Ravi Ramu CFO MphasiS BFL shares how they applied what they preach to customers on Business Process Outsourcing to their own internal processes. Making Bangalore the Finance and Accounts engine for the group’s operations around the world, resulted in a huge cost cutting and brought about tremendous efficiencies. Balaji Pasumarthy of businessgyan talks to Ravi Ramu.

Balaji: Is there any innovation, best practice or methodology that you have adopted in your organisation that you would like to share with readers of businessgyan.

Ravi Ramu: I think in-sourcing that we implemented in the accounts/ finance departments throughout our organisation is something that we are proud of and would like to share with others. During the year we have in-sourced or transferred the operations of the accounts department from more than 12 offices worldwide to Bangalore, and this has been a terrific experience. We in-sourced the full range of accounting and finance functions, ranging from Payroll to treasury management. In a sense the accounting engine for our entire company and subsidiaries is now in Bangalore. We have 4 offices in the US, 3 in Europe, 1 in Japan. Each of these offices had their own accounts and treasury management functions, all these now has been centralised in Bangalore.

Balaji: Philosophically is in-sourcing not similar to the business process outsourcing projects that you get from customers worldwide.

Ravi Ramu: In principal the driver is same, which is cutting costs by moving processes to a lower cost location that is India. But in terms of implementation, doing a project of this kind internally has its own challenges and nuances. Also the Business Process Outsourcing that we do as a company is not in the areas that we in-sourced. But sure with this experience it is possible that we might offer this expertise to our customers.

Balaji: What are the benefits of in-sourcing?

Ravi Ramu: Apart from the obvious cost benefit, what is of even more importance is the shear efficiency that this brings about; it translates to speed and accuracy of decision-making. Now management information reports, which used to take a day to prepare is possible within a few hours. in-sourcing has cut down on a lot of duplication of tasks across locations, Earlier a lot of time was spent in getting updates from branches, clarifying data, follow-ups on just getting information etc. A lot of unproductive time has been cut down.

Balaji: Things like reconciliation, etc?

Ravi Ramu: Exactly, be it branch reconciliation, inter company reconciliation, bank reconciliation you name it. Now an accounting entry is passed once at Bangalore. There is no need to duplicate the work. It is because of this that we were the first to declare our quarterly results during the year. Information for decision-making is also very easily available now. Linking revenues and costs to contracts, receivables collection and management is easier since there is no error or delay in getting the right information. We now drive the process of collections from Bangalore.

Balaji: Could you give us a flavour of the extent of in-sourcing, what are the areas that have got In-sourced?

Ravi Ramu: It is in-fact very comprehensive, now even the invoicing across the world is done from Bangalore. Treasury, payroll, bank reconciliation, contracts, vendor payments, everything is centralised in Bangalore. Unlike other organisations where the corporate office is like a post box to which managers from all around send reports and so much time is spent making reports to send to the Head Office, in our case the Corporate office becomes the disseminator of useful information on which managers can act.

Balaji: Is there some loss of flexibility for managers at various locations, does centralising everything in any way curtail on some efficiencies which might be due to the decision making authority that the managers in each of these locations have?

Ravi Ramu: What is being centralised are various processes, and having the complete data is now in one location. The decisions are still made at various locations. Of course there are some tradeoffs. For instance the manager in a US office may not have the convenience of just going to the next room and asking the accounts person to give some reports. But then the same request is handled centrally. The manager sends his request and the team in Bangalore prepares it and sends it. With the 24/7 concept that we are so familiar in this industry, the manager gets the required information in a few hours. More over because of the 12-hour time difference if the manager sends a request when he is leaving the office in the evening, the information is available with him when he comes back to work in the morning. The other important thing is because of this in-sourcing now people at various locations need focus on their core activities rather than spend time on culling out data and other accounts related work. Knowledge sharing is optimised, analysis, trend analysis all such information is now available with ease. There are some changes perhaps that might have happened in the way that reports were presented at various locations. Each manager might have had his own favourite formats of getting various reports, but we tried to provide the information in a manner that various people were used to and over a period of time made changes to make it more uniform. This way there was very little resistance to the change in process.

Balaji: How did you go about implementing this process? Was this a project, which was announced and debated in the organisation? What were the teams involved?

Ravi Ramu: One belief that I have is that one should not look at projects like this as Rocket Science. And this could be true for any transition management exercise. I know that typically what management consultants would do is give an exercise like this a big name, to get peoples attention and commitment, and then form committees etc. etc. But the way we did it was totally different from this usual change management approach. We did not have any name for this initiative and we started first with one process the Payroll process. At this stage we did not even speak in terms of implementing an ERP package. We just took up payroll and in-sourced it to Bangalore. We showed that we could deliver pay checks around the world on time from Bangalore, we gained confidence both for the team which was implementing it and others in the organisation and then went about taking over more processes. But what is crucial like in any change management process is complete support from the top management.

The advantage of making it a low-key affair is that, the people in the implementation team can believe that something like this can be done. There are no risks of losing face in public; this fear of failure could become a deterrent for people in the team. There is no need for big committees etc. Since the task taken up at a point is very specific and “not large” it becomes easy to implement. I believe in showing people small steps at a time and taking those steps in a firm manner. This way one actually travels a longer distance. I believe we implemented the ERP in the quickest possible time of just 3 months.

Balaji: You were saying that this essentially was not an ERP driven project. So how was this really done?

Ravi Ramu: When we first in-sourced we used basic accounting packages like Quickbooks etc. The idea was to first make a process change and then implement an ERP.

Balaji: I believe in a lot of cases it is the other way round. One implements an ERP and while doing so a lot of processes are reengineered.

Ravi Ramu: Sure, but since we were taking an identified process at a time we did not start off with the ERP, though we knew that it will be coming down the line. The first priority was to identify strong processes and have them running and then implement the ERP. If we had started it off as an ERP project it would have looked big and could possibly have run into a lot of implementation issues as it happens in such projects. If we have the philosophies in place, the philosophy of in-sourcing, of managers at various locations being willing to transact and get information from a remote location in Bangalore and so on it becomes easy to implement an ERP later. More over if we had implemented an ERP over the earlier processes we would have had to have people trained in that ERP in all the 12 locations, now we need that expertise only in Bangalore. This approach worked out much better because we had first got the philosophies right and then implemented the ERP. It was because of this reason we were able to implement the ERP so fast. It is very similar to wanting to win the world cup; the first thing to do is have a great team in place. The approach was a bottom up approach with support from the top, since we were taking up small bits at a time, there was no need for parallel runs, transition plans, top level meetings, dealing with egos of various people and other such issues.

Balaji: Did you encounter any resistance to change?

Ravi Ramu: It is but natural. But it wasn’t much since we were tacking up one process at a time. For instance when we started with the US payroll. There was anxiety within the team as well as I guess elsewhere. We have 350 people in the US and had a person there handling the payroll. The questions being asked were like, “What if there is a mistake? What if the payments get delayed?” There was a real concern that if this were to happen people might leave our company. Unlike in India people in the US have a lot of payments to be made immediately on receiving the monthly paycheques, payments for various loans, mortgages etc. and a delay of even a day would affect all these personal payments. The concern was definitely there.

Transferring accounts which are anyway being handled in a particular location, is in any case a tricky process, people do not want to disturb a process that is working without any problem. But we had the confidence that it could be done, and went about delivering the results. The best way to tackle any hitches along the way is to have direct and specific dialogues and sort out the issues with the people concerned.

Balaji: What about sorting out local issues like, country specific tax laws, accounting and reporting procedures and such aspects.

Ravi Ramu: While we were in-sourcing we were also out-souring. For instance we have local experts in all these countries who advise us on various local tax and regulatory issues. So though the data processing etc. happens centrally we do not lose out on these location specific issues. We also had people from our team in Bangalore visit various locations gain experience first hand on how the process was being managed at each location. We also have people visiting these locations say once a year. But these costs are marginal compared to the savings achieved. For instance if we have to employ someone in the US for accounts we would have to spend around $75,000/- which is roughly Rs.35 lakhs. For an accounts person of similar skill in Bangalore the salary would be around Rs.3 to 4 lakhs. That’s a huge saving. Even if we add any communication and travel cost the in-sourcing model is still a winner.

Balaji: Did you cut down on the number of people also since you were reducing duplication of work?

Ravi Ramu: This is more of a costs play than a numbers play. We in fact did not reduce on the number of people. But we saved a lot of money in-sourcing to Bangalore. And the benefit from saving in time, effort and shear efficiencies is really tremendous.

Balaji: Going back to your approach of taking small steps and achieving small victories, rather than announcing a grand project and going about implementing it; I was wondering if there would be any issues of the team’s success getting recognition and rewards, after all in large organisations the champions and people who save the day would be getting the recognition. This could be an issue for most support functions, because as long as things are going smoothly and efficiently the team is not even noticed. So how do benefits from process improvements etc. get measured or noticed in an organisation. Any comments?

Ravi Ramu: You have an very interesting thought there. I think this is something that I would like to share with my first down. You are right that if a song and dance is not made about a project it may not get noticed. A low-key approach has its advantages as we had discussed earlier but this recognition aspect is something interesting that you have brought out.

Balaji: So what motivates your team and you personally to make such process improvements?

Ravi Ramu: I think the motivation is more internal, than a quest for some tangible reward. It is the sheer internal need to become more efficient, do things in a better way and identify these needs and make the team act on it. One must recognise a job well done by the team members and share success with each of the team members. The reward is the sense of satisfaction that one has on seeing a job well done. There are a lot of things that drive you, not necessarily the applause of others, like being part of a world-class team and achieving something tangible. You do things more because you want to do it. The rewards may not be apparent but they will happen along the way. It is like telling your wife how much you have done for her. No amount of words can convey this other than her confidence and belief in you. This happens over a period of time and naturally. It is always for others to realise that there is value in what has been delivered. At the same time as a team leader it is very important to carry the team along and recognise and spend some time and words on every small success. To avoid any de-motivation the team leader must motivate the team internally. Managements too need to be fair and reward long term process driven results.

Balaji: Did Internet, and related technology help in any way driving this process?

Ravi Ramu: Yes, because we are able to get the data directly from various banks etc. But then again, the crux in this project was not technology as much as the mind set. At one stage we were even scanning data and sending it across. So it is more an issue of people taking the responsibility for in-sourcing, having the willingness to do it and acting on it.

Balaji: Thank you for sharing your experiences with our readers. I am sure we will see a lot of companies now implementing in-sourcing.

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