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Infosys Awarded 5-Year F&A BPO Contract Renewal by Philips to Continue Transformation Journey

Infosys has been awarded a five-year renewal through June 2019 of its F&A BPO contract with Philips.

There is no significant change in contract scope or direction in the renewal, largely a recognition that Philips and Infosys are part way through a major program of change in the way that Philips carries out its finance and accounting operations, including a major change in Philips' system landscape with simpler IT platforms and a simpler master data structure underpinning all IT platforms. Accordingly continuity is very important to Philips.

Overall, the number of personnel in Philips' finance & accounting function is split 50:50 between Philips in-house and Infosys, with the split for operational activities being approximately 2:1 in favor of Infosys. Infosys' service employs 2,800 personnel, uses eight delivery centers and is based on three major hubs: two in India and one in the Philippines. The scope of the contract covering purchase-to-pay, order-to-cash (mainly cash application), and record-to-report will remain unchanged on contract renewal.

The nature of the governance is clearly very important to Philips, with the implementation of joint objectives and a single leadership team across Philips and Infosys. Philips' finance operations have moved from a geographically based organization structure to a process-based organization structure, with the emphasis on each party holding the other accountable. To this end:

  • End-to-end common dashboards are used to monitor finance operations
  • Global process owners within the Philips team are mirrored by global process owners within the Infosys team
  • Infosys is accountable for the end-to-end KPIs and the analytics used to identify scope for improvement.

The goal in five years' time is to have very standard processes that are easy for Infosys to operate, and Philips has approximately 20 process improvement projects planned over the next 2-3 years to improve process effectiveness and efficiency. These are relatively evenly spread across the major processes areas with an emphasis within P2P, for example, on increased automation, e.g. through use of e-invoicing.

As in many mature F&A BPO contracts, there has been a move from FTE-based pricing to transaction-based pricing, with the latter regarded by Philips as the ideal end-point. Currently approximately three-quarters of the contract is priced on a per transaction basis with a quarter of activity (in areas such as compliance) still FTE-based. In addition, there are bonuses and penalties, each around 5% , associated with targeted improvements in end-to-end KPIs. Philips has set improvement targets for six key indicators, tasked Infosys with identifying the three main factors for underperformance in each KPI, and also baked efficiency targets into the contract.

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