Geoff Smith, Executive Vice President & Chief Operating Officer, ePolicy Solutions: “We operate in a global economy. You have to look for the best ways to make yourself competitive in the marketplace.”

In this interview, Geoff Smith, Executive Vice President & Chief Operating Officer, ePolicy Solutions traces ePolicy’s journey in outsourcing and the lessons learned so far. He addresses critical issues of managing risk, evolving a methodology, implementing processes and cultural orientation.

Geoff Smith: Insurance is a complex business, one that’s difficult to understand. There is hesitancy from a domain expertise perspective to outsource processes that may require insurance knowledge.

However, there are insurance processes that can be outsourced and don’t require significant domain expertise such as call center activities. From a software standpoint, there are development processes that can be outsourced as well.

I believe the reasons that motivate the insurance industry to outsource are no different from those of other industries. They are:

--To reduce costs and become more competitive in the marketplace
--To increase the speed and efficiency of production while maintaining quality standards
--To scale cost-effectively and increase productivity

Geoff Smith: There were three major criteria that we focused on when we looked at selecting an outsourcer. Our goal was to work as partners, in the true sense of the word, not as a vendor and a client.

We considered:

Competitiveness in terms of pricing. Cost is very important because we are in a very competitive marketplace with respect to the product we offer to insurance companies. We were looking at ways to make our product more competitive.

Trustworthiness. The ability to establish trust. We have a lot of intellectual property, and the value of our company is essentially the intellectual property that we have developed over several years.

We have to ensure that we can establish a very high level of trust in the working relationship.

Execution. The ability to execute and deliver based on the business requirements of clients.

In terms of execution, we looked for a company that was certified at a high level of CMM (Capability Maturity Model). Mastek is CMM Level 5 in software development.

Another key factor was the ability to implement and scale up quickly.

As we were going through the selection process, we were talking to a major prospective client, Liberty Mutual. We knew if we signed the account, we would have to ramp up very quickly, beyond our capability in the U.S. We needed a company that had the ability to rapidly staff our project with experienced people.

We had started working with Mastek in July 2002 on a product for delivery by year-end so we knew how well they performed. Mastek delivered what they promised. The team was on time, on budget and the quality was exceptional.

Mastek had a good track record with us in terms of performance before we actually made the selection. We did look at other vendors, but the decision boiled down to competitive price, execution and trustworthiness.

Mastek has also grown consistently and been a stable company financially.

Geoff Smith: ePolicy Solutions is focused on the Property and Casualty insurance industry in the U.S., with a specific focus on commercial insurance.

When we started working together, Mastek did not have depth in commercial insurance. When we selected Mastek, we knew going in that we had to further their domain knowledge in our area of specialisation.

One of the challenges of our relationship is to work closely with Mastek and enhance the knowledge levels in the P & C (Property and Casualty) domain. ePolicy is successful because of our collective experience and expertise in the commercial insurance space in the P & C market of the U.S.

Geoff Smith: We started our new working relationship with Mastek in July 2003 when we announced changes in our company and began to integrate the culture of Mastek into the culture of ePolicy in the U.S.

The challenges that we faced, that can be represented as risks, were the time difference between California and Mumbai, the communication between the two organisations, the understanding of CMM Level 5 methodologies, the methods put in place to ensure success and the project management approaches.

There were a lot changes; change was very, very impactful on this new company.

We mitigated those risks by forging close working relationships at senior levels of the company, between the management teams, and below that, the working level of the company.

We initiated a human resources relationship between the two companies and exposed everyone to both cultures. We communicated continuously in formal meetings and informal telephone conversations and videoconferences, so that we became one integrated team.

We have been very disciplined in documentation, following best practices in accordance with CMM Level 5. It started with meeting minutes, formalising and capturing everything that was important, detailing action points in terms of who was responsible, date of delivery, etc.

Finally, we determined that we needed a person at a senior level in India, on-site who would ensure that this working relationship can be taken forward as broadly and rapidly as possible.

Integration involves a lot of moving parts, changes and a new working relationship. It was a big challenge. Today, we are quite stable.

Geoff Smith: We brought Mastek human resources staff from Dallas, Texas, and India to our offices for a cultural orientation into the Indian way of thinking, communicating, behaving and using body language.

We also oriented the Mastek people here on American culture. I personally had ‘check-in’ sessions with Mastek people every other week. At one time, we had about 20 Mastek people on-shore.

I spoke to them about their concerns; we talked about what we can achieve together and how they are integrated into the organisation. This was done so they can go back to India as our ambassadors to a larger group of offshore developers.

Additionally, senior executives at ePolicy have forged strong links with key Mastek executives, including Sudhakar Ram, the CEO; Atul Vohra, President of Majesco, U.S.; Nagarajan Krishnamurthy, Business Development Head; Suresh K.L.; and the Onshore Program Manager, S. N. Simhan, and his deputy, Chandra Mariyal.

Our senior executives have visited India for several customer meetings. We have engaged ourselves in India to understand first-hand how work is executed, how the teams work together and what the Indian culture is about, so we can better explain to our people.

At the time of the Mumbai bombing last year we averted a personal crisis for two of the ePolicy folks who were on the ground. The way Mastek reacted and managed the situation through personal attention to our staff was an indication of how strongly the relationship was beginning to develop.

Geoff Smith: The fundamental propositions of outsourcing are driven by the need for increased productivity and the ability to have lower variable costs that can drive the economics based on workload and work demand. Scalability… being able to grow an organisation quickly is vital.

We operate in a global economy. You have to look for the best ways to make yourself competitive in the marketplace. You have to look at ways of improving the quality of your product at the most competitive price that you can deliver. High quality, low cost and high productivity are keys to ensuring that your strategy pays off.

India has been a leader in the outsourcing industry. India has significant advantages with its educational system and the competency levels of the people doing the work, fluency in English and the focus on software and technology.

There are other countries that are striving to get into outsourcing. But it will take a lot of time before they can seriously challenge India in delivering the highest quality.

Geoff Smith: Prior to our relationship with Mastek, we had implemented basic Project Management Institute processes and practices. When Mastek came on board, they introduced a uniform process throughout the organisation, complemented our processes and improved them significantly.

Thereafter, we were all speaking the same language, using the same template and making it available to everybody in the company. When we spoke to prospective customers, we focused on Project Management and our presentations were well received.

Having Mastek with us as a CMM Level 5 technology resource is a big plus. There are few CMM Level 5 companies in the U.S., especially in the insurance business. CMM Level 5 practices really help us with the way we organise our work and the processes we use with our client teams. Our clients and prospective clients recognise its value.

Geoff Smith: One, never underestimate the need to communicate, the time you need to take to build a relationship one-on-one and with the team. Two, never underestimate the challenge of communication when you initiate a relationship. Three, never underestimate the cultural differences.

Don’t overlook infrastructure, hardware and software that have to be put in place to ensure that the two organisations can transact business. Also, don’t underestimate the costs associated with it. There are overhead costs and time invested in the relationship that have to be factored in.

Make sure you have a well-defined plan that is jointly approved with a lot of checkpoints and milestones.

One more point, don’t ever underestimate the challenge of the time difference, 13- and-a-half hours is not insignificant.

Geoff Smith: You have to build a level of trust. You also have to build contractual protection between different parties to ensure that the intellectual property is protected. There should be a strong ethics clause built in. To give an example, protection between the Mastek team working on our business and other Mastek teams working on other businesses.

You have to ensure that there is a contractual guarantee so intellectual property is protected from competitors. Mastek was very cooperative and offered us a comfort level that was valuable to us.

Geoff Smith: If the outsourcing outcome is contributing to the bottom line as well as satisfying the customer, then it doesn’t matter whether it’s a soft market or a hard market.

It all depends on execution. If you are getting results that contribute to improving the financial picture and satisfying customer needs, outsourcing is great.

In a soft market, where competition is heating up, managers would look to outsourcing more frequently to help improve their operations than perhaps in a hard market. When everything is looking great, people tend to get a little relaxed and may not be as energetic or focused on getting better.

But markets are changing all the time. So you always have to look at ways to improve and innovate.

Geoff Smith: I believe the relationship is strong; it’s going to get stronger. The revenue opportunities for both are significant in the markets where we operate. Our joint sales strategy is going to pay off as we begin to execute it.

We are working very closely together on a joint sales strategy that gives Mastek access to the Property and Casualty market in the U.S. In addition, Mastek can refer customers to us. It strengthens the relationship and binds us together as one company looking at the insurance space in the U.S. Our joint sales strategy ensures a cohesive, international, integrated approach. There is also a Business Process Outsourcing (BPO) opportunity in the U.S. Property & Casualty market.

The current offshore relationship has stabilised. The first 4-5 months were chaotic because of the changes and having to ramp up so quickly; we are now at a stable level of scale in terms of people.

The first few product deliveries are coming off the line and they are looking good, so far. The quality and execution has been good. We have taken great care on the project management side in escalating issues, the hours being estimated in executing the project and in getting comfortable with those estimations.

These are early days in the relationship in terms of major projects being delivered. But overall, I’m very pleased over the last six months. I think we have a great future together.

Geoff Smith: Our relationship with Mastek is different from other relationships. With Mastek our goal is to execute as one company. Mastek is totally integrated into our company and we are integrated into Mastek. The success of our future is totally embedded in both our hands.

Our other strategic relationships are more sales and technology driven and function like alliances. Our relationship with Mastek is on another level.