Karvy Global Services Applies Its Thinking to BPO and KPO

Karvy Global Services grew out of an accountancy firm that was opened in 1981 in India by five chartered accountants, whose first initials formed the original name of the company, Karvy Consultants Limited. The firm expanded in new directions: stock broking, depository services, investment banking, insurance broking, cutting a wide swath in its segments.

Currently, the group of companies processes about 150 million transactions a day — those for its 20 million individual customers and 300 corporate customers as well as for other firms in India. Current clients in the Karvy family include Infosys Technologies, Wipro, Deutsche Mutual Fund, Reliance, and dozens of banks, including Bank of Punjab, Bank of Hyderabad and Union Bank of India.

In 2004, the company made the decision to begin formally offering its business processing services outside of India. That’s when Karvy Global Services was formed, with operations in India, the United States and the United Kingdom.

ARthur R. Flew, a man with a lively sense of humor who has worked for 35 years in software development, technology consulting, business development and onshore and offshore outsourcing in a number of industries, was named CEO. He talked with Sourcingmag.com earlier this year about how it will build a name for itself in business process outsourcing — and most particularly knowledge process outsourcing (KPO). The following is an edited version of that conversation.

Regarding Global Services, which areas overall are the major revenue producers currently?

ARthur Flew, CEO of Karvy Global ServicesARt Flew: In the areas of insurance and healthcare. So we’re doing claims processing and billing and adjudication of healthcare claims, which — for whatever reason — gets more attraction for us and is one of our primary activities right now. Also, in the finance and accounting area: accounts payable, accounts receivable, journal, ledger.

[In April 2006] you made an announcement about knowledge process outsourcing. Can you explain how KPO distinguishes itself from BPO? Do you see KPO as a subset of BPO or is it the same thing?

You know, I can give you a couple of answers for it. Number one is: I didn’t invent the term. Some entrepreneurial marketing guy decided to… “Let’s put a new tag on some of them.” For instance, you’ll see RPO out there a lot, Recruitment Process Outsourcing.

People are trying to gather little niches and put a tag on it and try and differentiate it, I believe, for marketing purposes. But if you look at the people [involved in KPO], they’re very different. So, it’s a different group of people that you need and different skills in order to be able to do this.

Two, the work comes in two different ways. The largest part of it — at least in our experience — comes direct. We want research work or analyst work, like investment research. That’s all… [Clients] may, in fact, end up giving you other work, but they really came to you for that — your domain expertise and your capabilities in that particular area.

And the other side is, it spins off other work you’re doing. As an example, we have a hospitality client. We’re doing their full financial, journal, ledger, the receivables, payables, everything, as well as their payroll. They talked to us about doing revenue management work, which is really KPO work. It comes out of the research and analytics area. But it’s an adjunct to their finance and accounting, where you do revenue management analytics.

In KPO, we do very well in the investments area and markets and industry segments. We’re also doing OK in M&A, which is a natural area, given our investment banking; but we don’t do as well at getting into that as we do in investment research. There are some lines like logistics and route optimization, load optimization and airline industries… One might ask why in the hell are we doing that? Part of it is because of the algorithmic side of it — and the data mining side of it is a specialty area and we have those people. But part of it is also because we feel supply chain — which this is part of — is an area that’s going to be really, really big. And it may take some years yet. So we’re pretty much committed to trying to break a pick or two to see whether we can go be on that path when it really explodes.

The services being offered require a great deal of training and experience. Can you talk about the kinds of programs your company has for finding the right people and getting them up to speed for client work?

They are hard to find, these people. They’re quite a bit more expensive and — if they’re a bit qualified — they’re quite a bit more expensive than the standard BPO individual. [Karvy is] the largest financial, non-banking institution in India. We’re able to attract people out on the marketplace just with the cache of our name and our reputation.

We took 15 people out of one of the universities. As they graduated, we interviewed their class…what we consider the top 15 people and have brought them over. [We’re] going to put them through almost a year’s worth of training in our shop, in learning how to be an analyst and in various markets and in various segments of this. It’s such an investment you have to make to bring these people up. Hopefully, they’ll stay with you for three to five years.

You know, in all probability many of them will move on, of course. You just have to keep running these training programs and tie up with universities and hire them over once they’re finished and put them through your own training programs.

Can you talk a bit about what the training consists of? How do you create an analyst?

We start with domestic. We have plans where we’re lining up research in various markets today, so the first thing you do is work on the data gathering side and teach people how to gather data, what data to gather and where to go for it and how to find it out. Some of the cases, it’s not easy. Especially, if you look at some of the markets we track, like in the GCC [Gulf Cooperation Council] area or in the emerging areas, it’s quite difficult. We generally want to start domestic because there’s a lot of domestic information available to us in India, as you would expect.

So they’ll spend time learning how to gather data. Then we take them into a marketplace and actually assign them some companies or industry segment or something of that nature and have them working in parallel with some of our other analysts.

As they become proficient with that, we’ll start switching them into others, so that they can see the different kind of things they have to do in [each segment]. We’ll switch markets on them, so we’ll take them out of the Indian market and put them in one of the GCC or in the US or in one of the European marketplaces. You start building a lot of pressure, because this is all about timing and pressure. You have to start getting into covering a lot more in a shorter period of time.

I’m trying to teach them some of the tools that we use to get them more productive and more efficient. It’s really a time and familiarity — and build up the pressure sense so that you can see how fast they work.

You talked about having healthcare and insurance processing work. So, how does Karvy break into new arenas?

I think some of the stuff is pretty normal. We obviously have intended to break into investment research because of the strengths we have anyway. We know how to do research and we know how to build research people. So, that was more of a target. Let’s get good at it, and then let’s go out and target the [next] industry. It’s just hard work.

You [have] got to slug away until people recognize your name and buy some service from you. In other areas, it’s more of the market driving us, you know. We are the first Indian third-party BPO to get its ISO 27001 certification. That’s a very important certification in certain industries like healthcare. As a result of that, we have gotten calls. It’s more of [potential clients] coming to us with queries. And we are able to then convert some of that over to actual business. But to a larger extent, we’re too young to be too picky. The market’s driving us.

…I have to be honest. We’re having a harder time, breaking into HR functions than in other functions. You know, it seems to be tougher area for us. One of the reasons is, F&A is a very fragmented. If someone looks at HR, they probably think of ADP or Hewitt or Convergys. Those three companies dominate so much of the HR business that for me it just seems harder to break past that; at least, that is what I chalk it up to rather my inability to do things.

Let’s turn that around then and look at it from the client perspective. What’s the advantage to a client company of being a guinea pig or a pilot project, so as to speak, for your company to break into a new area?

In theory, you’ll get more attention from us than you might get somewhere else. In many other cases, certainly, if you look at the investment area — my goodness! We’re the largest company doing this stuff in India. You’re really not being a guinea pig.

So, I think what’s in it for them is they come and get domain knowledge. Very few people have the domain knowledge in some of these areas that we have. You can get compliance. I am a broker. I am an investment bank. You know, I have a compliance area, and a traditional BPO would not have a compliance area. They don’t need one. They don’t have one. And so they have to learn compliance and how to do compliance. I don’t have to learn that. I have that naturally.

The other thing is because of the strength of our overall company, we recruit people and train people much differently than any other BPO. As a result, if you’ve read about India, attrition, for example, and the data areas is running 35% or more in India. And attrition in the voice areas is running 55% or more. My attrition is running less than 20%.

The reality is, you cannot deliver quality if you can’t get attrition right. As long as you have high attrition, it’s not possible to deliver quality — because nobody’s around long enough to really learn the job well.

If you get a person in Infosys working away, and he’s a manager of this particular kind of thing, where does he go when he wants to try his hand on something else? These people are usually MBAs.

Where does he go in Progeon [now called Infosys BPO]? He can’t. Whereas in Karvy, he can turn around and say, “Yeah! I like something else. Can I transfer to the investment bank? Can I transfer to the stock broking operation? Can I go over to your registrar operation? Can I work in a branch for a while?” So, there’s much more of a career orientation… a long term career orientation at Karvy than in many other places.

I’m not saying there’s anything wrong with Infosys because I really like that company. But it’s very different.

Can you explain how the heck these large [offshore outsourcing] firms manage their staffs and keep them from just sitting around?

Well, surprisingly, they are employed.

Most companies carry a 10% bench. But if you think about it, so there are 10% that aren’t productive or not billing — if that’s the right word, but I hate to use that word.

But if you look at it, an Indian gets 20… 21 days of holiday plus 10 other legal holidays.

[Large outsourcing firms] need to cover that somehow, because in most BPO deals nobody wants to worry about that. So let’s say, [a client wants] 40 hours a week, five days [a week]. Or 4.2 weeks in a month. And they leave it up to us to manage. That’s why I have to put some for all the pricing algorithms and have a whole of that baked in.

That’s why the bench is there. It actually works out good for a couple of things when it covers those absences and illness and holidays, etc. It’s also because you have [staff] on training all the time.

You’ve had a distinguished career in outsourcing. When you’re engaging with a new client, what’s the optimal way to do that? Can you walk me through what kinds of pilot projects you prefer to tackle, what kinds of organizational readiness you like to see your clients undertake to prepare?

The obvious people to talk to are CFOs and COOs. But we prefer to get pushed down into an organization because we find that it works better if the organization has bought in, than if the management would pull them. It’s not like we’re trying to take over anything or do something on our own, but, in fact, we’re just another department for these people. The telecommunications link is just a bit longer. And to make them comfortable with us, we certainly spend a lot of time trying to understand what the client needs and desires and wants are. We try to make sure the client understands that it’s not a simple throw-it-over-the-wall-and-we’ll-catch-it [process]. But there’s real work to do here and on both sides in order to transition something over.

We almost always like to suggest that you transition as is. It may take some tweaks on what I call the input side. For instance, if you’re dealing with some paper, we then have to image that paper because it doesn’t make sense to ship paper. But other than things like that, you try to keep it as is, so that when you get it over and you stabilize it, you can measure it against what you haven’t sent over yet.

Very few people will send a 100% over. And they shouldn’t. They should start with a pilot, 15-20 people. Move it over. Measure the two operations in parallel and see how the Indian operation performs. We are advocates of transparency.

I contracted with a third-party firm [MetrixLine] to install in every one of our operating client situations a real-time metrics capabilities. So, we’ll be measuring the process against the metrics that we jointly agree on with the client. And they will be able to log in anytime, 24 hours a day, and see exactly how their process is doing and if they want to know how many people are working, how many hours there are, how many areas are made, how many transactions are processed, how many of… whatever… what the cost of this item is, etc., that would be available to them online, real time, 24 hours a day.

Upfront, you have to define success. You work a pilot for 90 days. Why 90? Because usually it takes you a month to just settle in and get working. Then, after the second month, you hopefully have hit your service level agreements. And the third month is to make sure it wasn’t a fluke — that you can repeat that.

By then, you know if you have done it. If you have an achieved success, you have some decisions to make. But I mean that’s typically how we do it, how we see it done. Of course, there are always variations on the theme.

What are the trends that you’re seeing right now in IT and BPO services?

Many more people are looking at broad offering capability. They’ll start with a single one, but they want the ability to go broader with single vendor relationship. Today, they may have more multi-vendors, but they want their vendors to be able to produce a broad offering for them.

They’re asking much tougher questions. They’re much smarter about outsourcing, and the areas that are top of the concern right now are things like attrition. They really want to understand how you handle attrition and how you handle recruiting and how you’re keeping people happy and those kind of things. Other areas: securities information and data security, and how do you manage those and what are your practices and what are your certifications — such as HIPAA if you’re going to work in US healthcare.

Lately, we’ve had a lot of companies ask us about — I don’t know a better way to say this, but our demographic profile. How many women in executive management? That sort of thing.

I think it’s all about, they don’t want to wake up in the morning and have some funny article [about the company they’ve chosen] published in The Wall Street Journal.

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Karvy Global Services
http://www.karvyglobal.com/index.asp