HCL has launched a service called EFaaS, Enterprise Function as a Service, to address reducing the operations costs of organizations through creation of specialized utilities. The service is initially targeted at capital markets firms, retail banks, and insurance companies and at the finance, procurement, HR, risk & compliance, legal and marketing functions.

The EFaaS service has arisen from HCL’s Next Gen BPO tenets, namely domain orientation, innovation and improvement focused, based on output/outcome/flexible constructs, utilizing HCL’s Integrated Global Delivery Model (IGDM), and addressing risk and compliance. In particular, the EFaaS service aims to deliver business function services as utilities by undertaking elements of business operations transformation, IT standardization (e.g. SAP/Oracle transformation, unified chart of accounts, reduced reporting platforms, data warehouses etc.), platform transformation, and infrastructure consolidation and to achieve 25%-35% cost reduction within each utility. Accordingly, HCL is:

• Looking to create domain-specific global shared centers
• Use business outcome based constructs to put “skin in the game” in transforming the organization’s enterprise function
• Focusing on enhancing risk and compliance and HCL will engage with global accounting firms for SAS compliance
• In addition to cost reduction benefits, the carve-out of a business function utility aims to deliver increased business agility, enhanced controls, and faster scalability.

HCL has a five-step approach, typically spread over 24-30 months, to implementing EFaaS, namely:

• Due diligence and risk assessment, in conjunction with a Big 4 consulting partner, including developing process maps, integrated IT-BPO roadmap, co-governance model
• Process consolidation, including functional alignment, adjusting grade mix and location mix, and shared services utility creation
• Commercialization, including market assessment, asset monetization, and revenue sharing arrangement
• Carve out and transition, including carve out, transition, rebadging, and organization change management
• Platform transformation, including creating common data model, data & platform consolidation, new platform implementation and analytics.

HCL is working with global strategic partners in the development of these utilities, with partners assisting in:

• Benchmarking with world class enterprise functions
• Cost/benefits evaluation
• Performance and change management frameworks
• Stakeholder assessments and leadership alignment
• Communications strategy.

HCL initially targeted a number of major banks, all of which are looking to achieve multi-billion dollars of cost take-out from their operations. In particular, these banks typically face the following issues:

• How to carve-out non-core business functions
• How to boost their controls and put in strong compliance & control environment.
• How to manage complex IT environments typically involving use of the major ERPs plus a number of regulatory point solutions.

HCL has so far signed two contracts for EFaaS, both in the banking sector. In HCL’s initial contract for EFaaS, the contract scope covered four principal business processes within the client organization:

• External reporting, for example to the FCA and Bank of England
• Management reporting
• Cost utility, covering allocations/adjustments/accruals
• Regional and Group reporting & consolidation under U.S. GAAP, IFRS, U.K., GAAP and multiple local GAAPs.

Across these four process areas, HCL undertook a multi-year contract, undertaking to take out 35% of cost, while simplifying the IT environment with no up-front IT investment required by the client organization. In addition, the client organization was looking to establish a private utility or utilities across these functions that could then be taken to wider banking organizations.

In response, HCL established a private utility for the client organization across all four of these process areas and identified external reporting as the area which could be most readily replicated and taken to market. In addition, the process knowledge but not the technology aspects of the “cost utility” processes could be replicated, whereas management reporting is typically very specific to each bank and can’t be readily replicated. Accordingly, while private utilities have been established for the initial banking client organization across all four target process areas, only external reporting is being commercialized to other organizations at this stage.

Process improvement and service delivery location shifts have been made across all four process areas. For example, prior to the contract with HCL, 60% of the reporting was done by the bank in Excel. HCL has standardized much of this reporting using various report writing tools. In addition, HCL has implemented workflow in support of the close process, enabling the life-cycle of the close process to be established as an online tool and increasing transparency on a global basis.

Within the external reporting function, the approach taken by HCL has been to use Axiom software to establish and pre-populate templates for daily, monthly, and quarterly external reporting, extracting the appropriate data from SAP and Oracle ERPs.

In terms of delivery, HCL is creating global hubs in India (~80% of activity) with regional centers in the U.S. in Cary and in Europe in Krakow.  HCL has also put in place training in support of local country regulations, for example the differences between U.S. GAAP and U.K. GAAP.

HCL is continuing to take EFaaS to market by targeting major banking and insurance firms, initially approaching existing accounts. In terms of geographies, HCL is selectively targeting major banks and insurers in U.S., U.K., and Continental Europe.

The banks and insurers are expected to retain their existing ERPs. However, HCL perceives that it can assist banks and insurers in adoption of best-in-class chart-of-accounts design and governance and best practices around data management and simplifying the various instances of ERPs.

In general, within its EFaaS offering, HCL is prepared to fund projects for banks and insurers that involve cost take-out and where HCL can take fees downstream based on criteria where HCL has control of the outcomes.

HCL perceives “speed of replication” to be a key differentiator of the EFaaS approach, and the EFaaS framework initially used has now been replicated for another banking institution in support of their finance operations and external reporting processes.

This service is a timely response to the needs of capital markets firms in particular, that have been seeking to take considerable costs out of their operations and to carve-out and commercialize non-core functions into separate third-party-owned utilities. It is likely that capital markets firms will carve-out a relatively large number of narrowly-focused utilities with some of these being successfully commercialized by third-parties. The retail banks are likely to follow this pattern subsequently, though probably to a lesser extent than capital markets firms.

In addition to Finance as an enterprise function, HCL’s EFaaS model will be subsequently developed to target other enterprise functions such as procurement, HR, risk & compliance, legal, and marketing functions.