Rajiv Raghunandan currently runs the Sales & Fulfillment Practice at Infosys, BPO and has been with the organization since Infosys began the BPO business, eight years ago. The practice, which served the very first Infosys BPO client, has grown consistently and is today a $50 million portfolio.
SSON: Rajiv, thanks for joining us. Can you explain the term 'customer-side outsourcing' and how this is actually different to traditional order-to-cash as a business process?
Rajiv Raghunandan: Since starting out in the business we have come to realize that traditional order-to-cash largely focuses on certain aspects of the customer value chain, starting from when the sale happens. So it supports the execution of the sale, to some extent, and then largely manages the realization of cash. If you look at it from a service provider perspective, this comprises the enterprise finance processes which sit under this bucket, and some of the front-end CRM world within order-to-cash, either in the context of order taking in retail businesses or in the context of collections.
But there is a whole world that sits between front-end customer service and back-end enterprise finance processes, which is not included in the G&A cost line. This is in their cost of revenue; and then there are other processes that are more end-to-end, holistic, and go beyond order-to-cash.
Typically, these process cycles include what happens before an order comes in, i.e you generate a query or quote and manage the conversion process, which forms the inquiry-to-order process or the cycle that extends from the time you make a sale to actually fulfilling the sale. This is the backend cycle that fulfills that order and is termed 'Plan to Van.' It involves the whole distribution and logistics planning.
So, picture a diagram that has multiple circles and intersections. Let's say order-to-cash is one circle, but you have all these different circles that are behind and after or above and below what is traditional order-to-cash. Each of these circles touches the customer in some form or another. So, in summary, we've tried to expand the definition of order-to-cash and as a result have discovered that we are not even in the realm of order-to-cash anymore. It's almost a whole different offering with order-to-cash being only a small component of this.
SSON: So this terminology considers the end-to-end process now in order-to-cash. Explain where this process begins and ends and how Infosys is accommodating that.
RR: I think the way we look at it in Sales & Fulfillment, the process really begins whenever any of our customers or clients engage in their sales cycle. So it could begin from the time our client's sales team looks at next year's targets, figuring out what their target lists are -- so all forms of sales support before the actual sale is made, eg, account planning, research and customer profiling -- to when a customer request comes in, to when a report is generated,â€¦until the time an order is actually received from the customer. All of this is covered in this space and generally is not included in traditional order-to-cash, because these activities happen before an order is generated.
The other aspects of this are related to upstream/downstream processes. Conventional order-to-cash is really focused on executing an order and then there's a 'black box,' where a lot of stuff happens, and an invoice is generated. That's how service providers have traditionally looked at it. But we are focusing on what that black box is. You can feel that black box; it's all of this stuff around planning an order, fulfillment, inventory management, looking at whether material needs to be sourced on back order and how that is integrated with the sourcing engine.
It also includes the whole logistics and distribution planning activity; the after-sales work, which again conventional order-to-cash may not look at, specifically, in the technology and some of the manufacturing industries where there's a whole lot of service revenue.
I think all of these activities are somewhere in and around order-to-cash. Infosys has defined a more holistic, end-to-end offering that in a lot of ways is more meaningful to the customers. I think it's more transformational in nature because these areas are traditionally where a customer or a client would not look to outsource because they are considered strategic or core. But I think we've been able to work with some of our customers to break that barrier and that's where we believe it's truly a transformation because it can open up a whole new market that conventionally did not exist.
SSON: How does this shift industrialize the specific business process?
RR: The fact that we industrialize these processes has enabled us to break open a market that possibly did not exist earlier. What I mean by that is: the moment you get into stuff such as distribution planning, service contract management, warranty management or inventory management, you are getting into a very specific industry segment or a business. I think industrialization is an end-product in order to make this service meaningful and marketable. We picked a whole set of businesses where we had a certain amount of critical mass and experience and took what was a horizontal process and virtualized and industrialized that service.
That has given us an opportunity to break open markets in each of these industry segments, so for example we have an offering within the sales space for television networks and media companies around traffic management and ad orders coming in for television stations and radio networks. Again, it's order-to-cash or order management, but it's very clearly different. If we were to go with the standard order-to-cash solution to these businesses, we would possibly get thrown out of the room.
Another example is around warranty management for a leading construction and mining equipment manufacturer. Again it's a very specific offering around that space. Advertising order management for newspapers, represents a whole new business because the industry is different, so that's something that we've worked on. Also, directory management could again be ad orders for space in telephone directories. And of course on the software side, if you look at the pricing and licensing for software, the order-to-cash lifecycle is again a very different process. I could go on and on, but I think we've been able to take portions of the offering and industrialize them, which has added to the strength of the offering.
SSON: That's interesting. You mentioned the different verticals you are working with -- can you name some clients who are currently applying these models?
RR: Well, I can't really name the clients due to confidentiality reasons but suffice to say that about 25% of the over 90 Infosys BPO clients have adopted this service. They range from global leaders in technology such as Cisco to CPG majors such as Procter & Gamble.
We do see a pattern in the types of customers that are adopting this service. Specifically, there are three types of customer segments that have adopted this service more than others:
- Mature industries that are significantly used to outsourcing; they have done the first wave of the classical horizontal BPO, whether it is finance, HR or procurement, and are looking at what's next and where they can drive greater value into the business.
- New clients that don't have that much experience in outsourcing, but are really growing in emerging markets, such as the Middle East, Asia, Eastern Europe and Latin America. These are generally consumer product companies, retail companies or even technology companies that are looking to expand.
- Other customers that are not looking at outsourcing just as a means to cut their G&A costs, but looking at outsourcing as a way to fundamentally change their cost of goods sold or their cost of revenue.
SSON: What have been the significant changes to their return on investment, if you like, or how is this adding value to their organizations?
RR: The classical return on investment is about how you can do more for less and how to bring about more efficiency -- so greater productivity and maybe some more compliance and reporting on information visibility. That's the classical value proposition for a typical process. But given that a lot of this work touches the customer and the revenue of our customers, it allows us to add value, largely on the revenue side and not just on cost.
So really I think the offering allows us to play in areas where we are able to impact business metrics, which are far more relevant and meaningful for our clients and the big business metrics are really revenue enhancement, revenue assurance and preventing revenue leakage.
SSON: Is this strategy specific only to Infosys? Or are we seeing it selsewhere?
RR: We are possibly the only provider who has brought all of these pieces together into what we call a Sales & Fulfillment BPO. I don't believe that the pieces by themselves are fundamentally new, but there are not too many players out there bringing them together in this fashion.
As part of this offering, we are invigorating conventional service lines of BPO and IT service providers, such as technology, consulting and operations. You could have a consulting firm who's looking at taking out the inventory from their supply chain but they look at it only from a consulting perspective. Our offering gives us the ability to not just engage upfront and consult with them, but also to figure out opportunities to bring technology into play and how we can actually take on the process to manage it more effectively and drive revenue and business benefits to the client. So I think in that sense, the strategy is very specific to Infosys.
SSON: Rajiv, can clients simply outsource an order to cash 'mess' and have it 'fixed' with the service that you're offering? Is it easier for them to do that now than in the past?
RR: That's always a tough question because as a service provider we hate to take on a 'mess.' But you're right, given the fact that this offering is a lot more holistic and end-to-end than order-to-cash, it does give the client an opportunity to give the whole piece away and hope for it to be fixed. And, yes, it is a lot easier for clients to do so in this model as opposed to a stand-alone, order-to-cash kind of model.
This service is a lot more end-to-end and there are multiple partners in the process that are able to integrate business issues. As a result, the ability of this collective ecosystem to fix a client's 'mess' is a lot greater than in a conventional BPO order-to-cash engagement.
SSON: What other changes do you envisage in the financial BPO space over the next five years?
RR: We started off in order management and then moved to order-to-cash, and somewhere on this journey we moved into to sales and fulfillment BPO, and thus beyond the conventional financial BPO space.
Our stakeholders are no longer just controllers or CFOs; obviously the CFO is a key stakeholder, but our stakeholders today include the heads of sales, marketing, supply chain, quality, distribution and logistics. Hence, we have actually moved beyond finance BPO and this space is probably going to continue to change and evolve.
There are three key secular trends to consider:
The first trend is the move away from some of this work being looked upon purely as finance BPO; it no longer is that.
The second trend is the aggregation of different sorts of services to provide a more holistic service, and we just spoke about that in the previous topic, Today, a 3PL can do what a conventional BPO can do, and today, BPOs have partnerships with some of these physical inventory providers. And that's just an example of what I believe is a secular trend of different sorts of service providers coming together to form an ecosystem that meets a client's end-to-end process needs a lot better than before.
The third trend is the changing focus from General &Administrative cost to Cost of Goods Sold and Revenue. Any BPO activity where we can help our clients actually reduce their cost of revenue, cost of goods sold, or even increase the revenue, is going to hold the key to growth in the next decade.
SSON: What role will technology play in all that you're introducing in the next five years?
RR: I think that technology is going to be absolutely integral to this whole journey and it's also not just technology that a services provider like Infosys can bring to the table. It's about what we call 'an ecosystem of providers.' You will have specialized technology providers who own a very small part of the value chain but understand that space so well that their technology has significant value to a very large outsourcing contracting kind of player.
Technology also has different hues and dimensions; generic business process related technologies such as workflow management, workforce management, and information management are integral. But I think very specific functional and industry specific technologies will have a greater role to play in the coming decade and that's where this ecosystem will play a key role because no single provider can bring to play all of the technology that is relevant.
SSON: And finally, Rajiv, in your own view, in today's markets, how does outsourcing order-to-cash services, and indeed other financial services, compare to automating them in-house?
RR: For a conventional order-to-cash system I think in-house automation is a fairly good solution and possibly as cost-effective as outsourced partnerships.
SSON: It's very honest of you to say that!
RR: Yes, and I say that because the view of conventional order-to-cash is fairly transactional in that sense. However, when you start talking about a more holistic and end-to-end view and go beyond pure order-to-cash into what we discussed as Sales & Fulfillment, then the potential automation is not limited to just in-house processing. It is now applicable to the extended value chain and that's when in-house automation becomes a sub-optimal solution to outsourcing the process.
SSON: So, can a large Fortune 100 consumer products major automate their order-to-cash process?
RR:That's one thing and it may be doable, but if they were to look at automating all of their customer-facing back-office, that's a different ballgame, simply because there are multiple service providers who are integral to their value chain who are not in-house. For example, say they have a third-party logistics provider, an analytics provider, and Infosys as their technology service provider -- so somewhere along the line, their value chains have become so evolved that their integral businesses have multiple service providers. And this offering today, which is way beyond order-to-cash, really cuts across multiple players and hence I think the in-house automation solution is no longer feasible because the underlying knowledge, the underlying expertise, resides in very different entities today.
SSON: Thank you, Rajiv.