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In late October, HfS Research attended a duo of Analyst Days hosted by EXL in their relatively new Digital Experience Center (DEC) in Jersey City, NJ. The stated mission of the Digital Experience Center is to serve as a collaborative space to design and architect digital solutions that transform clients’ businesses. EXL attempted to bring this mission to light by focusing the event on business outcomes achieved through digital transformation with banking, financial services, and insurance (BFSI) clients.
The briefings dovetailed with EXL’s announcement of its Q3 results, which showed double-digit year-over-year revenue growth of 12.4%. Analytics continued its strong growth trajectory (29.1%) and its operations management business chalked up modestly respectable 7.0% growth. Its financial performance served as a timely backdrop to the discussion of the firm’s movement away from labor-arbitrage-based operations management services to one offering digital transformation led by analytics and industry-specific solutions.
Growing Focus on BFS, Largely Led by Analytics
EXL is well known for its industry expertise in the insurance sector and increasingly in healthcare. It is somewhat less well known for its developing focus within banking and financial services. Part of the haziness around the company’s depth of BFS expertise is tied to choices the company had made around SEC reporting, whereby BFS is reported as part of a segment called “Other”. Another factor is its analytics business, which is often reported and discussed as a horizontal set of capabilities. However, BFS is one of the biggest growth engines within EXL’s analytics business, supporting various risk and compliance needs with deep industry-specific process knowledge.
At the event, EXL showcased various client examples to illustrate the link between digital transformation and tangible business outcomes. While the BFS examples were generally analytics-led, the examples also showed good continued growth in use of enabling technologies such as intelligent automation and data management, which have been focused growth areas for EXL. The depth of BFS-related risk and compliance expertise was also on display, as follows:
In both examples, while the supporting technology may be applicable across industries and even across permutations of risk monitoring and regulatory compliance, it’s the process knowledge that helps EXL deliver an effective solution and begins to bridge the gap between analytics and enhanced operations management. As EXL continues to cultivate its BFS segment, HfS expects to see them leverage analytics to pull through operations management opportunities especially around process reinvention. EXL needs to ensure that its strength in risk and compliance process knowledge specific to BFS is not lost in the broader analytics message.
Setting Up to Become an Industry Participant in Insurance
EXL’s focus on business outcomes for insurance clients was apparent at the event, with a more cohesive than ever before message about the firm’s range of industry-specific capabilities. Part of this comes from the strategy work done by Nagaraja Srivatsan over the last year in his role as Chief Growth Officer for EXL in collaboration with the provider’s insurance practice leaders, including those at the event – Keith Johnson, Sr. Vice President and Head of Life & Annuities; Arnab Dey, Sr. Vice President, Head of Property & Casualty, and Chief Strategy Officer; and Brad Burdick, Sr. Vice President, Insurance Tech and Products. In its journey from being a niche operations player to a broad-based solution provider, we saw a few examples where EXL is consolidating capabilities to become an industry participant for insurance:
Progress Toward the Triple A Trifecta
HfS developed the “Triple A Trifecta” of robotic process automation (RPA), smart analytics, and artificial intelligence (AI) to provide a clear and crisp articulation of the emerging change agents for clients to optimize, renovate, or transform their business operations. While each element of the trifecta has a distinct value proposition (RPA drives efficiency, smart analytics improves decision making, and AI can solve business problems), the increasing convergence between the three elements is the Holy Grail of service delivery transformation.
EXL doubled down on analytics long ago with its Inductis acquisition (2006) and has continued to invest and build its expertise. Lately this has included a focus on data management with its acquisition of Datasource. As we evaluated EXL’s updated BFSI strategy, we noted new use cases involving RPA and AI, areas in which EXL was somewhat late to market. The firm needs to continue to embrace and increasingly combine these change agents to help its clients and itself achieve digital transformation.
Exhibit 1: The HfS “Triple A Trifecta”: Automation, Analytics, and AI
Source: HfS Research 2017
Bottom Line: EXL’s BFSI offerings are evolving with the increased use of intelligent automation; however, BFSI reinvention is only possible if EXL embraces the Triple A Trifecta.
HfS sees a thoughtful front presented by EXL on its BFSI practices: rooted in its analytics strength and industry process expertise, but increasingly stretching to develop more technology enablement and deliver on business outcomes for clients in these markets. As we noted in our recent HfS Chicago Service Buyers’ Summit, clients aren’t looking for RPA, AI, or blockchain products off the shelf; they are trying to buy an outcome. EXL is on the right path with rethinking its analytics and operations management business with these new expectations, taking its own advice to “look deeper” as it goes to market. It must now refine and ramp up its new intelligent automation capabilities as clients continue to challenge its risk appetite for change. There will be a notable self-cannibalization of its operations business as this unfolds.