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February 3, 2022
On this special Fireside Chat, HFS CEO Phil Fersht talks with Vipul Khanna, the Managing Director and CEO of Firstsource Solutions.
You can listen above or watch this HFS Videocast here:
Vipul joined Firstsource in 2019 from Cognizant Digital Operations where he led a start-up practice into a $2 billion, top-5 global BPO business.
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This transcript was auto-generated from the original recording and lightly edited for readability. We've done our best to catch errors, but names, technical terms, and company references may be misspelled or imperfectly captured. For the definitive version, please refer to the original audio or video. Views expressed are the speakers' own.
Thanks, Mark, and great to see you again, Vipul. And welcome, everybody, for taking your time to listen to us for a little while. I’ve known Vipul Khanna for several years now, and I first met him during his role leading, I think, Cognizant’s operations and business process management area. Since then, he’s taken a very exciting role at Firstsource, leading the charge there in the digital and marketing technology area. But I think, to start this off, I’d love to hear a bit more about you, Vipul, and a bit more about your background and how you got into this business in the first place.
Sure, thank you, Phil. Thank you, Mark. It’s been a pleasure to know you over the years and see how you and your firm have developed, and it’s been great inspiration to follow your progress as we developed our businesses. I grew up in a small town in the northern part of India. I was very bad at math and science, so the only option was to go into accounting and business. As I made that transition in high school, I really liked the world of business. A couple of biographies I read in my 11th and 12th grade — Sam Walton’s Made in America, Lee Iacocca’s biography — and some business magazines left a mark, and I fell in love with business. So I did my CA, chartered accountancy, in that small town, and for work one had to move out to a big town, so I came to Delhi way back in the early 90s and got a job in Price Waterhouse. I literally felt like a small guy standing at the base of a skyscraper, looking up with your neck arched 180 degrees, looking at the world of corporate business and how social living happens in large cities. Very exciting times. And then I stumbled into American Express, which was the first truly shared-service organization following a follow-the-sun methodology and opened up a shared service center in Delhi. I kid you not, it took me two or three months to really sit down and understand it. Explain to me how you’re doing Japanese bank reconciliations sitting in Delhi, or how you’re doing Australian credit loss provisioning models sitting in Delhi? Because those were the very early days of the whole offshoring boom — very foundational days of trying to understand the world of offshoring and outsourcing. And then a senior colleague of mine left and joined a startup funded by a US company. He said, hey, are you going to come over? I said, what will I do? He said, pick your title. So I said, let me be the head of transitions and solutions in that startup. And we created a good business — I think a $200 million business over six years. I remember my first contact center contract was signed where the client did not visit India before signing the contract. That’s kind of sacrilege after that, but setting up the first international call center way back in 2000 in Mumbai was an experience, and we grew from there. UBS came calling to set up their captive, and they set it up as an internal service company. That was fun, to get deep into banking at that point in time. But they always had a vision that they wanted it to stand on its feet. So there I was trying to run a captive, competing with the big guys with no resources. We were competing with all the big vendors who served UBS, and I was a little captive trying to say, hey, there are inherent advantages of using a captive versus a third party. But come the financial crisis, the bank took a call on whether to buy or make, and then they put that captive up for a partnership. We went through a process, and Cognizant finally bought that captive at the end of 2009. I spent the next nine years at Cognizant — a great ride there, first on the operations side in India, then moved to the US, building up a business before Firstsource came calling in 2019. So here I am, bringing my learnings with the evolution of BPO into this world.
I think I’ve lost count of the amount of people I know at Cognizant who’ve become CEOs today. Was there some special formula there?
Yeah. It was a very supportive, very growth-oriented, entrepreneurial environment, and I think that allowed people to chart their course. The CEO at that time used to say, for every large account I want a CEO in charge — you are the CEO for this account, or you are the CEO for this business. That ability to chart your course — I think those experiences have helped.
Interesting. So you decided to take this role, I think just before the pandemic, at Firstsource, which was predominantly a call center, contact center business at the time. What inspired you to take that position? What excited you about it? And has it been everything you imagined?
I think largely my thesis has worked out. I wanted to personally make the transition from running a division to running a public company, and there’s a steep learning curve to that — including all the knocks on the chin on how to manage and learn to manage investors, and how to think about the value creation equation in the true sense of the word. It’s been a very supportive board, which was very steadfast in what they wanted. The mandate they gave was, we want a growth CEO, whatever that means. And it’s been very supportive from that standpoint — on whatever strategy I’ve laid out, backing that strategy, backing investments behind it, and backing the people I need to implement on it. It’s been a learning. I like to call it — we are into our third avatar as Firstsource. We’re a 20-year-old company, but we’re almost on to our third avatar. I like to call it, we’re like a 20-year-old startup now. A bunch of folks sit around and decide where we want to go, debate it up, and then get going. But the position we have in the industries we operate in has given a good foundation and good runway for growth that we’re now traversing to get to a meaningful place.
Interesting. And then how did the onset of the pandemic change the game plan? Was it significant, looking back from what you started out with, when you went through that whole experience?
Yeah, so I joined in August of 2019. I got one or two rounds of travel to India, the UK, the Philippines, and different parts of the US, and then everything was shut down in March of 2020. So the first few months were, like everybody else, trying to keep the ops running, trying to get remote operations going, and the massive logistics of getting 25,000 people kitted out and started to work remotely. But it’s been an evolution in developing that model from an operating standpoint. We’ve all learned along the way how to engage remote folks, how to get security in place, and all the bells and whistles of getting that going. Business-wise, macroeconomics have played different roles in different parts of our business. For instance, our hospital business, our provider business in US healthcare, has been mostly subdued because of the pandemic. Hospitals have prioritized COVID treatments, so the elective and other treatments haven’t happened, which means the volumes going through the hospitals are lower. So it’s been a dampener. But on the other hand, because of the interest rate environment, the macro environment was good for our mortgage business, and that provided some tailwinds. So those are the two macro examples. Obviously, like everybody else in our industry, we’ve seen our clients, led by consumers, adopting digital. Clients have accelerated their digital timetables, and it’s manifesting in different ways. That’s been a good tailwind, and it has also accelerated our own transition — what I call digital first, digital now — both internally and externally. It is exacerbated by the fact that talent is in short supply everywhere. I joke that it’s easier to sell to a client than to sell a client to talent now. It’s harder to get talent than it is to get a client or business. But it has also forced partnerships, and given everybody’s remote, tactically partnerships have become stronger because people have gotten used to working across this. It doesn’t need a lot of getting together in person. Everybody’s gone into the mindset of, hey, let’s get together quickly on a phone call, on a Zoom call, and get going. So the urgency has forced the partnership ecosystem for us to flourish and get embedded in our solutions. So puts and takes, but overall I think business has emerged on a stronger growth path. We are looking at double-digit growth consistently now, relative to where we were in the past.
So how has the nature of the Firstsource business evolved in the last couple of years in terms of the service lines you’re looking at and the industries you’re servicing?
Yeah. So, Phil, at a high level, about 50% of our business is banking, about 30% is healthcare, and about 20% is comms and media. The one thing I’ve been very clear about, and I’ve learned it along the way — I didn’t start with it — is to be very focused. We’re a smallish company, so we have to choose our battlegrounds carefully. Within banking, for instance, we play in just mortgage, receivables management — which is collections — and UK retail and commercial banking. And we think within that there is still a lot of runway to find adjacent areas of growth and stay focused. So we’re trying not to do a lot of things — not to get into capital markets, not asset management, not commercial banking — and stick to where we think we are the leaders, or where we can get to the leadership position. The thing we’ve added there is a focus on FinTech and DeFi. In the last two quarters we’ve signed up like five fintechs now. That world and the financing volume is shifting — small volume, but percentage growth is high for the FinTech and crypto world, and we want to make sure we follow that trend and build capabilities. And that is manifesting not necessarily in well-defined processes, but more like designing operations for them, then running it, and you continue to rinse, repeat, and finesse that operation. So that’s one example of staying focused and finding adjacencies. The second aspect, which I mentioned, is we’ve cheekily coined the term digital first, digital now, to bring urgency into our services, our offerings, and our internal ecosystem of technology. Recognizing that our primary heritage is about business knowledge and operations, a big part of our technology footprint is about partnerships with product companies and service companies alike. We’ve already bid out and won a couple of large engagements where we’ve partnered not only with a product company but with an IT services company as well, so we can compete with the big integrated companies and not be disadvantaged because we don’t have a big IT services arm. Again, we have to choose those areas carefully, but partnerships is the way to go from a technology standpoint. We’re also building our own technology, but that’s mostly around configuration and putting technology to work to extract the juice out of technology for the sake of our clients’ business. So that’s digital. And then the third, if I may, is a little more esoteric and abstract — being a purposeful company. To me, purposeful is all about — I have to first change myself before I expect even my kids to change. They won’t listen to me if I ask them to change. So purpose is all about inside out — can we be relevant and purposeful for our employees? Can we give them the right avenue, pay them a decent, competitive wage and benefits, and help them find their potential and relate them to the story of what they do? Can they find purpose in what they’re doing day to day and see their contribution? It manifests in a variety of ways — training, development, and all the good stuff that goes with it. If we can attract the right people and empower them, they’ll get the other right people, we’ll have the right reputation in the communities, and we know clients like it. Clients want to work with purposeful companies. A big part of ESG is about people. Most of our clients now ask, what is your ESG strategy? And people becomes a big part of it. So those are the three things I would say — focus, digital, and being a purposeful company.
As you look at moving into a more transformational remit for the business, it’s interesting to hear that you’re working more with fintechs. I imagine that’s a very different experience from working with Global 2000s, where maybe you move down the stack a little at the operational level. Do you feel with the fintechs you’re more involved in the strategy setting and the transformational pieces as well?
For sure, for sure. I think it depends on what stage we catch them. A couple of them are very early stage, like Series A, and there it’s more about — you focus on the product, the compliance, and the marketing, and we’ll bring all the capabilities around operations, including design, including the operational technology stack, together for you, testing it out, the user experience, devising the operational policies and then running it. That’s a very different, drawing-board sort of experience — challenging, but it also allows us to bring the best of the partner ecosystem into play, whether it’s the big behemoths like Salesforce or startups like Celonis and Cresta in different aspects.
OK. So do you feel that the talent you’re hiring and training — the need is changing from what you were working with two or three years ago, as you try to move into this transformational space with your clients?
100%, whether it’s hiring or retooling what we already have. It won’t be just all hiring — it’s new hires as well as retraining the existing ones. So one big part of my focus since last year is to build, let’s call it broadly consulting, but it’s mostly a design capability, working with SMEs, with people who have a good process orientation, and people who put technology to work — bringing those three things together: technology, process, and design — to make sure we’re devising the processes or designing the transformation. So it’s people with more consulting and more design orientation joining. The second aspect, like all of our peers, is making sure our managerial core — the team leaders, the managers, the front line — are very aware of the tools available to them for managing operations now. It’s not just about managing people, but more about where I can deploy technology, the most efficient use of technology, and how I create a culture of continuously questioning the process and putting things up for automation where I can. So training that population of 2,000 people is a big focus for us on these new tools available in our program.
Interesting. And convincing clients that a company like Firstsource can really help in the technology enablement space as well as process — is that still a huge challenge for you, or do you think clients are becoming more open-minded and more willing to work with mid-tiers and things like that?
I wouldn’t say it’s a walk in the park. We’re not necessarily invited to all the big transformation programs — obviously the big guys with some of the older relationships and credibility get there — so part of it is changing the perception to be recognized for that, getting into the accounts, getting onto the drawing board, and then slowly working our way up. But in a couple of examples where it’s been outright fighting the market from an RFP standpoint, we’ve been successful, and the difference there has been how much attention we put into the business knowledge part of it. To say, there are 33 components that have to come together. There is technology, there are the people, and it’s the training of the people on how to use that technology, because ultimately it’s the trio of those three that will produce magic at the end. On their own, they’re not going to organically come together. So how are people taking that technology, case by case, function by function, process by process, showing you that the output could go from A to B because I’m putting this lever in play? The detail of it — that’s where we scored, to show, here’s how across the 10 levers I put in place, here’s the outcome I can deliver at the process level, not necessarily at a macro level. That credibility of showing familiarity with the business is what has allowed us, and on the back end we can then source the technology partnerships where required to actually help us implement to that level of transformation. Personally, I was a bit of a late adopter to RPA. I didn’t believe in it in 2013, 2014, 2015, or 2016. I was like, oh, we’ll figure it out. But that was a hard lesson for me personally — that was something emerging that has sucked up so much value as it went mainstream. So that’s my personal commitment now, that every new thing that comes up, I have to be on it to understand it and be deploying it. I do think RPA, process analysis, omni-channel, and now, as we get to machine learning deployment — these are all hammers looking for nails. Everybody has access to these hammers. The trick is who’s able to put them to use in the context of a client or their situation and get better output. I think that will be the differentiator, and that sweet spot of business analysis, configuration skills, and doing the grind of implementing is a sweet spot where we could make a mark and hold our own.
It’s interesting. So where are you finding there’s most demand from your clients at the moment? We’ve come through a crazy couple of years. It feels like there’s a rush to do things that clients should have done 10 years ago and they’re doing them now. Where are you seeing most demand and immediacy for your business? You talk about double-digit growth again — where do you think that’s going to come from?
There is a sector view and there is a service line view. From a sector standpoint, as I said, BFS in the areas we operate has a lot of runway. Just take one example — our receivables management business, where we primarily serve the card side of the world. We’ve extended it to autos. We’re extending it to other industries, like utilities, taking it to that form of consumer receivables. We just finished an acquisition of a company called ARSI at the end of 2021, which takes us — we already do early and late stage — those guys do legal collections. So that’s the next stage, where you have to use law firms to enforce obligations that borrowers might have. It gives us a huge amount of adjacency, and our intention is to combine the two and take it to FinTech. Take FinTech, for example. Our thesis is that fintechs are very good at the front end as far as the lending and the transaction side is concerned, but in their evolution they haven’t reached a stage where they’re very good at the back end, which is receivables management. So can we go and help them design the right receivables management strategy and define decision points on what strategy to use for collections at what stage of an overdue — whether it’s call-and-collect or the legal side of it — and then run that strategy for them? That’s one example. As well, we want to take this to our UK and European market. Today it’s a very North America-centric business; take it to the UK and Europe, where we have a large set of clients, with our new offering as well as a digital avatar of collections. Because it’s not call-based now — nobody takes a call, for marketing, for service, or for collecting. So it has to be text-based, email-based, with the right responsive technology at the back end to make it a pleasant digital experience. Healthcare — we see a lot of runway. We play on both the provider and payer side. On the payer side, something as basic as digital intake, which is the stuff getting into a health plan — claims, authorizations, appeals, and so on — I’m surprised at how messy that process still is for most of the industry. So we’ve retooled our platform, and we’ve won like five engagements where we’re saying it’ll be more digital intake so it sets your downstream processes more nicely, more predictably. We see a lot of demand in that — the basic or traditional done in a new manner. At the same time, we’ve seen the pandemic accelerate the adoption of telehealth. We’re working with all our clients on telehealth, but the evolution there is remote patient monitoring, or continuous patient monitoring, where devices keep us connected to our service providers, doing the hard work of data gathering and trend isolation, and giving it to the human to say, yep, Vipul needs intervention now — his heart rate is running too high because Phil is asking him difficult questions. So what’s going on with Vipul at this stage? RPM becomes a big thing. And then media has been a strong suit, but as that goes to digital — the transition of traditional media to digital is something we’re playing in, whether that’s cable going to OTT or streaming, or publishing going online. That transition of customer experience and retention is something we want to play heavily on through partnerships, bringing new products. Overall, today our portfolio is about 40% what we call a digitally empowered contact center, about 45% back office, and about 10% pure digital. I would expect that to start to lose its relevance and become end-to-end processes. Today we track and report it that way, but people then look to end-to-end journeys and say, what do I do in this process? It could be back office, could be a multi-channel engagement. So that’s a sense of our portfolio and where it’s going.
So you mentioned earlier that selling to your own people can be harder sometimes than selling to your clients. Do you think that’s going to be the crunch point this year as we look out at the industry — the demand is, who can win the talent, who can win the market share? And if so, what do you think you’re going to do that sets you apart there?
Yeah, getting good talent is incredibly hard. At the frontline level, it’s about making sure you pay a competitive wage — that’s brass tacks, you’ve got to get all those things done. But I think it’s the training. As humans, our minds have fundamentally changed. We can’t sit through long sessions, we can’t sit through trainings, going through endless PowerPoint. So we are completely revamping our training. We’re making it bite-sized, using a lot of videos, gamifying it, making it a lot of peer learning — more conversational and discussion-based. If you start with that, and with the right tools — we’re starting to call it CX follows EX. Are we getting the right employee experience? It’s the tools, the training, and how they connect to their purpose. What am I doing? In our healthcare business, for instance, we do a lot of patient advocacy, which is for our hospitals — people who come in without insurance coverage. How do we help hospitals recover revenue in those cases where people don’t have insurance coverage? What we’re really doing is finding avenues for those patients to find coverage. The purpose for the employee is that once you find someone and enroll them into a state Medicaid program, you’ve taken them from no coverage to coverage which is for life, and you’re bringing them onto a medical network. So if a patient advocate, our employee, gets that vision and relates to it, then they’re into it, because they’re doing something really meaningful to help someone. So that’s the kind of work at the frontline level. At the leadership level, good talent attracts good talent. If I’m able to attract one good leader, they have their own set of followers who follow. Where I’ve found particular success in attracting top talent is that a lot of talent is done with the large-company experience, and attracting them to a smaller, more nimble, agile organization has been the draw — to say, hey, we are at this stage of a revolution, we want to be big, there’s an opportunity to be part of that journey, and there’s an opportunity for personal financial wealth creation as well. That’s the draw for getting talent from large companies to come into smaller, nimbler organizations.
So you’re spending more time externally focused rather than internally focused.
And as you do even more marketing engagements, more transformational engagements, that in itself makes it more credible that we’ll be doing high-quality, transformational work. And size notwithstanding, it gives us more leeway to play around.
Excellent. Well, I think you answered that very well. So, looking at your career, who would you say have been your biggest influences along the way, and even today?
Somehow — I haven’t nurtured it — I’m generally very curious. In fact, I have to temper down my curiosity at times, otherwise I get all distributed and dispersed in different areas, so I have to be more focused on where I keep my focus. A big part of curiosity is that ability, or desire, to learn from a variety of people and situations. So it’s hard for me to answer that, because it’s such a melange of things and incidents, of people who influence you. And it’s not about people who influence you on what they do, but people you learn from on what not to do — a huge part of my learning has always come from what has made me feel less energetic, embracing that and making sure I don’t do it. But, as I mentioned, some early business influences reading autobiographies. A couple of my leaders at UBS were very influential on how they thought about selling — I learned selling from a leader at UBS, and that was internal selling. Frank and Gordon at Cognizant have been great influences on how to build businesses. And then a lot of my friends and mentors — I’ve been blessed to have two or three mentors along my journey. My wife is a big source of anchoring down, to say, hey, let’s sit down and talk about it. What are you excited about, and is it sustainable?
There you go. Well, I hope she’s listening. All right, so, to put you on the spot, I have a final question. We’re going to send you to a nice sunny desert island to see out the rest of this pandemic, and you’re going to have one book to read, one movie to watch, and one piece of music, one song, to listen to. What would you go for?
Oh, wow. Oddly, I do find comfort in going back to the familiar at times. So if I were to go back to my favorite movie, it would be The Pursuit of Happyness, the Will Smith movie. I found it incredible. I’ve seen it I don’t know how many times, and I could watch it again. The one book to read — I wish I could say I want to learn machine learning or something, but of late, especially with the pandemic, I’ve been going somewhat on the spiritual side. So I’ve started reading those kinds of books, a little bit of Buddhist philosophy, of acceptance and so on. One of those topics would come out — in terms of how to find purpose and self-fulfillment. There are a variety of books there. Music — unfortunately, or fortunately, I grew up and haven’t still found a taste for Western music. I left that stable too late, so I would still go back to Bollywood songs; that’s what I’d go to on my playlist.
And anyone specifically?
No, I can’t think of one. I have a playlist of like 800 songs, so I can pick one or the other.
Sounds like my wife with a Persian music playlist.
There’s so much of it.
Well, honestly, I’ve really enjoyed listening to this very much, Vipul, and I look forward to sharing this with our network. A lot of people here have known you and followed you throughout the years and would really enjoy hearing this, as well as people who maybe don’t know you as well. So I thank you very much for your time.
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