EXL Services - A Strategic Review

• First runners up position at 10th Pacific-Asia Conference on Knowledge Discovery and Data Mining (PAKDD 2006)

(Inductis (EXL's Research and Analytics subsidiary) adjudged first runner's up at the 10th Pacific-Asia Conference on Knowledge Discovery and Data Mining (PAKDD 2006) in Singapore)

• ISO 9001:2000 certified for excellence in operational performance
• BS7799 certified for information security
• OHSAS 18001 certified for maintaining and enhancing employee health and safety

2. The IT and ITES Industry

Over the past decade, the Information Technology (IT) industry has become one of the fastest growing industries in India, propelled by exports (the industry accounted for more than a quarter of India’s services exports in 2004-05). The key segments that have contributed significantly (96 percent of total) to the industry’s exports include – Software and services (IT services) and IT enabled services (ITES) i.e. business services. Over a period of time, India has established itself as a preferred global sourcing base in these segments and they are expected to continue to fuel growth in the future.

2.1 Industry structure

A number of players providing BPO services across the globe can be segmented on the basis of the business models adopted by them, such as:  

• In-house/Captive centers: In-house facilities for back-office work, mostly in the form of subsidiaries. These captive centers perform transaction processing for a wide range of processes across different business units or divisions. Eg. AOL, Citigroup, Dell, Hewlett Packard, HSBC and JP Morgan Chase
• Spin-offs of global companies: Spin-offs provide services not only for their parent company but also for a number of outside clients. Eg. Convergys from Cincinnati Bell, E-Funds from Deluxe, First Data from American Express, Genpact from GE, WNS from British Airways
• Focused BPO providers / Third party vendors (TPV): Automatic Data Processing (ADP), Paychex and Teletech
• Broad based service providers: Large consulting firms such as Accenture and PWC have established their presence in the BPO segment due to their client engagements in business process re-engineering. IT services majors such as EDS, CSC and IBM Global Services also offer BPO services due to their experience in IT outsourcing.
• Near-shoring: Activity, which is outsourced to locations, which are cheaper and geographically nearer than the offshore locations. In the current scenario, American companies prefer to outsource their activities to near-shore locations such as Canada and Mexico, while the European countries prefer near-shoring to their backyard countries like the Czech Republic, Hungary and Ukraine.

2.2 Market size and segmentation

The worldwide BPO spend during 2006 was estimated at $420.6 billion by NASSCOM. In 2007, the spend increased by 9.8 per cent year-on-year (y-o-y) to $461.8 billion. Globally, major portion of the BPO spend is concentrated in transaction, marketing and logistic services. Procurement and training services are growing at the rate of 20 per cent each.

Of the worldwide BPO spend, North America and Western Europe continue to dominate the regional spends, reflecting the differing levels of market maturity. The biggest chunk of outsourced services is from the United States. 

The use of offshore facilities to serve customers from a location that offers reliable, cost-efficient labour is a growing trend in the industry. The global locations that have emerged into prominence are India, Ireland, Mexico, Canada, Australia and Philippines, among others. 

The number of MNCs outsourcing has increased over the years due to which outsourcing has become a global opportunity. The MNCs who have presence in multiple countries have a preference for country centric delivery models. Since their demand is for global customer management solutions that are universal in nature, companies want vendors who can serve them across geographies.

2.3 Major Players 

1. Convergys Corporation

Convergys Corporation is a global leader in providing customer care, human resources and billing services.

Services

• Customer management segment: Provides outsourced customer care services, and professional and consulting services to in-house customer care operations.
• Information management segment: Serves clients by providing and managing complex billing and information software of all segments of the communications industry.
• HR management segment: Provides a full range of HR BPO services including benefits administration, human resource administration, learning, payroll administration and recruiting, and staffing services.

Verticals

Communications, financial services, government, healthcare, manufacturing, retail, technology and transportation.

Geographical presence

The company has nearly 80 customer contact centers and other facilities in the US, Canada, Latin America, Europe, the Middle East and Asia.

2. Genpact

Genpact is a global provider of business services and technology solutions, managing business processes for companies around the world. It was formerly a GE-owned company called GE Capital International Services or GECIS. Currently, GE owns a 40 per cent stake in the company.

Services

Genpact provides a wide range of services, including finance and accounting, collections and customer service, insurance, supply chain and procurement, analytics, enterprise application, application maintenance, technology integration, content solutions, and IT infrastructure and management.

Vertical presence

The company has presence across verticals such as BFSI, media and entertainment, healthcare, pharmaceuticals, automotive, energy and power, airline, consumer goods, retail and real estate.

Geographical presence

Genpact operates service delivery centers in India, China, Hungary, Mexico, the Philippines, the Netherlands, Poland, Romania, Spain and the US. It has regional offices in New York City (US), Gurgaon (India), Shanghai (China), Tokyo (Japan), London (UK). In India it operates from Halvad-Gujarat, Gurgaon, Delhi, Hyderabad, Jaipur, Bangalore and Kolkata.

3. Hewitt Associates

Hewitt Associates is the global provider of human resources outsourcing and consulting services.

Services

• HR consulting: Actuarial, retirement, healthcare, compensation and reward, organisational change, international HR, and federal consulting
• HR outsourcing: Services on benefits, defined benefit, defined contribution, health and welfare, and federal HR administration.
• Integrated HR services: Integrated health and retirement benefits, and integrated talent management.

Geographical presence

• North America: Canada and the US.
• Latin America: Argentina, Brazil, Chile, Mexico, Puerto Rico and Venezuela.
• Africa: Mauritius and South Africa.
• Europe: Austria, Belgium, Channel Islands, Czech Republic, France, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, Poland, Russia, Spain, Sweden, Switzerland and the UK.
• Asia-Pacific: Australia, China, India, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, South-East Asia, Thailand and the UAE.

4. IBM Daksh

IBM Daksh provides a comprehensive range of outsourced voice-based services (both in-bound and out-bound) and back-office transaction processing. Today, with more than 14 delivery centres in India, Daksh is an important part of IBM's 36 delivery units.

Services

Customer care services, technical support services, outbound collections, telesales/ telemarketing, transaction processing and back office services, and re-engineering and value added services, voice-based, email, data management and blended services like optimising resources of an entity.

Verticals

Banking, insurance, retail, technology, telecommunications and travel, and transportation.

Geographical presence

India, the US, the UK, France, Germany and the Philippines.

Alliances and tie ups (recent tie-ups)

• Financial Alliances: Citigroup, CDC Capital Partners and general Atlantic partners.
• HR Alliances: Mercer Human Resource Consulting, Ernst & Young ESOP Structuring, and Egon Zehnder & Korn Ferry.
• Infrastructural Alliances: CB Richard Ellis and Infrastructure and Facility Management.
• Technology-Hardware Alliances: HP, IBM, SUN, CISCO, AT&T, NORTEL etc.
• Technology-Software Alliances: Microsoft, Aspect, Veritas, HP Openview etc.

5. Infosys BPO Ltd.

Formerly known as Progeon, Infosys BPO is the business process outsourcing subsidiary of Infosys Technologies.

Services

• Customer service: Contact centers for sales, and customer service and helpdesk.
• Finance and accounting: Accounts payable, accounts receivable, collections and credit management, billing and invoicing, finance planning and analysis.
• HR outsourcing: Recruitment and staffing support, workforce deployment, hr administration, benefits administration, HR helpdesk.
• Knowledge services: Credit analysis, equity analysis, economics research, industry and company analysis, financial planning and accounting, presentation support.
• Order management: Quoting, order entry, order management, expediting / substitution, contract renewals and management, customer support and logistics support.
• Procurement: e-business solutions, tactical procurement, strategic procurement, compliance and performance management, and spend analytics.

Verticals

The company has a presence in BFSI, telecom, manufacturing, healthcare & life science, automative & aerospace, retail, transport, energy, and utility.

Geographical presence

India, Czech Republic, China, the Philippines, Lodz, Bangkok and Mexico.

6. Wipro BPO Services Private Ltd (erstwhile Spectramind)

Wipro BPO delivers long-term benefits to customers through business process re-engineering, integrated technology and knowledge services. It was formally known as Wipro Spectramind.

Services

• Business process outsourcing: Customer interaction services and industry administration services.
• Consulting: Related to business, technology and quality.
• IT services: Content management and business process management.
• Product design: Hardware design and system software development.

Verticals

Banking and capital markets, insurance, travel and hospitality, hi-tech manufacturing, and telecom and healthcare sectors.

Geographical presence

Wipro Ltd's operations span Japan, the US, the UK, Canada and other Asian and European countries. However, its BPO operations has presence only in India (Delhi, Mumbai, Belapur, Chennai, Kolkata, Pune, Bangalore, Hyderabad), China (Shanghai), the Philippines (Cebu) and Romania (Bucharest).

2.4 Margins

The ITeS/BPO industry is highly competitive. The significant competitive factors are service quality, price, reliability, breadth of services, data security, industry experience, scalability, technology capabilities and disaster recovery capabilities. The industry players include small niche players, large conglomerates and consulting companies. Competition also comes from existing as well as prospective clients who are or can perform these services in-house and have the scale and resources to offer these services to other customers.

2.4 Indian context

Although the ITeS industry in India has existed since the late 1980s, outsourcing emerged in the early and mid 1990s. This emergence of outsourcing was an outcome of the reforms post 1990 in general. More specifically, it gained momentum after the introduction of New Telecom Policy of 1990 and the liberalization measures post 1994.

One of the first outsourced services was medical transcription. Outsourcing of business processes like data processing, billing, and customer support began towards the end of the 1990s when MNCs established wholly owned subsidiaries that catered to the process off-shoring requirement. This initial phase was also marked by the absence of vendors with proven capabilities. The next phase of evolution saw the rise of third party service providers or vendors (TPVs). Their value proposition was the cost advantages that an Indian player could offer and the ability to leverage the time zone difference to process non-real time transactions. The current phase of evolution in the ITeS BPO industry is marked by the proliferation of players and service lines. There has been further development of process and regulatory standards. Also, there was a change in the cost economics, with the decline in labour arbitrage being offset by process efficiencies and scale. There was also some amount of consolidation noticed in the industry.

2.4.1 Key trends in Indian ITES industry

Abundant talent pool, cost advantage, rapid infrastructure development, and favourable political environment are among the few drivers of the Indian ITeS industry. After gaining expertise in various service lines, Indian ITeS industry is moving ahead in vertical specific outsourcing activities. The Indian ITeS industry recorded a growth of 32 per cent in 2006-07, a slowdown from the previous year's rate of 39 per cent. Exports, which form the bulk of the revenues, were primarily hit by the appreciating rupee and grew by 33 per cent y-o-y. The domestic revenues too showed a slowdown and posted a 20 per cent of growth against a robust 52 per cent growth last year.

Manpower pyramid in a typical BPO

Revenue mix by service lines in India

Customer care continues to be the largest segment in terms of revenues with 44 per cent share in the ITeS/BPO pie. It grew by 28 per cent in 2006-07 which is comparatively lower than last year's 37 per cent. The HR and finance & administration segments had grown by 33 and 32 per cent respectively in 2006-07.

 The analytical and knowledge management services have played a major role in the growth of the ‘other' service line segment and is consistently notching up very high growth rates. The focus of Indian ITeS firms has shifted to higher value added segments like KPOs and LPOs, which form nearly 60 per cent of this segment

Consolidation in the industry continues

In 2007, Indian ITeS players were actively involved in outbound acquisitions. They are constantly on the lookout for acquisitions and establishing their presence beyond local boundaries. This is borne by the fact that nearly 70 per cent of the acquisitions done by Indian firms are outbound in nature.

 Indian firms are focusing on verticals other than BFSI segment for consolidation.  The past year has seen Indian players going in for acquisitions in the healthcare, hi-tech and telecom segments, primarily in the high value, KPO service line.

Capacity expansions continue unabated

Indian ITeS players are extending their presence in and outside India through acquisitions, market penetration, unit establishment and various other ways. Indian players are setting up their delivery centers and offices in different regions of the world.

With the successful establishment of the offshore delivery centers, Indian players have also geared up their business in near-shore establishment. Players like Genpact, Infosys BPO, Wipro BPO, and Tech Mahindra have set up their delivery centers in regions close to their clients. Mexico, Philippines, Ireland and Czech Republic are the preferred destination for the ITeS players.

The expansion and growth of Indian ITeS industry also resulted in an increased demand for the human resources. The Indian ITeS industry employed around 553,000 people in 2006-07 and estimated to hire 704,000 people in 2007-08 with y-o-y growth of around 27 per cent.

Venture capital and private equity investments in India

In recent times, the IT-BPO segment has been a popular choice for funds directed towards entrepreneurial activities, consistently attracting the highest levels of private equity and venture capital investments in the country.

Pricing models in the industry

The maturity of the third-party model has brought with it a variety of pricing and engagement models. Some of the pricing models seen in the industry include:

• Per-unit time / variable cost - At present, this is the most common pricing model in the industry. The client guarantees a minimum amount of business and is billed on an hourly basis or per seat basis.
• Per seat or full time employee (FTE) per month - The client guarantees a minimum amount of business for a number of FTEs on a monthly basis.
• Activity based billing - Billed by the volume of activity (i.e. per call, per statement or per line transcribed)
• Outcome based - Billing based on quantifiable value delivered (i.e. success rate, conversion ratio etc) - based on mutually agreed parameters.
• Hybrid pricing models - Combination of 2 or more models. Typically incorporate a fixed volume rate plus a marginally higher rate for peak load absorption.

Onshore expansion by Indian companies

While leading global service firms announce expansion plans in India, Indian vendors continue to expand their onshore presence. During 2006, Indian IT-BPO players invested nearly $500 million on consolidations in US alone.

Indian ITeS companies are acquiring companies in the US and other locations with several objectives. These include greater access to new markets with ready resources, clients and revenues, new skill sets or domain and process expertise in the target market, new technologies and greater credibility with target clients. This also highlights the transformation of offshore outsourcing to global sourcing.

Other trends

• Emergence of domain/industry specialized BPO.
• Service-providers are now migrating to higher-end strategic processes.
• Paradigm shift from cost-saving initiative to the one that is adopted for realizing process improvements, and enhancing efficiencies which has resulted in maturing of the client-vendor relationship, to a partnership based approach.
• It has been identified that traditional sources of cost advantages - manpower and infrastructure costs, may no longer be sustainable.
• Service providers are diversifying their geographical bases, by creating new infrastructure in Tier II cities, in order to leverage the lower costs and lower attrition rates, as well as to find access to a larger talent base.
• Leading service-providers are leveraging clients concern of Migration strategies, risks and costs to differentiate their service-offerings by providing value add services during the stages of transitioning including knowledge management, performance improvement, base-lining etc.

Regulatory and legal framework

The Indian government has enhanced the country's attractiveness as an investment destination for ITeS firms through various policy measures. This is in line with the ITeS industry's potential to generate revenues and employment. The promulgation of the Software Technology Park of India (STPI) scheme and the National Urban Renewal Mission is the most successful measure for the development of the country's IT sector. Some of the benefits of these policies and facilities are:

• Tax holiday for a minimum period of 15 years, subject to certain conditions.
• Procuring capital goods and raw material at nil rate of custom duty.
• Manufacturing IT software at nil rate of excise duty.
• Benefits in income taxes
• Fringe benefit tax (FBT)
• Telecom infrastructure: Telecom costs constitute 10 per cent of the operating costs for ITeS companies, as compared with 1-3 per cent for software services companies. The acceleration in the growth of telecom infrastructure has played a major role in the healthy performance of Indian ITeS industry.

3. Strategies of EXL Services

3.1 International Strategy

It is long standing belief that BPO industry is the back office of the large MNCs in the under developed countries. But this belief is challenged by emerging BPO companies like EXL service which has become multinational themselves.

3.1.1 Overseas Offices

EXL was first incorporated in US by then CEO and Managing Director of Ernst & Young Mr. Vikram Talwar and Mr. Rohit Kapoor of Deutsche Bank. With a client base of more than 60, which is spread across the world, EXL has set up Sales and Marketing offices in US and UK and Consulting Engagements across the world (US, UK, Africa, Australia etc.). Their New York office is the Global Headquarter of the organization. It also works as a Sales office, Technology Hub and an Inductis office. Similarly they have office in Jersey City in New Jersey (EXL and Inductis office) and Sunnyvale in California (Technology Hub). In UK, they have a sales office in London. In Singapore, they have an office of Inductis. Through these offices they are more close to their clients which enables them to cater to these clients more efficiently. Also since it is headquartered in New York, it is more like an US company run by Indian professionals and has only their delivery centers in India. This differentiate them from other BPO companies in India which have head offices in India and have only sales and marketing offices in US or in any other country. This strategy enhances their image in the market and enables them to capture more business.

3.1.2 Delivery Center in Manila

As mentioned earlier, EXL services converting into a multinational company by expanding their delivery centres across different parts of the world. Initially, EXL had delivery centres only in three cities in India (Noida, Gurgaon and Pune). But in April 2008, they have started their first Delivery centre outside India in Manila, Philippines. The management of EXL views this as an important first step in EXL’s strategy of providing seamless global delivery from countries around the world. The EXL Philippines facility has a total seat capacity of over 950 seats and provides a world-class and modern environment for EXL’s professionals. The new facility is located in OneE-ComCenter in Pasay City, Metro Manila approximately 30 minutes from Makati City and the Manila International Airport. The site is Philippine Economic Zone Authority (PEZA) approved and adjoins the Mall of Asia, the third largest shopping mall in Asia. EXL sources states that the Philippines facility has been built to meet the expanding demands of EXL’s existing clients in multiple industry verticals as they spread their outsourcing operations globally. Through this expansion, EXL seeks to provide a range of outsourcing services from Philippines for both new and existing clients. Their reason behind selecting Philippines to setup the facility is the voice capability of the employees of Philippines to handle international clients. They are also planning to expand to Romania and Croatia, which also have a good workforce with good language skills which is necessary for the BPO industry.

The Philippines operations will be led by Mr. Sumir Anand, who was the Business Leader of International Delivery of EXL, as the Vice President and Global Head of Infrastructure and Strategic Initiatives. Instead of hiring someone who has prior experience in a company in Philippines in similar sector for leading the operations of the new facility, they have selected one of their older employees. This move shows that they are following a Global Strategy instead of a Multi-Domestic Strategy and this is quit reasonable as the processes of a BPO company are very much standardized and they mainly serve clients which are not local, but can belong to any country in the world. One of the main things necessary for a BPO industry is operation efficiency and hence a former employee who is well accustomed to the work culture and operational strategies of the organization is the best fit for such a job. They may hire some HR managers from the local pool of talents as most of their employees there will be local and they will need some person with experience of handling local employees.

One of the main challenges faced by the BPOs of India is the appreciation of the rupee against the Dollar as they value most their projects in terms of dollars and they have their operations back in India. Most of the BPO companies hence have 80-85 percent of their cost base in rupees. But for EXL this ratio is only 65 percent of their total cost base. This provides them better return than competitors even when the rupee is appreciating. Moreover, EXL have a diversified revenue structure where 50% percent of the revenues come in pounds Sterling and only the remaining 50% is in Dollars. This also helps them when the rupee appreciates against Dollar, but not against Pound Sterling.  

3.1.3 Acquisition of Inductis

In July 2006, EXL Services acquire Inductis, a leading strategy and analytics company serving the financial services and insurance industries. As a result of the acquisition, Inductis became a wholly-owned and independently branded subsidiary of EXL, focusing on consulting, research and analytics. Through this acquisition EXL has expanded the types and sophistication of their research and analytics services and have developed a world-class analytical outsourcing service offering.

Inductis is one of the largest and most successful analytics players with a global delivery model in the marketplace with 250 employees based in offices in Gurgaon, New York, New Jersey, and Singapore. It helps large companies leverage strategy, analytics and technology to make better decisions. Inductis was founded by an experienced team of finance, technology, marketing and operations professionals with years of consulting, data analysis, technology and outsourcing experience. In 2005, Inductis achieved revenues of approximately $20 million. Inductis focuses on analytical consulting, management consulting, and analytical services. Inductis specializes in identifying high-impact problems and opportunities where they can generate results quickly, creating immediate and lasting value. Key analytical consulting focus areas include marketing analytics such as customer acquisition and retention, credit risk analytics, customer data integration and fraud detection. Management consulting offerings include marketing strategy, product and service strategy, re-engineering, global resource optimization and outsourcing. Analytic services offerings include analytics staff augmentation, lead generation and marketing campaign management etc. Inductis counts three of the top 5 credit card issuers, two major retail brokerage and asset management companies, a top 25 FTSE bank, a large commercial insurer, and a top 5 health insurer among its many clients.

While commenting on the Inductis acquisition, Mr. Vikram Talwar the CEO and Vice–chairman of EXL Services says “the days of BPOs focusing only on cost reduction are over. With this acquisition, we plan to assist our clients by leveraging our offshore research and analytics expertise and give results that would impact their bottom line”. This statement explains the core strategy that EXL have behind the acquisition of Inductis. In fact, Inductis is more of an addition to the value chain that EXL has created so far. EXL will add the strong capabilities in quantitative analytics and knowledge of business intelligence platforms of Inductis with its existing base of services and clients in asset management, investment banking, and private equity, makes for a formidable and compelling business proposition. This combination will make EXL equally strong in creating solutions and delivering them to their clients.

This acquisition enables EXL to compete with bigger players in the market such as TCS, Inforsys who not only deliver the solutions but also produce them in-house. Their selection of Inductis was also very crucial. EXL evaluated many high-end research and analytic companies, but they preferred Inductis because it has the critical mass of talent, as well as the management team and delivery capabilities for complex strategic solutions which was necessary for EXL to satisfy their clients' needs as they think about BPO more strategically.

                                   SOLUTION                                                      SERVICE

                 

                  

                                                                                           BEFORE ACQUISITION

3.2 Operations-Level Strategy

Gaining and Sustaining competitive advantages are the key to superior financial performance. Process execution refers to the company’s capacity and its abilities to produce the elements of differentiation, low cost, and quick response that customer’s value. EXL’s operations centres are currently located throughout India. This enables them to leverage India's highly skilled, English speaking, professionally qualified talent pool.

3.2.1 TQM (Total Quality Management) practise at EXL

EXL employs the TQM technique for the operations improvement. Quality and continuous process improvement has been the cornerstone of operational practice at EXL. Real and sustained improvements require investments in the right methodologies and platforms. Process Excellence is a scientific methodology that brings holistic improvements. It deploys analytical tools, best practice sharing and the employees' creative solution delivering abilities.

Formal system developed strives to build a culture of a customer focused and continuous improvement.  This function, which comprises Master Black Belts, Black Belts and Green Belts, implements initiatives across client processes, delivers process improvements, spearheads process re-engineering and acts as internal regulator and control mechanism over operations to ensure that client objectives are met. Business improvement techniques like Six Sigma methodology for reducing defects in business operations, Kaizen initiatives that stress on continuous incremental improvements in each stage of a business process, and have developed proprietary tools to identify and continue to deliver process improvements for EXL’s clients are used.

EXL's quality focus has enabled it to consistently exceed client SLA metrics, enhance productivity and quality and assist its clients in realizing significant cost savings through process improvements.

3.2.2 Proprietary tool for making the invisible process visible

Among the many best practices that EXL has implemented for effective process management, the proprietary tool ProMPT a2 (Process Management and Performance Tracking - Advanced Analytics) is a standing testimony to the commitment to quality, which EXL has developed with significant investment. This product is a comprehensive process management and performance-tracking tool, which provides senior process managers with complete dashboard metrics on an ongoing basis. It has exceptional drill down capability for identifying root causes of issues and correlation of performance to various aspects of business. In addition a whole suite of analytics can be performed to better understand process performance. This product is customizable to the unique needs of each client.

Features of Process Management and Performance Tracking Solution (Advanced Analytics) are:

• Web based tool with transparent performance tracking
• Access available to all clients
• Extensive digital dashboards - ability to drill down to group, manager, agent and parameter level
• Advanced Six Sigma based analysis - Paretos, Box Plots, Force Field, Correlation, 4 Quadrant analysis and Cause and Effect diagrams
• Transaction level capture of information
• Wide variety of standard reports (graphical and textual)
• Process audit functionality
• Improved and more scalable architecture

3.3 Marketing strategy

3.3.1 Brand building through existing customers

This is a common practice among established ITeS companies. These firms have tried to leverage their existing client relationships in order expand their presence in the BPO segment. Due to the centralization of decision making and rationalization of vendor base among global companies in recent times, such vendors are able to offer bundled contracts, which offer end-to-end outsourcing solutions, i.e. IT services as well as process outsourcing. Although, in most cases the revenues from BPO do not account for a very high proportion of the total revenues for these companies, the cross-selling opportunities on offer have resulted in an increased focus on BPO operations, for example ADS and PWC. Customer service in terms of the best in the industry makes EXL’s customers to come again to EXL. It is very evident from some of the following excerpts of its CEO as well as clients published in business dailies and reputed websites:

• EXL's CEO and President, Rohit Kapoor, stated:”I am proud to announce two new outsourcing wins, three new transformation wins, and two new expansions with existing outsourcing clients into the Philippines, all within the insurance vertical." (June 19, NASDAQ- Press releases)

• Aviva has confirmed its commitment to EXL by renewing its outsourcing contract with EXL to provide services from EXL's Noida facility through January 2012 including provisions relating to annual minimum volume commitments.
• Centrica has extended its contract with EXL for an additional one year period based on the existing terms and conditions in the Master Services Agreement between the parties. (July 14, 2008, NASDAQ)

3.4 Human Resource Strategy

EXL plans to achieve world class operational excellence and competitive advantage. And for this, the organization is working towards the Six Sigma processes. Presently, it has a skilled manpower of 10000 employees which has grown from 1575 employees in 2003.

With excellence as the key mission, accountability and ownership are the qualities that they cherish most in their employees. They believe that employees should be self-initiating rather than just relying on the organization to take care of everything. Having a sense of purpose and responsibility towards their work is what they aim to inculcate. To make this a possibility the company has chalked out two areas — ‘leadership-enablement’ (employee-centric approach) and ‘process-enablement’ (proper co-ordination of different processes). For leadership, EXL believes in creating a superior people-driven organization enabled by world-class quality processes. To ensure this the company has a well-scrutinized appraisal system. According to experts, in the BPO arena the main challenge for the organization is to manage customer expectations, do effective problem-solving, keep a tab on the achievement of targets and help an individual evolve in the organization.

In case of ‘Process excellence’, the prime concern is to formulate a work culture, where customer focus and continuous improvement are the key guiding factors. At EXL Services, the process excellence approach concentrates on speed, cost and accuracy, in improving their client-servicing endeavor. The whole mindset should revolve around customer-driven approach and this should reflect in the culture of the organization. There is a continuous effort by the HR to achieve competency, productivity and satisfaction of the employees. The idea is to ensure that nobody takes anyone for granted, but work with the idea of respecting and understanding their responsibilities, so that each individual gets equal opportunity to develop. Once the employees are able to understand the depth of individual accountability it reflects on the professionalism of the organization.

The company believes in maintaining transparency with the purpose of having foolproof systems within the organization. An individual is assessed mainly under two core areas. First, is competency in terms of goal accomplishment and the second is in terms of process accomplishment (as to how one goes about it). The purpose is to ensure that the appraisal process (which happens twice a year), is as transparent and credible as possible. There is a strong emphasis on maintaining the quality of team managers and team leaders, who influence the other employees. For this, the company has a separate management support process, which takes care of the issues of team leaders and keeps a close check on their performance.

There is a continuous emphasis on making EXL a close-knit organization, with an active participation by the top management. And this spirit is reflected in the company’s in-house corporate forum, which is a platform for the employees to voice their concerns, issues and queries. According to their HR Manager, rather than having a monthly ‘open house’ for all the employees, EXL has opted for such a forum, twice a year, for interaction between the employer and the employees. The purpose is to make it a platform for self-expression without hesitation. This also helps them test the communicative spirit of their employees. Besides this, each team regularly has a brainstorming session to be in tune with the core organization values. Usage of Intranet to give and receive feedback is also practiced.

Though the company does not have a set-system for grievance solving, the effort is to respond as soon as possible. According to the HR Manager, this boosts the credibility and enthusiasm of the employees. Though apparently the environment looks formal, the spirit is to have flexibility and informality in different processes. The company does not have an ‘open-house’, the weekly informal meeting of each team goes a long way in putting the company’s flexible work culture approach into practice. They motivate their employees to solve their issues by a face-to-face approach, rather than having a complex system of layers.

3.4.1 EXL's Recruitment process

EXL’s recruitment process is rigorous, with multiple hiring screens, which are customized to client/process requirements. They have the ability to recruit and train a significant number of employees per month to meet the rapidly expanding demands of the clients. EXL has made large investments in developing in-house training competence with centers of excellence in language skills, cultural orientation, insurance training and process / product training.

There is certification at every stage and the standards are set based on process requirements. Their language skills recruitment, training and certification process is highly integrated and its quality is monitored throughout the on-boarding process by a team of Customer Experience Executives who have been trained on EXL's proprietary tool for language assessment. The entire on-boarding process is metric driven with monthly measurement of recruitment and training quality and a capability to drill down to root causes enabling corrective action. Their values are very strongly oriented towards creating client satisfaction and business.

4. Factors driving growth of Company

1. Acquisitions: The acquisition of Inductis has given new wings to the business of EXL. Through this inorganic growth, EXL has raised from just being a service delivery company to a full solution provider.
2. Focus on Organic Growth: EXL has been more focused on organic growth unlike its peers, Firstsource Solutions and WNS Global Services that have made multiple acquisitions. Firstsource, for instance, has made seven acquisitions so far, including the largest overseas buyout by an Indian IT or BPO firm. In comparison, EXL has made only one acquisition — its acquisition of research and analytics firm, Inductis, last year. (Economic Times, September 21st, 2007).
3. Leadership: In April 1999, Mr. Talwar co-founded EXL. He is widely regarded as one of the pioneers who foresaw the huge potential that could be harnessed from a vast, educated pool of graduates in India. In just nine years, EXL has earned a leadership position in its industry through continuous innovation in its value proposition-increasing operational efficiency, enabling effective decision making and enhancing risk and control environments. He was selected as a finalist for The Metro New York Ernst & Young Entrepreneur of the Year(R) 2008 Award. According to Ernst & Young LLP, the awards program recognizes entrepreneurs who demonstrate extraordinary success in the areas of innovation, financial performance and personal commitment to their businesses and communities.
4. Efficient and cost effective operations: Company is looking forward to expand its operations to tier 2 cities, where it can get talent at less costs. Overhead costs would also be less in these cities.
5. People are the asset of the company: Company is known to take the best people from the industry. Currently it offered Mr. Kiran Karnik (immediate past president of NASSCOM) to be on its Board of Director and the offer was accepted.

5. Challenges faced by industry

1. Voice: Non-voice mix of business: Generally, firms try to balance voice and non-voice business portfolios to diversify revenue and improve seat utilization. But voice based services continue to be the major portion of business for most of the Indian ITeS firms. The costs associated with a voice-based business are high given the high attrition rates and wage hikes.
2. Foreign exchange woes expected to continue: Climbing exchange rate can potentially be a threat to the Indian ITeS industry.
3. Attrition: Average attrition rates in the industry run as high as 55-60 per cent in the voice segment and 30-35 per cent in the non-voice segment
4. Knowledge pool: In order to ensure a consistent flow of trained manpower in the future. The challenge for the industry is not in employment but employability.
5. Wage increases: The ITeS segment recorded a rise of around 8-12 per cent in pay packets. The entry of a large number of newer players into the market has also raised wages.
6. Infrastructure: The lack of infrastructure has been an impediment to the growth of the ITES industry. ITeS companies are now locating their businesses on the outskirts of mega cities owing to the acute shortage of land. Thus, development in infrastructure is needed for roads, highways, mass-transit systems, power, water, housing, upgrading the international and national airport, hotels, convention centers and international flight connectivity to cope with the rapid growth of the IT Services/ ITeS-BPO.

6.  Steps of relief

• Indian ITeS players are making use of various hedging policies and built-in clauses in contracts. Some are even looking at non-dollar denominated contracts. Also Indian ITeS players are extending their presence in and outside India through acquisitions, market penetration, unit establishment and various other ways. Hence, declining foreign exchange has no longer remained a nightmare for Indian ITeS companies
• With the maturing of the sector the wage hike rates are expected to reduce by a few percentage points. Salary increases with the large established suppliers would probably be below the industry average. Also because of the future consolidations and expansion plans of various companies issues related to labour costs can be handled. Hence, EXL has not to worry much about the labour costs.
• In order to ensure a consistent flow of trained manpower in the future, the industry needs to work with the government to introduce courses at a school and college level, which are in line with the requirements of the ITeS-BPO industry. Such kind of initiative can be started by EXL itself and gain from it.
• In India, government has tried to address the issue of infrastructure through STPI, by providing incubation office space. Large quantities of real estate are being added each year, to tackle the problem of non-availability of land. Also, the deregulation of the aviation sector and the subsequent mushrooming of low cost private airlines have provided hopes for the availability and affordability of the airline travel. Hence, EXL and other companies in the industry have a good future in India.

7. References

1. Rajeev M. and Vani B. P., Problems and Prospects of Business Process Outsourcing Industry: A Case Study of India.
2. EXL Expands Global Footprint (8th April, 2008), Company website () accessed on 18th August, 2008.
3. ExlService BPO to expand in India, overseas; to invest $8 mn by Nayanima Basu (15th July, 2007), Nerve News (), accessed on 18th August, 2008
4. Indian BPO firm EXL Service acquires Inductis by Sufia Tippu (7th July, 2006), ITWire () accessed on 18th August, 2008
6. CRISIL research report: IT enabled Services

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