing or insurance claim processing, is repeated about 10,000 times a day.

This is where HDFC comes into picture. As one of India's leading housing mortgage companies, HDFC has been in the business of call processing for quite some time.

Having done that, HDFC has the capability to handle repetitive work.

HDFC and TCS have set up a 500-seat capacity back-office in Mumbai. Around 1000 employees working in three shifts handle business processes for customers in the U.S. or the U.K. Gupta says this facility will be ramped up to 2000 seats with multiple shifts over the next two years, indicating the business he expects to flow in the near future.

“We have state-of-the-art facilities and technology to handle back-office operations. With the technology we have in place, an operator sitting at one terminal looks at 18 databases simultaneously. The databases provide the operator with information about the customer, his last contacted date, his credit card details, basic lead track record of things, etc. The operator quickly runs through the available data and provides meaningful information to the customer.”

Most of the talks are turning in favor of Intelenet because most American corporations have begun to realize the cost savings they can achieve by sending business functions to India.

“Cost benefit to the customer comes in three stages: by applying technology to optimize the processes, customizing the process, and leveraging labor arbitrage by migrating the process to the offshore center. The customer can see anywhere between 40-50 percent cost difference,” says Gupta.

Business process outsourcing, rather than IT outsourcing, is the core of the company. And sending the business processes offshore is a brand new concept. Since most of the players are new comers, the winners are those who handle the processes efficiently as compared to the competitors.

With all systems in place and business leads turning in favor of them, the TCS-HDFC venture is all set to emerge as a winner in this space.

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