The Hindu Business Line : `Innovation is our bread and butter'

Not often do you find a vice-chairman in charge of technology too, in any organisation. But Royal Bank of Canada seems different. And different in other respects too. It claims that its offshoring initiative was not to cut cost, but to help it innovate, that there was no crisis that forced itsarm but that it was a fully thought out decision.

"If anything, people would tell you we weren't among the first to do this," says Marty A Lippert, Group Head, Global Technology and Operations, and vice-chairman, RBC. Excerpts from a conversation with this buyer of software services.

You have an interesting job profile — VC and Technology & Operations head. Not too many technology buyers have someone from operations head their tech initiatives.

My responsibilities are for technology, operations and call centre activities. In addition, I have business line responsibilities for a number of the JVs that we operate. The idea behind what we have done inside the organisation is going to catch on in a lot of other Financial Institutions. It is difficult to execute but if you can be successful at it, it brings a lot of value to the organisation.

Inside the company, there is a Group Executive — five of us, in addition to the CEO. Three of my colleagues run the major businesses (retail banking, capital markets and international businesses) and are largely responsible for driving sales, while another runs administration/finance law. I operate the back end of the company.

That gives us the opportunity to step back and look at processes end-to-end and the elements that go into delivering customer experience — IT component, Operations component and our Service capabilities.

In the past, we had an operation team, technology team and business architects, each working on a piece of the project and handing over to another. Now, for each project, we have put together a team from all of these disciplines. So there are no more hand-offs. People look at things in a more holistic way, which has helped bring about solutions that have really been thought out from every aspect.

This structure, which has been in place for about 27 months, has already resulted in improvement in the delivery of our solution to the customers. Third party surveys have shown the service needle, in terms of the service from RBC in relation to the rest of the industry, moving in a very positive direction. In fact, other institutions have been contacting us to follow our model.

How do you measure these improvements?

We have put in place metrics, internally, that we measure. For example, an `open account process' on the retail banking side for the consumer market was a problem for us. It typically took us about 40 minutes to open an account for a customer.

As a result of the technology we have applied, process change that we brought about and also the way the branch addresses the issue, we have now brought it down to 12 minutes. It has not only reduced the number one client irritant in the network, but has also freed up time for the branch staff to sell more.

There are other very specific internal metrics we look at. We also have external measures - customer surveys done by third parties. These results have shown that the customer satisfaction levels have gone up. The reason why this is so critical is because we have very strong data that correlates the customer satisfaction levels, from a service perspective, to the revenues a customer provides to us. A customer who views our services as superior provides a 300 per cent increase in business to us than a customer who considers our service as average.

Why did you choose iGATE? Can you take us through your relationship?

RBC's relationship with iGATE is nearly two years old now. We did not enter into the outsourcing engagement with iGATE to drive costs down in the organisation, though that has been a side benefit.

RBC has been experiencing significant growth. Over the past 10 years, we have been the top-performing bank from a shareholder return perspective. We are the sixth largest bank in North America and 14th/15th largest bank in the world. Our own development organisation could not keep pace with the demand that we were putting on it to deliver new products and solutions and keep up with the change agenda that was going on inside the company.

We recognised that the demand we were seeing was not going to be met with just internal resources. The arrangement with iGATE was much more of a resource augmentation strategy, one that gives us the ability to tap into resources, from a specific technology perspective, that were difficult to get in our own market place in the scale we wanted.

That was the principle driver with us moving into the offshore arrangement. It was not a move in the middle of a crisis, nor was it a `cost savings' exercise. It was a thoughtful and disciplined approach to the offshore decision and has resulted in a much more positive experience for us with iGATE.

When we talked with some of the big players in the market, I was concerned about being a small fish in a big pond and not getting the right kind of attention from their management team. We chose iGATE as we wanted a partner for whom RBC would be a significant client.

iGATE has talked a lot about its iTOPS model, which combines the business process and IT services. Are you using those services in this relationship?

Phaneesh's (Phaneesh Murthy, CEO, iGate) iTOPS model is quite similar to the model we operate inside RBC. The Global technology and operations structure we have at RBC does exactly what iGATE talks about. We believe very strongly in the iTOPS model and think that there is tremendous leverage in looking at technology in relation to those processes that take place inside the organisation.

Hence, Phaneesh's model aligned very closely with our own strategy. We are now starting to look at how we can take what has been a relationship on application development front and extend into BPO.

Is iGATE your exclusive partner? Details of the contract... ?

Yes, iGATE is an exclusive offshore partner. The service we have got from iGATE has been exceptional.

We are under increasing threat from non-conventional competitors, such as online payment systems, and these represent real challenges for us, as we go forward. We are looking at iGATE to look at new approaches to doing things, to take care of some of our innovation challenges and to think more holistically about newer ways that we might be able to face our competition.

Has iGATE helped innovate for you till now?

At this stage, iGATE has clearly contributed to process and technological innovation. In this offshore partnership model with iGATE, we are now looking at them contributing to business model innovation, product innovation, distribution innovation, in addition to process and technological innovation.

We are currently in talks with iGATE to bring some of the bigger issues and challenges to bear and getting them to do a bit of R&D around that and coming back to us with some perspectives from this part of the world. We are also looking at iGATE to provide inputs on better product offerings linking India and Canada, that will help to put in place a seamless process to take care of the transition between India and Canada and ways to make it easier to move money back and forth between the two countries.

What is the Pricing Model for this partnership?

I don't look at this as a Vendor-Bank relationship. This is clearly a Bank-Partner relationship.

We are looking for idea flow and good intellectual dialogue that will help make us a better bank. We are very open to exploring different types of compensations with respect to the pricing model. It could even be a consulting arrangement, where we end up paying a percentage fee to iGATE for bringing in an idea where value is generated for RBC.

Where there is a value created for RBC, we are happy to share it with our offshore partner. That is what we believe will bring additional ideas to us.

How many people are on the RBC account at iGATE?

Currently there are about 500 people. We expect that number to continue to grow. Eighteen months ago, there were about 35 people. That for us is fairly rapid growth, not just from a numbers standpoint but from making those resources productive and getting them engaged on the account. We are very pleased with the rate of the ramp-up. Also, we have got aggressive ramp-up targets for the next 12 months.

When a slowdown happens, will IT budgets become a constraint and what happens to offshoring then? Clearly the focus will not be on innovation because that is not bread and butter?

Actually, we view innovation as being bread and butter. Innovation is very critical to us, being able to drive our revenue equation as well as our cost models. We spend a lot of time benchmarking our organisation from a cost and efficiency perspective, using third party companies to assess the level of effectiveness we are operating at. We thus try to place ourselves at the best in class level.

We know our cost structure is very strong and so when downturns come, we have mapped out approaches that we take, to try and react to a reduction in revenue in order to keep the earnings of the company growing.

That comes in different forms — shifting IT budgets or prioritising them differently. One of the things we spend a lot of time discussing inside the organisation is whether we should actually be spending more in a downturn recognising that our competition is likely to pull back during that period.

If we are able to position our businesses during downturn with additional investments that our competition is not making, when the cycle begins to turn, it puts us in a much more positive position to ride the curve back up again a lot more aggressively than our competition is positioned to do.

Hence, it may not be right to assume that when a downturn comes, IT budgets will go down.

What drives the change agenda that you spoke about earlier?

As I said earlier, we have been the top performing large bank globally for the last 10 years. And that has come as a result of the culture inside the organisation that constantly has us worrying about our performance. When you have that kind of culture, change becomes inherent in what we do so we never find ourselves falling behind. We have had a record year (last year) from a profit perspective and a lot of organisations would look at it and leave it at that and not change anything. We are looking at it from a perspective of what we could have done better and different to have driven profits even higher. And then to bring a change around that to keep driving the profitability numbers that will help keep the organisation in the top rated ranking.

Can you give us real life examples of how technology has actually helped make things better?

In the account opening process (mentioned above), iGATE was very much engaged in the change initiative. They have been involved in change initiatives on the Internet banking front providing additional customer functionalities with respect to bill payment capabilities. We are now able to provide customers with images of their cheques online, which has had a tremendous impact on the customer service front. While in the old system we had to refer to physical cheques, now all of those have gone into image archives. With it becoming available to customers online, they do not even have to come to an RBC employee to get access to that. That is a tremendous service enhancement to our customers.

bharatk@thehindu.co.in

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