Ritesh Idnani is the chief operating officer of Infosys BPO and one of the 15 members of the executive leadership team at the Infosys group of companies. He successfully helped scale Infosys’s BPO business from $43 million in FY 2005 to $427 million in FY 2010. Based in New York City, Idnani focuses on managing Infosys’ global sales and operations across all its businesses and is responsible for driving best practices, especially in end-to-end solutions.
In part 1 he talked with Outsourcing Center’s Senior Editor about the challenges in what he called “outsourcing adulthood.” In this installment Idnani talks about pricing strategies, new trends, cloud computing and the continuing changes in globalization.
BER: Do you think the industry has matured enough so it can deliver on business outcomes rather than process metrics?
RI: Most buyers typically measure business outcomes. They rely on process metrics because that’s the only way they know how to measure effectiveness and it’s in their comfort zone. There is resistance to moving to business outcomes
We start by linking the process metrics to business outcomes. Then we ask them if they would like us to impact important business metrics. For instance, if we are running an order- to-cash process, we link our performance to a reduction in the days sales outstanding. Or find them more working capital. This is a start.
BER: Do you see buyers and service providers coming together to innovate and co-create value?
RI: I do see both buyers and service providers coming together to innovate and co-create value if they are in alignment from an expectation standpoint. Co-creation can arise through helping a client. For instance, we were working with a large client on the global data management side cutting across finished product, pricing and customer. Management of master data was in silos and there as lack of agreed roles and responsibilities. We were also missing data quality measures and procedures. Today, with a one touch master data environment, they are able to see performance indicators real time.
BER: Does the outsourcing partner’s wider expertise in a domain lead to a shift in the way clients look at problems and solutions?
RI: The service provider has to shift the discussion from core to context. Let me give you an example. Three years back buyers in the CPG industry thought processes like trade promotions were core to their business. Now they realize it is not providing a competitive advantage, so they are interested in outsourcing them. Another example is tail spend management with telco operators. We did a deal with one of the largest telco service providers in identifying saves in their tail spend. Then we talked to other telecom companies about this process. Having done it before with another telco operator shifted the discussion to what is possible with others in their peer group.
BER: Let’s talk about pricing. Is pricing an area that comes under relentless scrutiny year after year?
RI: What’s important here is the level of transparency in the relationship between the buyer and the service provider. Do they have an open dialogue about the relationship and is the relationship delivering continuous value? If not, pricing will become a discussion point.
BER: How has pricing changed in the industry?
RI: Buyers started off with head count-based pricing in the past. In the last few years, we have worked closely with our clients either providing them a transaction pricing model or linking our pricing to specific business outcomes. Bundled pricing for different components of the stack (application, process and infrastructure), gain share and higher skin in the game are some of the things that we have been working on closely with our clients.
BER: Is on-demand pricing sustainable and profitable for both parties in the long run?
RI: Yes, both sustainable and profitable. But that’s true only when a buyer offers a certain minimum threshold of volume. It works for the service provider if it can serve multiple clients on a platform.
BER: What are the important emerging trends that will impact the outsourcing industry?
RI: There are several:
- End-to-end processing. Service providers need to be able to take over a process from beginning to end which will require them to have multiple sites across the globe close to the client location in addition to offshore and near shore locations. This will also allow them to link their performance to specific business metrics
- Data privacy and security. These are crucial considerations particularly in sectors like financial services and healthcare
- Emerging technologies like cloud
BER: Globalization is clearly here to stay. What are the new global trends?
RI: Five years back everything was predominantly in India. Today we have more service delivery locations outside India than in India. Our strategy is to always be on the edge of where are buyers are. Our goal is to deliver the same unified experience to our clients regardless of the location.
Five years back 95 percent of the offshored BPO work went to India. Today buyers distribute their work differently:
- 10 percent to a location on the edge of their domicile
- 20 percent to near shore locations
- 70 percent to low cost locations
BER: Cloud computing is all the rage. What is really happening and how do you advise your clients?
RI: Cloud will have an impact on what and how we deliver. Today, we are engaged in third party implementation of process solutions for clients on their clouds (e.g. enabling a business process solution on the clients’ clouds such as order-to-cash on the top of existing ERP). We are also providing cloud strategy and adoption and consulting and helping implement cloud migration services.
We are also leveraging the internal enterprise cloud for internal efficiencies and hardware rationalization. For example, we revamped 12 server rooms and released about 4,400 square feet of server room/lab space during the year. The instance utilization has increased to as high as 90 percent at any given time.
To sum up, cloud computing activity thus far covers three areas:
- The use of cloud computing to open up new business models (BPO platforms)
- The internal enterprise cloud to drive internal efficiencies and effect order-of-magnitude cost/capex reduction in-house
- Third-party implementation of cloud-based applications for build-out of clients’