Q&A: Srikrishna Madhavan, Xchanging
Srikrishna “Sri” Madhavan is President – Business Processing Services at Xchanging. Ahead of our Editor’s Roundtable on ‘How finance is leveraging technology’, we got together with Sri to get his take on some of the key trends at play in the FAO space today – and how his organisation is positioning itself to keep ahead of the game…
Outsource: Sri, thanks for joining Outsource today. Can you tell our readers a bit about you and your role at Xchanging?
Srikrishna Madhavan: So, I am responsible for the business processing services that we provide, largely F&A and several other industry-specific services. I have been with Xchanging now for 10 years but I come from a background in finance and was a Finance Director at Xchanging for several years. Before that I was a CFO elsewhere in the outsourcing domain. So I know a little about dealing with the challenges that the audience has!
O: So with that in mind, let’s have a look at what you see as the key trends in FAO right now and how you’re positioning Xchanging to stay ahead of your competitors.
SM: So thinking in terms of what are the real challenges that organisations face from a finance organisation perspective, I think there are various trajectories that come together. One is grounded on the biggest challenge that organisations or CFOs face today. The world around is evolving faster than ever before. We then as an organisation need to be able to react to those kind of changes, that much faster and quicker. Now large organisations therefore need to create smaller decision-making pockets to be able to respond quicker to challenges. And those decision-making pockets can only be made by creating a larger visibility of really tangible, dependable information, management information in various contexts – both financial and operative information.
In my mind the main challenge of the CFO has gone from what used to be compliance and statutory requirements and all those issues, to making sure the business has the information, and visibility of information, to take the right decisions, in various pockets. And that’s where a huge amount of other trends come together. So I’m actually seeing trends we’ve spoken about in the past, things like next-generation BPO, we’ve spoken about technology-enhanced services, we talk about process automation and process improvement using tools like Lean Six Sigma. We talk about robotic process automation and we talk about analytics supporting decision-making tools. And all these individual trends kind of come together, and what you’re looking at now is actually an increasing demand for companies to assimilate all those trends into a singular solution perspective for their financial needs. So those are the key trends I’m seeing coming through.
O: One of the issues we’ve seen over the past few years has been the decreased capacity of buy-side organisations to keep up with the technology impacting upon their fields without an increased reliance upon an outsourcing or technology partner. Do you think that’s a fair assessment and, if so, what sort of extra responsibility does that place on the shoulders of providers like yourself?
SM: I think it’s a matter of what is the real objective of each company. For a service provider, it is pretty much their business to make sure they keep abreast of everything that happens and that can change their particular domain. That’s not necessarily the case for F&A within large organisations. If you look at for example an energy or utilities company, retail or pharmacy, they need to focus their investments on what is happening in those spaces. They will not be able to focus on dedicating their efforts and investments towards what’s happening with respect to the F&A processes in their domain. Those investments are likely to be made more by the service providers than by the buyer companies. Service providers are more likely to be able to research and take those steps forward much better.
O: Are buyers making the most of what outsourcing can offer right now? And if not, what are the obstacles to that?
SM: I think very, very few buyers are taking advantage of everything that service providers can offer. And the reasons for that are many – but on the other hand, there are also fairly limited opportunities that service providers have to be able to maximise the potential value and deliver the real cutting edge to our customers.
The reason for that is the way buyers buy today: the old human faith in having a competitive process, pitting service providers one against the other. Now what that leaves people with is a situation where service providers in certain situations need to demonstrate certain levels of innovation as part of the bid responses. But there is also a huge constraint in that service providers need to respond with commercially competitive bids, within very, very finite timelines for returns on investment, etc. Now that pushes service providers to a position where they cannot suggest or recommend large-scale investment and change agendas as part of those kinds of responses.
Now, it’s a really hard sell going in to pitch a proposition where you’re looking at a substantially higher price for the customer to pay you, with a longer-term return on it, which may be beyond the term of the contract that is currently being proposed. So service providers obviously take the view that they will deliver what innovation they can within the terms of a contract that commercially they have made sure is coming in competitive.
So the nature of the process, I think, precludes significant opportunities to come into that process. There are a few cases that I am aware of – and there may be others of course – where buyers and clients are able to work as partners and drive the level of innovation through that mutual trust. But in the way things are typically bought, the total potential for innovation can never be brought to bear. That’s my opinion.
O: On the topic of how things are bought: we’re hearing more and more that the person within the organisation who’s doing the buying is changing from IT to marketing, HR or some other function requiring solutions; that it’s more often than not now no longer an IT-centric decision. Is that something that you’re seeing within Finance specifically, or are you still speaking to IT most of the time?
SM: You’re absolutely right. I think that’s one area that’s going through a tremendous amount of change. I think the role of the technology function within the organisation is something that is being challenged significantly. Increasingly it is the user communities which have the pressure to deliver, and technology is an enabler for what they need to deliver to their business. So it is those people who are beginning to drive that decision, and they look for technology as just a supporting portion of their agenda rather than looking to the CIO to take those buying decisions. The CIOs do play a role, but technology is just one element leading to the overall service.
O: Just to expand on that, do you think that’s leading to a different type of deal and a different type of relationship?
SM: Yes, and I think that’s consistent with a lot of the demand moving to the user – so all the times we talked about the demand for technology-as-a-service, software-as-a-service, cloud-enabled services, these are all trends which are more user-driven rather than technology-driven. So yes, you do see those kinds of trends coming out differently, because user communities have different types of drivers.
O: What are the primary challenges to an organisation like yourself of the rise of the as-a-service model? And do you feel like you’re on top of that particular game?
SM: The primary challenge that we feel is in terms of achieving the balance between innovation and the investments that we need to make in a deal, and articulating that proposition to the buyer communities. So in the past, we’ve particularly talked to the CIOs and the CTOs and the language for them was very different. But today, you need to talk to the user communities in their language and about things that are particular to their business. Which is where the other trends come together: industry-focussed solutions and technology underpinning services.
You need to talk the language of the CFO for example in a particular industry, about the metrics that are important to that CFO and how you are going to enable those, not about what the features of the technology are that you’re bringing to the table, but how does that help them in terms of the specific metrics that the CFO drives in their business? So for an FMCG customer that CFO is looking at stock turnover issues for example, or looking at driving a stock-keeping unit improvement. You need to talk knowledgably about that industry and interpret all the value proposition that we’re talking about when it comes to technology, in terms of how it will impact that particular business.
So we are having to challenge ourselves to build and position that familiarity with the customer’s business. I think that’s the biggest challenge.