O2C Productized Solution An HCL White Paper. Interested to know what we mean by BPO Cannibalization through IT? Read more!!

Transcription

1 O2C Productized Solution An HCL White Paper Interested to know what we mean by BPO Cannibalization through IT? Read more!! Randy Mueller & Trisha Sharma 4/30/2011

2 HCL Technologies - Business Services Next Generation Business Process Outsourcing (BPO) Finance and Accounting Outsourcing (FAO): Order to Cash (O2C) o Transforming O2C processes and realizing the benefits of Straight-Through- Processing through HCL s O2C Productized Solution What is Order to Cash (O2C)? Order-to-Cash (O2C) definitions in the FAO industry originate from the software industry to designate a specific subdivision of the accounts receivable process. The order-to-cash systems enable the integration of the order management department with the accounts receivable department. Some of the largest players of the software industry agree on a common definition of order-to-cash, linking the order management process and the accounts receivable financial department. These steps are included in this definition: Customer Master Setup Credit Check Contract Administration Order Management Billing Collections Cash Applications Deduction/Exceptions Management Value creation comes from the optimal utilization of resources People, Process and Technology managed by a team of Professionals and Domain experts resulting in a scalable, sustainable O2C infrastructure and significant improvement in operating costs and working capital thus directly impacting the client s bottom line. The team focus is not just on the processes, but to question every step in the cash conversion lifecycle and add significant value like: Minimize working capital tied up in accounts receivables (measured by days sales outstanding - DSO) Minimize operational cost and increase cash flow Minimize delinquencies through constant focus on recoveries Improve customer satisfaction through faster resolution of customer issues Elimination of unapplied credits Page 2

3 Our expertise and experience in O2C provides our clients with: Best-in-class processes World-class technology platform Skilled collections and dispute-resolution agents at our service delivery centers Rigorous process controls embedded in operations. What is HCL s O2C Productized Solution? In order to have a solution, we must first explore what is the problem most companies face today in O2C functions which include: Non-standardized O2C processes across geographies Multi-lingual and multi-currency requirements Different O2C processes due to multiple Enterprise Resource Planning (ERP) systems Reduced time to market of products and services Retaining existing customers and attracting new customers Reducing DSO Lack of consolidation for Mergers & Acquisitions Our O2C Productized Solution from HCL is a solution set offering combining years of experiences in O2C processes addressing the 3 main enablers of any solution: People: We have a standardized methodology to assess actual resource load requirements to support an optimized O2C process. These resources may be retained by the client or a hybrid on-shore, off-shore model delivering maximum labor savings. HCL s Employee First Customer Second has been widely spoken about in the industry and we believe in empowering the employees in Value Zone (who are creating nexus between client and HCL) thereby creating client delight. It is because of the same reason, at HCL; the employee turnover rate in O2C is the least compared to our competitors. The resource deployed would be a mix of seasoned O2C professionals with varied industry experience to that of budding professionals with limited years of O2C experience. The typical split between the activities retained by our clients and the work in scope is depicted in the following chart: Page 3

4 Client (5% 25%) HCL (95% 75%) Controllership Manage authorization hierarchies and limits Establish/maintain financial policies Sales/Business Units Review/resolve customer disputes Credit & Collections Maintain strategic relationships with credit reporting and collection agencies Establish/maintain credit policies Define collection strategy and goals Collection of key/strategic customers Resolve escalations from customer inquiries Approvals above thresholds Treasury Maintain strategic relationships with banking partners Order Processing Receive/process customer orders Validate orders prior to release Contract Management Receive/process contracts Monitor contract performance Credit Receive credit requests/apps Setup & maintain customer master Perform credit analysis & propose credit limits Periodically review customer accts Perform credit data analytics Billing/Invoicing Release/review billing file Perform custom billing Send customer statements and invoices Customer Service Receive customer inquiries Track/resolve customer disputes Distribute disputes to client for resolution Collections Past due collection of key/non-key customers Manage deductions & disputes Document all customer correspondence Send dunning letters & notices Manage bad debts Monitor collection agency activity Cash Application Apply customer payments to open AR Research unapplied payments Escalate unknown payments Standard report generation & distribution Process: Through our benchmarking methodology, we will benchmark our clients against world-class competitors in the same industry to determine opportunities for process optimization and automation. We have experience in providing O2C solutions to matured players that have shared services implemented with best in class process metrics to that of companies who are so called First time outsourcers with challenges in their O2C function. Step 1 Step 2 Step 3 Step 4 Project Definition Data Collection Analysis & Design Report Out Activities Understand business strategy & objectives Est. Client project leader & team involved Define/finalize scope at subprocess level Mobilize joint team, finalize calendar, interviews, mtgs Finalize data acquisition & interview reqts & plan Finalize report out reqts Schedule interviews & meetings; publish plan 4Joint project team est. 4Initial BPO scope defined 4Data needed & output defined 4Agreed upon plan Activities Gather data (process desc./flows, SLA s, FTEs, costs, volumes, IT, systems, costs, etc) Interview business & key stakeholders ID timing objectives, local reqts, internal change mngt reqts, retain org, transition staging, issues inhibiting Validate data/assumptions > address gaps 4All process, IT, transition, cost, stakeholder reqts data collected 4SME Interviews completed 4Client HCL collaboration Activities Detailed process analysis High level solution design and transition approach Risk impact and change mngt analysis IT/Systems readiness for outsourcing High level business case analysis with HCL solution Proposed go forward plan to validate & finalize Reviews with Client 4Process & IT analysis 4Outsourcing risk analysis 4Financial analysis for client Process Analysis Process outsourceability Process improvement opptys Scope (in & out) & FTE impact Organization Analysis Retain & outsourced mngt Governance structure IT Infrastructure Analysis Readiness assessment Configuration for outsourcing High Level Solution Location strategy & FTE s Transition plan & approach Adapted in scope process flows Enabling technologies Risks & Mitigation Analysis Financial Analysis Client baseline HCL costs for in scope work Savings and benefits Proposed Next Steps Rapidly & Credibly Determine Potential of FAO Page 4

5 By judiciously following our Assessment Methodology, HCL understands the client s processes and through constant interaction gather process metrics and benchmark client processes to industry best practices. The following table provides few metrics that would be captured as part of process benchmarking: Mega Process KPI World-Class Client Metrics Delta O2C AR Cost as a % of Revenue 0.033% AR Cost per customer receipt $0.83 AR FTE per $Billion of Revenue 1.7 AR FTE productivity (customer receipts per FTE) 21.4K AR FTE productivity (customer accounts per FTE) 4.7K % of manual receipts 2% Auto match % 85% Days to apply cash 1.6 Deductions processing cost per deduction processed $5.76 Deductions as a % of AR 0.494% % of customer invoices that are corrected for billing errors 1% % of invoices sent to customers electronically 21% % of credit sales collected within terms 82% DSO 24 Cost per Customer Order >100K Orders $0.72 OM FTE per $Billion of Revenue 10.8 Days from sales order processing to credit approval 0.25 Days from shipment to invoicing 1 % of orders that have incorrect configuration 0.5% Technology: The key enabler of them all. We have both proprietary and partner technologies (platforms) in O2C to drive inefficiencies and complexities out of the O2C process to promote permanent cost reductions. All of our technologies have pre-built adapters and/or interfaces to the major ERP systems. HCL s O2C platform powered by our partner, Cforia, is a state-of-the-art O2C tool, affording clients with a competitive advantage within O2C. Some of the key features of this tool are: Incorporates industry best practices via hierarchal workflows, in conjunction with flexible account treatment methodologies guiding users through both system driven and manual account and transaction level follow-ups. The tool allows agents to streamline and gain efficiencies within AR with a combined approach of risk management, predictive account scoring and portfolio management protocols. Platform independent (runs on virtually any computing platform) Supports global enterprises with multi currency and language support. Built under strict security specifications (SAS-70) Page 5

6 The following benefits have been achieved by clients deploying the platform: Improved visibility: Client retained O2C teams now have real time visibility into HCL Sourced Traditional BPO practices Employee call activity regardless of location. focus primarily on labor cost New Measurements: Cforia s collection system arbitrage, but this comes at a measures individual collector s metrics including number of calls, number of letters, Promise-To- Pay transactions, broken promises, contribution towards DSO and DDO and days beyond terms (DBT) for their portfolio, allowing HCL clients to big expense in terms of degraded customer experience. HCL s NeXt Gen BPO focuses on maximum automation which offers much lower cost than better track value-add performance. just labor arbitrage alone, and more importantly achieves the Increased AR automation: Cforia s tools drive primary objectives of collector calls more efficiently to maximize cash improving AR metrics which collections. Eliminate Collection Loops : With Cforia, action items uncovered are directed immediately to the client retained O2C team or other are worth more than simple labor cost improvements, plus retaining all important customer good will through stakeholder for escalation and resolution. collaboration to recognize and resolve issues in a customer Redundant calls are eliminated until the issue is friendly manner. resolved. Customer satisfaction is preserved and an invoice dispute handled quickly and professionally. Improved efficiency with ERP integration: Commonly, large companies have receivables data spread across multiple ERP and legacy systems and customized billing and invoicing platforms. This stratification causes collection teams to hop needlessly to multiple screens or sessions. Cforia seamlessly consolidates these disparate systems into one operating environment for maximum visibility and productivity. Our goal is to bundle people, process, and technology in a productized solution approach to O2C with the consultative goal of delivering real results to our customers as rapidly as possible. Ultimately, the achievement of Straight-Through-Processing (STP) is HCL s goal for O2C with no human intervention. This productized solution can be solution light or solution heavy depending on each customer circumstance. The goal is not to sell our customers a lengthy billable hours consulting contract (as some of our competitors do) spending needless time and money on as is process analysis. Rather, our singular focus is to rapidly deploy a standardized solution, with minor customizations, to O2C delivering dramatic results to our customers. Page 6

7 Note: In order to optimally achieve straight-through-processing (STP), there may be significant re-design of systems and processes (primarily legacy systems). The business case analysis would determine the cost/benefit and feasibility of this optimal goal of STP. Why is HCL s O2C Productized Solution different from other Finance & Accounting Outsourcing (FAO) Service Provider offerings? We believe that FAO (BPO) providers, in general, are more worried about selling labor or FTEs. That is the business they are in. There is no true incentive by our competition to dramatically reduce the number of FTEs under contract. That is how they make money. They are not interested in what we refer to as cannibalizing their BPO operations with a productized solution approach that could derive permanent cost reduction for our customers. HCL, on the other, has always been a leader in applying technology to processes to drive dramatic change lasting change. HCL s heritage is IT. Bundled with IT, we call this Next Generation BPO. Our customers are demanding it; the industry is demanding it; we will comply and lead the industry versus follow the 800 pound gorillas which is counter to customer demands and wishes. We believe through productized solutions, we will leap frog our competition. Traditional BPO s with emphasis on lift and shift often exacerbate client system deficiencies. Throw great geographic distances, plus loss of institutional learning into the mix and customers become stuck in the middle of a broken process. HCL s NeXt Gen BPO fixes broken system processes prior to commencement of outsourcing and facilitates better ongoing communications between sourced and retained employees to assure that customers do not fall in the cracks. The goal of NeXt Gen BPO is to make the industry and practice known for driving great AR numbers, while maintaining and improving customer relationships. How is HCL s O2C Productized Solution marketed and deployed? O2C solution is one among the three products available to end clients as part of the FAO product kit from HCL. FAO product kit has three distinct products namely P2P Procure- to- Pay providing solutions to automate and transform accounts payable and travel expense function, O2C Order to Cash providing collections, cash application and cash posting leading to 100% on time, on- account posting, reduced DSO and improved visibility to operating cash and R2R Record to Report providing journal entry posting, cash, bank and intercompany reconciliation services and financial closing resulting to on time closure of books of accounts facilitating proper business reporting. Clients have the option to choose one Page 7

8 of the products or shall resort to a comprehensive widely recommended package called FAO in a box (3 in a box). Most of our clients who resort to subscribing one product initially end up buying all other products. Comprehensive package is One Stop Solution for clients finance function and it transforms the CFOs role from a Bean counter to a Strategic Advisor. Though O2C, P2P and R2R are standardized products, our endeavor is to custom fit the components during implementation (transition) to execution (steady state operations) phase. We do not believe in one size fits all as each clients business problems and needs are unique to their respective industry. HCL ensures that we deploy the necessary Architects who understand the industry and has hands on experience in Order to Cash landscape. When will HCL s O2C Productized Solution be available and who do I contact? HCL s FAO tool kit is available in HCL Technologies Website ( ). You may contact us to find more about O2C solutions from HCL Technologies. Name Designation Contact Details Randy Mueller Head Global Sales & Solutions rmueller@hcl.com Trisha Sharma Director O2C Practice trisha.sharma@hcl.com Page 8