Bangalore, India, is a booming, sprawling metropolis. You can find almost anything here. You can even find a piece of Cincinnati if you know where to look.
If you work at the Hewlett-Packard center handling BPO (business process outsourcing) for Procter & Gamble, you spend your day in as close an approximation of P&Gs Cincinnati headquarters as exists in South Asia, or almost anywhere outside Ohio.
It exists because HP, based in Palo Alto, Calif., has taken to heart the notion of bonding with the client—at least in part by emulating the clients physical location.
This behind-the-scenes look at the inner workings of the P&G finance and accounting outsourcing deal with HP—which was signed in April 2004—is the result of an eWEEK investigation of Indias technology hubs in Bangalore and Mumbai.
P&G refused to comment on work that is being done at HPs BPO centers in India and elsewhere.
As enterprises move to outsource critical business processes such as accounts payable, finance and accounting, human resources, procurement, and customer service, issues of corporate culture and brands may come into play, along with the necessities of quality of service and best practices.
For example, many walls of HPs BPO center here are festooned with posters recalling both P&G and its home in Cincinnati. All the better to give HP workers a sense of oneness with “the company.” When its time to huddle, workers head for the William Procter meeting room.
The 140 or so HP staffers are also split into teams, each carrying the name of a P&G product. Walk around the floor, and youll find yourself in the precinct of the “Dash” team, the “Gain” team, the “Lacoste” team, and so on.
Each team manages business processes in a different group of countries and tries to outdo the other teams for the best record of quality and quantity of accounts payable transactions processed.
Its ironic that two well-established American companies had to go nearly halfway around the world to get close to each other. In terms of corporate DNA, both companies were never that far apart to begin with.
“There are lots of similarities between cultures,” said Arunkumar Srinivasan, operations manager for HP BPO. HP seeks to bring its “Rules of the Garage” to the table, while P&G asserts its own “Values and Principles,” he said. Both sets of guidelines stress integrity, trust and competitiveness.
Fostering the feeling of oneness is critical for both partners of this deal. P&G wants its accounts payable done in a manner that represents its interests and practices as closely as possible, in a way that is transparent to its suppliers.
And with the global BPO market exploding, it behooves HP to get it right with P&G and other current customers and then replicate the best practices with other clients.
This transparent integration may be critical to the growth of BPO. A study by McKinsey & Co., of New York, that was commissioned by Nasscom, an Indian software and services providers association, found the current worldwide offshore BPO market to be $11.5 billion. The potential market, however, is between $120 billion and $150 billion, the study said.
They Have the World
One key factor that makes HP a good partner for P&G is that both companies have global operations.
P&G sells products within 300 global brands in 160 countries. In Bangalore, HP handles accounts payable work for P&G operations in 36 countries. HP centers in Costa Rica and China handle P&G accounts payable for 20 countries.
All told, 120,000 P&G accounts payable transactions are processed by HP in Bangalore each month out of a total of 300,000 that are processed monthly worldwide. HP has two BPO centers in Bangalore and one in Chennai (Madras), India. Other countries in which HP has BPO operations include Singapore, Romania, Poland and Mexico.
“We can support a global customer with local support,” said Sanjay Singh, HPs director of India business centers.
Bill Martorelli, an analyst at Forrester Research, in Cambridge, Mass., said while some companies are working directly with offshore BPO providers in India and elsewhere, companies that have a global presence might do well, as P&G has done, to find a global partner.
“The very biggest companies that are globally distributed may find the multinationals [like HP] are a better fit because they can serve them geographically,” said Martorelli.
By calling on worldwide resources, HP can expedite invoices that originate practically anywhere in the world . For example, a fragrance supplier in France might provide basic perfume ingredients for P&Gs Vidal Sassoon products and send the invoice to an HP facility in Wroclaw, Poland, where the invoice would be scanned and a digital copy created.
HPs Bangalore BPO center would access the electronic copies via the Internet and then process them for payment using SAPs accounts payable software.
P&Gs Newcastle, England, office would execute the payments, drawing them on a P&G bank account and sending them to the supplier in France. HP would archive the invoices in Poland for three months and then send them to P&Gs Newcastle facility to be permanently archived. Another archival facility is in Colorado Springs, Colo.
A global presence is table stakes when it comes to keeping customers like P&G happy. HP must go beyond that to handle accounts payable like a factory running with razor-edge efficiency. “It runs like a shop floor,” said Singh. “Its not just transaction processing, but business results.”
Key to any successful outsourcing relationship is meeting the requirements of the contracts SLA (service-level agreement). To make sure the SLA is met, HP raises the bar above the SLAs requirements by measuring its performance against Six Sigma guidelines, which set zero defects as the yardstick, according to Singh.
In accounts payable, it is important to pay on time, of course, but some suppliers offer discounts if invoices are paid early, say, within 10 days of receipt. Thus, its critical to pay these discount-eligible invoices early to maximize the discounts available to P&G.
A twice-daily production planning meeting separates accounts into “expedites,” or those that must be handled within 24 hours, and “nonexpedites,” which can be handled within 72 hours. This triage creates the workload for each team.
To streamline operations, HP calls on industrial engineering experts to measure the speed of operations and to help cut defects. In the process, the experts create studies of the office layout to come up with recommendations for speeding processes, Srinivasan said.
The approximately 140 HP workers are measured on productivity, with results displayed daily. Monthly performance is analyzed, with action plans for improvement drawn up where needed. Employee rewards are tied to meeting SLA requirements, said Srinivasan.
HP is not exempt from the pressures of the booming Bangalore economy, including an 18 percent worker turnover rate. Wage inflation, another local economic force, is running about 8 to 9 percent per year, Singh said.
Meanwhile, like other Bangalore businesses, HP has to hire rapidly to fill its needs. According to Singh, HP brings aboard 100 to 150 workers each month. E-learning tools get new employees up to speed at a cost thats 30 percent less than that of conventional instruction, he said.
But these challenges havent prevented HP from consistently meeting its SLA requirements, according to Singh. That is quality of service as it might be if the workers at HPs Bangalore facility were perched halfway around the world, in offices overlooking, say, the Ohio River.