Interview: Bala J Raman, President, Congruent Solutions

Wednesday, 08 August 2007

Several Indian vendors have been addressing the payroll processing opportunity for a long time. Large IT service providers like Infosys, Patni, Hexaware and Datamatics have been involved with application development services for their clients and have gradually moved on to providing BPO services.

Excellerate HRO has recently signed an extension of contract for providing benefits administration services to TOTAL, a leading utilities company. As part of the four-year deal, the BPO will provide services for approximately 15,000 people.

Affiliated Computer Services (ACS) has recently entered a benefits outsourcing contract with Ameren Corporation, a utility company. As part of the five-year agreement, ACS will provide services to 24,000 employees and retirees of Ameren.

The global HR outsourcing market is estimated to cross $78.8 billion by 2010 according to Global Industry Analysts. Some of the major US-based vendors of HR outsourcing include: multiservice vendors like IBM, Accenture, ACS, Convergys, and ADP and some focused HRO vendors like Adecco, Ceridian, ExcellerateHRO, Genesys and Hewitt Associates. The key components of HR outsourcing include: Payroll processing, Benefits administration, Recruitment and Training. Payroll and benefits administration comprise almost 2/3rd of the total HR outsourcing.

Services	Description
Payroll Processing	Payroll data processing, master file maintenance, statutory compliance & reporting, tax calculations, Payroll reconciliation, MIS reporting, remittance
Benefits Administration	Benefits policy administration, claims processing, loan processing, Employee Stock Purchase Plan, benefits trust accounting - pension plans, retiree services, benefits advisory, actuary advisory, statutory liaison, vendor management, billing and reconciliation
Recruitment and Training	Recruitment process management, pre-employment assessment, screening, sourcing candidates, talent management, performance management systems, recruting, hiring, employee training programs
Other Administrative	Expenses accounting - Business/Travel, Employee help desk

Source: ValueNotes Research

The Offshore Angle

Chennai-based Secova eServices is one of the few focused vendors offering HRO services. Recently, the company bagged a $5 million health and welfare benefits services contract from a US based firm.
Crossdomain Solutions has considerable expertise in a range of HRO processes including payroll and benefits administration.
Ahmedabad-based Motif provides benefits administration services amongst a range of other services to US-based corporations.
In 2006, Mercer entered a contract with Patni to provide a range of HRO services to global clients. Under the contract Patni will scale its operations to about 1,500 before 2010.

While mainstream outsourcing is gradually moving towards offshoring high-end processes in the HRO space, this evolution still has a long way to go. The market potential for payroll and benefits administration within the mid-market segment (between 2,000-20,000 employees) alone is estimated at around $15 billion currently. Of the various segments in HR outsourcing, Indian offshoring has been more prevalent in the areas of payroll processing. The benefits administration space has tremendous potential and is yet to be explored in a big way by Indian vendors. Building credibility is a key success criterion, as this involves dealing with employee personal information. Upcoming vendors need to seek partnerships/alliances with US-based HR companies or invest in an active sales team to drive more contracts.

Excerpts of an Interview with Bala J Raman, President, Congruent Solutions

Congruent Solutions is a technology and business support services vendor which plans to focus on Retirement / Pension Plans administration. With beginnings in the domestic market, the company launched their offshore business in 2000 along with a US headquarters. The privately-funded company has an office in Singapore, and has recently entered into a JV with a company in Luxembourg. We spoke to Congruent Solutions' President: Bala J. Raman. Excerpts of the interview:

VN: Please tell us about the key offshored services offered by Congruent?

Bala:We primarily offer technology development and retirement plan administration services. Of the over 200 people we have, about 40 are involved in retirement plan administration and the rest in IT services and outsourced product development.

VN: How did you get into Retirement Plan administration services?

Bala:We built a product for a client in the 401K space in the US, and, in the process, acquired very deep domain knowledge in the pension plan administration space. Then, we started preparing ourselves to offer Plan administration as a service. Technology development is a generic 'me too' kind of a service which we do very well through our SEI/CMMi compliant delivery center, but we are planning to build retirement plan administration services as our differentiator. Of the 12 to 14 business processes that typical retirement plan providers in the US have going on in their back-office, we have migrated 10 processes to our offshore center.

We are currently servicing 10 clients in this space and are probably the only company world-wide to have an ISO 9001:2000 certification for our back-office pension administration services. Moreover, we also have senior members of our team undergoing certification from National Institute of Pension Administration (NIPA), USA, which is another first outside the US. We are uniquely positioned in the place being an early mover and in addition setting the standards in the industry.

This definitely would be our key focus area, going forward, as this is a green-field opportunity with very few players and tremendous opportunity for growth.

VN: What are the typical challenges you face on the marketing front?

Bala: It's a challenge to convert customers for offshoring pension services, since off-shoring in this vertical is still in its nascent stages. So, we have gone through the cycle of converting cynicism, to cautious adoption to embracement with conviction. They are, understandably, wary of offshoring personal data, information etc. However we have been quality-oriented in our approach and have taken the certifications and follow the best practices in the industry. We have set standards and processes which we follow rigorously. We have also put in place high-level of information security practices to provide total comfort to our clients.

VN: Do you plan to expand your services? What kind of manpower growth do you envisage?

Bala:In the Retirement Administration area alone, we will add competencies in other process areas to expand our engagement with our clients. Of course, we are confident of adding several new clients to our list. On the manpower front, we will grow a minimum of 100% in the next few years.

VN: How big will be the retirement plan administration group?

Bala:We expect it to be 150 to 200 or so in the next two years.

VN: How do you plan to accomplish this? Any acquisitions in the line or just organic growth? Or vice versa?

Bala:In business, one has to be open to opportunities. We may look for inorganic growth options if we come across the right opportunity

VN: Any exit strategies?

Bala:None as of now… One is open to opportunities in an evolving business environment. However, I like what I am doing and am happy to run the business for the next ten years also. We are a profitable company and have been in the business for quite some time and have developed specialised processes and domain skills, and believe we have built an organisation of value.

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