ExlServices Case Study: Global Sourcing and Innovation

ExlServices

Question 1

Outsourcing BPO services especially in the information services, business process services and call center’s is becoming increasingly popular with a high demand from multinational companies. (Cronin, Catchpowle, and Hall, 2004) outsourcing is when a company obtains services by a third party to ensure smooth business operations.  Companies in the U.S and western Europe tend to outsource to developing countries to reduce costs and create opportunities for the third world (Friedman 2005). It is relatively cheaper for a multinational company to outsource their BPO services to vendors that are already established in a developing country. If they were to establish captive centers they would have to deal with legal compliances, recruitment and R&D to understand the country and the market.

In the case of Exl-services they are currently in a predicament of taking up the outsourcing of Dell’s call Centre services in India. Due to Exlservices this will give them an opportunity to expand beyond their specialization which is in the financial and insurance service sector which is a very complex industry and price protected in nature.

The benefits of Exlservices moving down market by taking up Dell’s call Centre services. Would enable them to recover from the decline of operations from Conseco. Furthermore, Exlservices value their employees and they have spent a lot of money to retain their loyalty. Moving down market will keep their employees engaged as there would be constant work to do. Dell would provide a lot of opportunities for Exlservices such as reputation and increased revenue. Taking up outsourcing for dell would provide Exlservices with a revenue of up to 10 million dollars annually.

Regarding the ExlServices case, it is wise to start the outsourcing process of their services and or move down their market since that move will allow the company to provide low-cost services to its customers. In that way, the company could start targeting the customers who prefer an inexpensive purchase by making them full-time customers so as to create consistency in the sales of the company merchandise and services provisions (Wagner and Dittmar, 2006). Such outsourcing strategy can help ExlServices or moving-down-market can provide the company an advantage that it can target customers whose aims are to purchase different products and services at their preferred prices. Additionally, such moves will provide ExlServices with an opportunity to lower its operational costs and consequently increases its revenues. 

Therefore, the outsourcing complexity would enable ExlService to provide its clients with losing to twenty-five percent to sixty percent savings regarding their actual in-house processing. Such kinds of the move will act as a value proposition strategy by the company. That is, initially, the company’s cost savings were attained through labor arbitrage. Currently, through a vigorous improved outsourced regime, the company now can exhibit a cost reduction through such process by close to additional ten to fifteen percent. The company has also developed a proprietary enterprise software known as ProMPT or the process management performance and tracking whose purpose is to aid in the internal performance by offering real-time reporting to clients. (Taylor & Bain, 2005).  That six-sigma methodology and training initiative which is achieved by the company through outsourcing has since acted as a drive process to the business by improving the enterprise efficiency in productivity.

Outsourcing in its part gives any business a competitive edge among its competitors within a specified market of specialty. Through a strategic outsourcing partner such as the Dell company, ExlService company is not only providing its customers with the best-of-breed services but also increasing their productivity while at the same time managing their in-house resources intelligently. In that way, the company through various outsourced mechanisms can surpass its competitors in the information and technology sector who have not embraced outsourcing benefits.

Initially, ExlService was on the verge of collapsing because of poor management of business risks and essentialities.  Poor management of risks could have been the reason why the company faced difficult strategic decisions concerning replacement of the reducing business from the company’s former parent. But currently with outsourcing strategies in place, the company is now in a position to share any risk with its outsourcing partner, Dell company thereby reducing the burden of struggling with those risks by itself.  In that case, outsourcing to a competent partner like Dell, the company has reduced the risk involved in having same tasks performed in-house by their staffs who maybe in some cases incompetent in such fields.

Consequently, with outsourced services and management teams, ExlService company has ensured their employees’ flexibility, in that with outsourcing, various independent tasks will allow the firm to maintain a financial flexibility during the period of uncertainty in demands. To that, the company will enjoy the benefits of scaling down or up comfortably (Taylor & Bain, 2005).   Additionally, the primary benefits of outsourcing by the ExlService is that the company during the process of looking for an outsourcing partner, it will foster business relationship and or partnership which is a beneficial factor for those multinational corporations who are employing outsourcing as a business strategy. Such relationship and or partnership will enable the company in identifying opportunities for successful outsourcing by establishing a strategy around outsourcing opportunity. That would allow the company develop action plans vital for ExlService management and improvement of those migrated processes.

Question 2

Sarbanes-Oxley business as per the provisions of section 404 of the Sarbanes-Oxley Act requires will require that Ex-service will submit the assessment of their clients internal control over annual financial reporting and the attestation by an auditor. Since this company is a start-up in this field and would likely target the middle level companies (Bernhardt, et al, 2015). This act has provided a new market for the company which is progressively innovative in the outsourcing business (Corbett, 2004). The new dimension in terms of business would mean the company would have to put in place personnel that are fit to perform the tasks before they secure the contract. This is a shift in terms of capacity building resorted to in 2000 when the company realized that most clients wanted the personnel and resources to fulfil the responsibilities to be first put in place before they could contract a given company for the outsourcing services (Frank, Finnegan and Taylor, 2004). To the company, capacity building basically entails equipping itself with the right personnel in order to meet the demands of their clients. This will therefore create need for employees who have accounting and auditing expertise and are familiar with the operations of the Act. Ex-service can successfully venture into this new market and should therefore proceed with the Sarbanes-Oxley business (Kaarst-Brown, and Kelly, 2005).

The success of this business for the company will significantly revolve around the employees of the company and the demands of the customer. The question therefore rises whether ExlService should hire experts in accounting or retain its employees and to what level (Lacity and Willcocks, 2014). Should the firm deploy more of Indian personnel compared to American for this dimension of business? Should the company utilize the existing employees who are quite familiar with the Generally Accepted Accounting Principles(GAAP)?

The new opportunity created by the market may lead to high employee turnover if the company does not critically evaluate the personnel it requires to have the services delivered to their clients (Willcocks, et al, 2004). For a company that has invested significantly in keeping its employees in order to minimize the cost associated with hiring new employees, it would be prudent that the expertise for fostering the company to a successful venture into accounting services come from the existing labor force that it has hired. The company has highly trained staff who understand the implications of the Act on GAAP. For this reason, there will be no pressing need for the company to hire expertise in this field to serve the clients (Corbett, 2004).

For various reasons the company has always been inclined to having its employees majorly being based in India. Venturing into this new market will however possibly create a shift in where the employees will be based and whether to hire more American experts (Cappelli, et al, 2010). From the internal evaluations, the company will have to conduct 80% of the tasks in the sites of the clients who are majorly based in America (Hira and Hira, 2005). Only 20% of the BPO processing will be left to the Indian employee’s contrary to the existing 100%. The need to reserve the services more for the American based experts will see the billing rise in the short run (Wagner and Dittmar, 2006). The potential of attracting many middle level companies and some giant companies will see the revenue increase in the long run. The short-term effect will not be greatly felt as the company involves in other BPO processes that generate income and could decide to shift this opportunity to its employees in America and leave those in India with the other tasks. The company should therefore proceed with the business as it won’t need to hire a significant number of experts to ensure its success in this market (Kaarst-Brown, and Kelly, 2005).

Another concern that creates the debate whether it should proceed with the business is the nature of its inconsistency. The Sarbanes-Oxley business is seasonal as most of the internal audits occur in the last two quarters of the fiscal year. The fact that the fiscal calendars for different companies vary, it is certain that at one point the company will have much more clients to attend to. The fear of the wage bill going remaining at the same level when the business is down should not be an inhibiting factor to proceeding to venture into this business (Hira and Hira, 2005). The auditors have the required qualifications to accomplish other tasks in the BPO processing such as being financial advisors and during the moments when clients are few they can be utilised in the other processes and will be receiving their damages and working at the same time (Nadkarni and Herrmann, 2010).

The most challenging issue in venturing into the Sarbanes-Oxley business is the diminished sales force of the company. When it was under Conseco, it sales capacity withered. The success of the company in this new market will be determined by its marketing and sales team (Sarbanes, 2002). For it to realize its potential in the auditing field, it must win over many clients who had other companies provide the services or were still enjoying the waiver under the Act especially middle level companies. The positive side of this experience is that most of the sales personnel were based in USA and headquartered in New York. This means that they are strategically placed to kick off the project as the company ventures into ways of handling the existing challenge with its sales capacity (Kaarst-Brown, and Kelly, 2005).

Most clients that the company anticipates in this business will be based in America where the Act operates and with the sales personnel mostly being within the market, the company has great expectations of beating sales challenges. The company will however have to ensure they do not fail in the sales processes because of the dynamics in outsourcing and will contact leading multinational companies in the business for guidance. The services are customised and this will entail the sales team negotiating the contracts and prices then handing the clients over to ExlService (Wagner and Dittmar, 2006). The American sales personnel being the best adapted to the environment will work extensively work to with the Indian personnel in order to negotiate and close the deals. The company should neither overlook the sales capacity challenges nor should it make the challenge the basis for not venturing into this potential business (Nadkarni and Herrmann, 2010).

Having learnt from the previous dealings, Kapoor and Talwar will be able to positively manage the turnover. When the company became independent after the relationship with Conseco, it realized the highest turnover and venturing into a new market may pose the same challenge because of the dynamics involved. (Stredwick, 2013) Though the company will need to recruit more experts in both sales and accounting capacities, it will not have to install an excess executive for this new business venture as observed in previous dealings there is always a slow start when getting into a new business dimension. The founders may opt to have promotions for the existing employees to be the managers of the sales and auditing departments so as to ensure the wage bills are manageable in relation to the income generated by the business.

Sarbanes-Oxley business though a new venture for ExlService as a company is promising considering the ability of the company to shift focus in BPO processing (Teece, 2010). The company should therefore venture into the business considering the necessary capacity to start exists and it won’t have to recruit more expertise than it already has.

Question 3

Employees do the work that keeps our businesses going and without them, companies may not be able to achieve much. In today’s competitive business world, employee retention has become a major concern. It is important for any business organization to implement employee retention strategies to manage employee turnover effectively and efficiently.

In 2003, according to Kapoor, the industry benchmark for annual turnover in Indian outsourcing firms ranged from 50 to 100 percent. The dramatic growth in the outsourcing industry contributed to the high turnover rates, giving employees an ever-increasing number of potential employers.  ExlService operated in an environment whereby employees had excellent alternatives. If they had little work to do at ExlService, they would find it elsewhere. This made it vital and important for the company to keep the employees and it did so in several ways;

Compensating the employees was a way for the company to keep hold of the employees. However, Compensating Indian employees were significantly different from compensating American employees with similar qualifications. Most Indian employees valued cash compensation over deferred or equity compensation because most Indian employees did not fully understand or value the equity compensation. On the other hand, American employees favored the later as we can see from the “Exhibit 2” table.

The company paid decent wages (though to keep pace with the market) and a range of perks including free door-to-door transportation and free meals to all employees, provided pool tables gymnasiums, and other such facilities. Such perks added as much as 25 to 30 percent to the cost of employing associates (beyond their wages and benefits). The company paid about $0.67 in benefits and perks for each $1 in wages and also retained associates by continually training them to handle more complex work while also offering an attractive career path.

The attrition rate in any given corporation can be as a result of various circumstances that may include an opportunity for development, salary level, job content or satisfaction and the relationship between the junior staff’s and their supervisors or their superiors.  EXL-Service currently has taken the initiative of curbing attrition rate by stopping job-hoppers by ensuring that a rapid promotion rewards loyalty among its workforce. That is, all the senior positions which may fall vacant or new positions created within the company are filled up from within the organization, for example, in the company, almost sixty-two percent of the senior positions are hired from the EXL-Service itself. That according to Deepak Dhawan who is the vice president of human resource at the EXL-service, such creation of growth and opportunity has enabled the company to prove that the industry is providing its workers with a career like any other. That has also allowed the company as it has ensured that the promising managers have a clear and swift career paths ahead of them. Hence more staff opted to stay just in case of a vacancy then they defiantly will get a chance to promotion.

Another initiative geared towards attrition rate reduction by EXL-Service is through training opportunities the company offered to its employees. Traditionally, employees training was a challenge to the company as they only attended accent neutralization and culture training. With outsourcing of BPO, the company now have access to skilled expertise that intermingles with initial staff thus acting as training mechanisms to the company hence the creation of growth opportunities for the existing staff and other attainable career paths (Taylor & Bain, 2005).   Training opportunities have enabled the company to balance content with both technical and operational knowledge of the staff and thus keeping them equipped to succeed. In that way, every employee feels part of the company since their technical initiatives are appreciated by the enterprise and in turn reducing their chances of job-hopping.

Through outsourcing practices, the company engages in fostering a collaborative approach including the building of relationship company staff and those of the outsourced company’s staff. In that way, the organization has built a collaborative and cross-functional team that allows a multi-skilled knowledge redundancy and team comradery vital for keeping a formidable team with the company devoid of any attrition thoughts. Additionally, maintaining the staff engaged is also another approach that has been taken by the company to curb the attrition rate among the enterprise employees. Through outsourced personnel in the different field, the firm has ensured that their staff gets flexible work options that allow them to continue to work while meeting their non-working obligations like their family duties and roles.

Various Benefit programs holding value for personal, family and community life to staff, programs that support educational and personal aspirations, the reward of successful outcomes and contributions by individual staff members. Such factors have provided the company with a better bargaining position with the employees regarding their terms of employment thus bringing out a sound understanding to reduce such attrition rates. The Indian human resource history of outsourcing has also made it possible for the company to retain their employees since many other companies have also outsourced the Indian human resource in activities including software development and call centers in their efforts to tap into their skilled workforce with lower salary demands (Taylor & Bain, 2005).

References