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May - 2008 - issue > Cover Story
Satyam BPO Transforming Core Processes
Jayakishore Bayadi
Thursday, May 29, 2008
When Satyam BPO clinched a deal with a construction and mining equipment manufacturing company to administer its assembly line in 2005, a natural progression toward "transformation" of the outsourcing deal began. Satyam BPO carried out enhanced productivity and reengineered processes, with quality as the primary parameter. The provider also lowered costs by instilling superior quality.

Later, when the client sensed that Asian and Far Eastern markets were ripe, it asked Satyam BPO to perform market analysis and leverage its industry knowledge. This request opened a new frontier for Satyam BPO: knowledge process outsourcing (KPO). The team managed the analytics work well, leading the relationship to transform into a real partnership. Today, Satyam BPO addresses integrated process and transformational deals focusing on the manufacturer's core business.

Satyam BPO’s philosophy of expanding a relationship into partnership level engagement enabling business transformation blends together an extensive tool kit of "operational excellence" methodologies such as Lean Six Sigma, Kaizen Team Activities and other best practices. This powerful approach drives rapid improvements in every aspect of their client’s business performance by transferring knowledge to their client’s staff for sustainable improvement.

"Talking about transformation is easy, but it requires a great deal of work and expertise. Partnership level engagement with customers could have been possible because we bring to table high levels of specialization." says Satyam BPO Chief Executive Officer Venkatesh Roddam.

Years ago, services like human resources, payroll and tech support were integral BPO activities, but the concept of BPO is evolving very quickly into a more strategic undertaking. In the past year or two, BPOs are involved in more than simple customer-vendor relationships, where they perform mundane tasks focused on cost-reduction. Leading BPO providers establish deep partnerships with customers and help with their core business—more than voice and non-voice service. The market features high levels of specialization that require deep partnerships with clients and considerable expertise.

"BPO focus areas today include providing superior work productivity, and value. Providers are collaborating more, and working toward mutual benefit," says Roddam. "Meanwhile, clients strive to determine how they can use their BPO partners to serve their own customers optimally. These are the priorities of this evolving business relationship."

How can a customer gain strategic benefits from BPO vendors? Consider a chocolate company: HR and Payroll, Financial Accounts, and Procurement are not its core business, and thus good candidates for outsourcing. However, the chocolate company can also outsource activities related to its core business—actual chocolate manufacturing. Many processes full-service BPO providers deliver are integral to a client's core businesses.

Are customers ready?

"If you offer services through transformation, I don't think any customer will say no. In fact, this is our key differentiator," says Seshadri "Sax" Krishna, the global head of strategy and corporate development at Satyam BPO.

Nevertheless, engaging clients in this new brand of transformation is a challenge. It is not yet fully established in the BPO market. It is a contionous process, and some customers remain leery. Consequently, even while performing routine, traditional BPO tasks, Satyam BPO strives to bring about transformation, using best practices and ensuring that customers notice the difference. Discussions with clients about transformation start from Day One. Of course, their success depends on our customers' acceptance of the idea.

Satyam BPO has learned how to make customers more amenable to discussion of transformational engagements. Three years ago, the market was not mature enough—parts of it still are not—for such a proposition. Differing expectations between CFOs and CIOs, or among other executives, are also problematic. The lessons: First, engage the client deeply in any transformational arrangement. Additionally, ensure the client organization is united.

"In the past two years, we have learned precisely how we should plan transition, how long we need to have an onsite offshore model, and how we should actually manage transformation," Roddam says.

As with any large-scale program, several factors must be considered when engaging in a transformational BPO initiative. Several are discussed here.

Pricing models

Changes in the way BPO is offered have led to new pricing models. However, in the new model, pricing can be a low-priority item for the right kind of engagement. Instead, it can be the outcome of a strategic conversation, rather than a pure-play commercial discussion, which is actually translated into an extended business conversation.

Consequently, rather than just billing, discussions now involve considerations such as where the customer wants to be in five years, or what it wants its operating landscape to look like. As such, the ability to invest and stay invested throughout the engagement becomes the prime criterion.

Cost vs. quality metrics

"About 50 to 70 percent of customers insist on cost benefits, while 20 to 30 percent are most concerned with quality metrics," says Harish S.N., Satyam BPO's global head of delivery.

Satyam BPO's work with GlaxoSmithKline is an example of a quality focus. Satyam BPO performs art and animation on GSK's packages and labels. The art must fit the style and/or marketing requirements of particular geographies, and the work must cost less than in the U.K. Additionally, it must be error-free; even an insignificant artwork mistake could lead to a product recall.

As such, Satyam BPO takes extra steps to ensure quality. "We studied each region and determined how other brands labeled the same product. We also checked to see if these products were subject to recall, and if so, why. This exercise added enormous value to our work," Harish says.

These efforts were not part of Satyam BPO's service level agreement with the client. Instead, they were designed to engage GSK effectively and lead to discussions of transformational projects.

Not surprisingly, even clients focused on quality are very interested in savings.

"We manage core programs such as workflow management, inventory, and shop floor and assembly line coordination for a US manufacturing company. While hammering out the deal, we assured them that year-on-year operation costs would drop considerably," Roddam says. "We achieve savings over time because the engagement is process-, not project-driven, as most IT deals are. It provides opportunities to leverage our expertise and execute the job to achieve cost effectiveness. It represents the fundamental difference between BPO and IT deals."

Moreover, as part of $2.1 billion consulting and IT provider, Satyam BPO has significant advantages over a pure BPO. "We are not just a BPO. We offer customers a valuable integration of IT and BPO," says Kulwinder Singh, Satyam BPO's head of global marketing and communications.

With transformation deals, technology is an enabler; process is the driver. Satyam BPO's access to its parent company's resources enables it to leverage deep industry and functional expertise to achieve cost advantage. Satyam's global presence and excellent balance sheet are other strengths. Moreover, its end-to-end services are especially attractive. To enhance its strategic portfolio, Satyam recently acquired Bridge Strategy Group, a Chicago-based management consulting firm (for $35 million); S&V Management Consulting, a Belgium-based supply chain management shop (for $36 million); and Caterpillar's market research and customer analytics business (for $60 million).

Satyam BPO will launch a business unit to provide MR&CA solutions and services globally to Caterpillar and its customers in various industries. The move complements Satyam BPO's business consulting capabilities, deep industry knowledge, and market research processes, and will enable it to establish itself at the forefront of the substantial KPO market, which is expected to reach $17 billion by 2010, according to KPMG.

"These deals truly strengthen our ability to provide a full range of services, and they excite our customers," Roddam says.

Best practices
Satyam BPO's quality initiatives are a significant differentiator. Satyam BPO is the world's first BPO provider to achieve eSCM-SP Capability Level 5 certification, which was granted by the prestigious IT Services Qualification Center (ITSqc) at Carnegie Mellon University in Pittsburgh, PA. Satyam BPO also relies heavily on its SMART (Specify, Measure, Adapt, Review, and Track) framework.

"SMART is a proven scientific transition methodology. Its quality management standards are governed by eSCM, Six Sigma, and e-Quip, an eSCM-based quality information portal," says Kishore Rao, Head of Quality.

SMART is robust, flexible, and proven over 60 processes. It can be easily customized to meet the specific customer requirements. "To encourage statistical thinking, our employees are exposed to eSCM, Six Sigma, quality control tools, and best practices," adds Rao.

Talent management
Finding, attracting, and retaining the best talent impacts brand directly. As such, regardless of whether the organization is called Nipuna—its original name—or Satyam BPO, it is recognized as a great place to work. "We created an organization that works in perfect consonance with Satyam's global sales organization," says Roddam.

Satyam BPO management attrition is incredibly low—less than five percent. This demonstrates how the company has transformed specialty BPO into an intellectual marketplace, where great people aspire to work. It boasts more than 200 engineers, doctors, and Ph.D.s. Of these professionals, 95 percent have non-IT backgrounds.

The company invests significantly in subject matter experts who understand particular industries. "Service providers must feature at least as much expertise as their customers to engage in a transformational partnership. That is an organizational priority at Satyam BPO, rather than just an IP priority," Roddam says.

As such, Satyam BPO HR professionals seek quality people within and outside the organization. "This has led to automation of some workflows, enabling ordinary graduates to perform tasks that used to require specialization. Moreover, we manage individuals' aspirations in particular areas," says Naresh Jhangiani, Satyam BPO's global head of HR. Forecasting future talent requirements is another important technique the company leverages.

Additionally, Satyam BPO employees must complete two projects outside their specific domains every year. This improves overall understanding of the company's business, and performance. Satyam BPO has institutionalized a "Benchmarking Process" as part of its Six-Sigma effort, which rewards excellent ideas.

"We also recognize individuals' service to customers, within and outside their domains," says Harish. The company's Knowledge Window and Mind Speak Space programs also enable associates to exhibit their capabilities and become subject matter experts.

Furthermore, Satyam BPO features the Foresight Group, 70 members of the extended management team who continuously brainstorm over strategic direction and thought leadership. Satyam prides itself on creating leaders, rather than simply providing IT and BPO solutions. To that end, the Foresight Group guides the company's future. Additionally, Satyam BPO works with The Satyam School of Leadership (SSL)—the corporate leadership university—to bolster strategic leadership and relationships with global customers.

The company is unique in its practice of distributed leadership and growth strategy—all associates are involved. Today, Satyam BPO employs about 4,200 people in Hyderabad, Bangalore, and Chennai, and at client sites in the U.S., U.K., and Belgium. Lately, the focus has turned from adding as many people as possible to doing more with the same team.

Headcount is no longer valid to judge whether an organization is large, mid-size, or small. Non-linear growth is more important today. Satyam revenues have grown 60 percent year-on-year over the last two years, but correlating headcount growth is much lower. "We gain by performing more specialized services, rather than by adding people," says Roddam.

Focusing on the future
Unlike some competitors—like Infosys, which bought Australia's Expert Systems and the BPO arm of Philips; and Wipro, which acquired Spectramind to achieve inorganic growth—Satyam BPO has grown organically. "Inorganic growth will also be critical, especially in the next two years," says M. Satyanarayana, the company's Chief Financial Officer.

The company will explore options like carve outs, strategic investment, or pure acquisitions to enhance its offerings. "Inorganic growth must complement and accelerate overall growth, build the brand, and open avenues to new customers," Krishna says. "Satyam's recent acquisitions—S&V, Bridge Strategy, and Caterpillar's MR&CA business—do all of those. Our efforts in this area will mirror the parent company's. We will focus on industries like banking and financial services, healthcare, transportation, and logistics, and services such as F&A and procurement."

Today, Satyam BPO has more than 30 clients all over the globe, representing numerous industries. Its distributed geographic model enables it to leverage its parent's 59 centers, which provide unmatched flexibility. It also enables the organization to evaluate establishment of operations in Latin America, West Asia, and the Far East.

Challenges ahead
Satyam BPO's own intellectual capacity will determine its success. "We are still in the transformational phase. Our first and foremost challenge is managing the skills pertaining to specialty requirements as the market matures in comparison with conventional BPOs," says Krishna. Leveraging newly developed and acquired skills profitably in specific industries will also be a challenge.

Satyam BPO will grow each industry practice as an individual company. As such, it must develop management expertise in addition to industry know-how, something it has done successfully for three years.

From the market standpoint, the slowdown in the US and rupee appreciation make a focus on service quality imperative. Cost arbitrage is no longer the key factor for most outsourcing customers. In fact, a recent AT Kearney study says clients want a combination of valuable services, skilled people, and cost reductions.

It also says the right talent and processes increasingly define the competitive landscape, and that profit margins will likely come down, forcing prices up. As such, customers will only purchase outsourcing if they perceive exceptional value, something Satyam BPO understands very well. Customer focus, innovation, and value are not simply terms the organization bandies about carelessly.

"In every engagement one is involved in, innovation and value matter most. If you can't quantify and demonstrate both via clear metrics, you are not at a level of quality demanded by today's customer," Roddam says.
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