2007 began well for Aviva. On Jan. 1st the company successfully concluded a Build Operate Transfer (BOT) program with one of its offshore partners, 24/7 Customer, in far away Bangalore. Launched three years ago as a strategic initiative, Aviva’s BOT program has been one of the most talked about experiments in the industry. The industry has been curious to see if this model of offshoring, requiring a third party to build a facility, hire the employees and get the operations off the ground before transferring the facility to the customer company, would succeed.

 In the case of Aviva at least, the model seems to be on the right track. BOT programs are rare in the BPO world, and exercising the transfer clause in the program is rarer still. For Aviva, reaching the “transfer” phase is a vindication of its BOT strategy. When other BOT deals have lingered in the “operate” phase (as a matter of strategy or not), Aviva’s strategy seems to have succeeded.

Today, the Aviva Global Services office in Bangalore is a frenzy of activity. It gets frequent visitors and lavish attention from Aviva headquarters in the U.K. There is hope and excitement among its 1,600 employees as they transition from working for a small Indian service provider to being a part of the world’s fifth largest insurance provider.

“This is not a change of direction, but merely the execution of a well laid-out plan,” says Rajnish Virmani, CEO, Aviva Global Services. “While the plan at the start of the offshore journey in 2003 was to have a mostly proprietary [captive] business, the BOT contracts with our partners have enabled Aviva to ramp up rapidly and gain speed to market.”

WHY AVIVA BET ON BOT
Although BOT is a much-touted model for offshoring BPO work, customers are rarely interested in owing operations. For many customers, the transfer option exists only as a comfort clause — in case things go wrong, customers can have the option of owning their operations.  

But for Aviva, owning operations was always important because customer support is core to its business. “In insurance, customer care is our life line,” Sean Egan, ex CEO of Aviva’s offshore program, had stressed to Global Services when we met him in 2005 to understand the company’s BOT strategy. (Read Is BOT an Indecent Proposal? at www.globalservicesmedia.com)

  “[transferring operations] is not a
change of direction, but merely the execution of a well laid-out plan”
— Rajnish Virmani, CEO, Aviva Global Services

Yet, the company chose the BOT model because it wanted to avoid the hassle of setting up operations from scratch in a foreign land. It made sense to work closely with partners who could do the ground work of setting up the infrastructure, getting regulatory clearances, recruiting employees, setting up basic processes (and proprietary processes along with Aviva), training manpower and stabilizing operations before Aviva took over. Aviva also wanted to leverage the partnerships to groom a team of local leadership.

It selected three India-based service providers, 24/7 Customer, EXLService and WNS, based on cultural fit and due diligence of their competencies. All three operations involved the setting up of dedicated centers by creating Special Purpose Vehicles to facilitate the transfer. Operations for Aviva were set up by 24/7 Customer at Bangalore (India), by EXLService at Pune (India) and by WNS at Pune and Colombo (Sri Lanka).

After three years of operations with 24/7 Customer, Aviva has chosen to exercise its first transfer with the Bangalore-based provider. The next transfer, at the WNS Colombo facility, is expected shortly, in July 2007, while the transfers at EXL’s and WNS’ Pune facilities will be completed by January 2008.

With the transfer of the 24/7 Customer facility, Aviva has demonstrated how offshoring can be a strategic fit to its vision of globalization. Offshoring has enabled Aviva to make neat savings of 40% of the cost of equivalent onshore activities, and sometimes even more than that. At the same time, it has allowed the company to own sizable customer-service operations in a country where it is ready to make a splash as an insurance service provider. India has recently opened its financial-services market, which is one of the most under-served insurance markets in the world.

Aviva has now positioned India as a part of a seamless network of support for its operations in the U.K. and Canada. “We do not look at offshoring in isolation,” says Virmani. “It is an extension of our business in the U.K. where an associate could be a part of a team that is supporting customers from York, Sheffield or Pune.”

MANAGING THE PROGRAM
The program was kick started by a project-management team headed by Sean Egan. Egan, a long-time employee of Aviva, moved to Pune in 2003 with his family and team members to work from ground zero with the three providers. The team monitored the transition of processes and the setting up of infrastructure, and worked on detailed service-level agreements.

By June 2004, the offshoring project was deemed to have achieved its objectives by the Aviva Executive Board. Their success laid the foundation for setting up of a shared-services organization in India, Aviva Offshore Services (AOS), to replace the “project” status of the initiative. AOS was later renamed Aviva Global Services. 

Meanwhile, Aviva recruited Virmani from American Express’ back-office operations, and groomed him for nine months at the company’s headquarters in the U.K. In its quest to hire and train a local team, Aviva reflected its commitment to the program.

By mid 2005 Virman moved to Pune. He had a clear mandate: To ensure a smooth and seamless transition from the providers by 2007.

Although Aviva worked very closely with the providers, in day-to-day operations, it remained largely hands-off. It ensured infrastructure and technical specifications were according to requirements and participated closely in the institution and training of proprietary process.

“The Aviva Global Services team knew exactly what was going on,” says S. Nagarajan, co-founder and Chief People’s Officer, 24/7 Customer. The program saw high commitment levels from top executives, including Executive Director, Patrick Snowball, who visits the centers in India at least twice a year.

MANAGING THE TRANSITION
As the countdown began, the frantic pace of activity at Aviva Global Services, Pune built up. A cross-functional team was created, aided by an external agency that helped identify time lines, monitor schedules, help with follow-up activities, and generally play nanny during the transition.

Second, different work streams that included human resource, technical, facilities, infrastructure, operations
and communications, drew up detailed work plans for the transition.

Certain broad guidelines were issued. One, customer satisfaction and employee morale must not go down under any circumstances. Two, metrics must be maintained as they were before the transition. Three, from the operational perspective, employees must not see any visible impact or change on Jan. 1, 2007 (when the transition happened) as opposed to Dec. 31, 2006. Four, the Aviva logo, its culture and values would gain more visibility within the premises, but there would not be a glaring change.

As a precursor to the transfer, Aviva also carried out an aggressive external campaign to increase its visibility in Bangalore through billboards and mass media so that employees and their families identified themselves with the company.

THE HR FACTOR 
As in any program, the X factor was managing the transition of employees and ensuring their smooth integration into the Aviva fold. Realizing the challenge, the Aviva Global Services team worked out a detailed HR strategy. The HR team was the largest in Aviva Global Services’ core team of about 50 people.

The biggest challenge was to keep the employees engaged and motivated. “From working in a small company, which is more like a family environment, employees must not feel suddenly lost in a much larger organization,” says V. J. Rao, Director, HR, Aviva Global Services.

The first challenge was to harmonize Aviva’s HR policies with those of 24/7 Customer. By and large, Aviva tried not to disrupt existing processes related to travel, compensation, leaves and holidays. “For instance, if somebody had a car lease for the next year and a half, we did not call for an abrupt termination,” says Rao.   

Transitioning employees is different from transitioning processes, and the engagement started much before the formal announcement wherein various functional people in the team started interacting with their counterparts at 24/7 Customer at an informal level.     

Aviva conducted a detailed survey amongst employees to assess expectation, satisfaction levels, views on Aviva and what their ideal company should be like. At the same time, employees were frequently exposed to senior Aviva executives through formal and informal interactions.

As a part of the transition process, key and functional people from the newly acquired center were sent to Aviva U.K. for 10 days to get acquainted with the business, culture and other employees.

All through the process of transition, communication was a key strategy with the leadership team communicating consistently and frequently through the intranet. “We leveraged [internal] leaders who volunteered for the job rather than hiring external employees for the role because employees tend to believe their leaders,” says Rao. 

BEST PRACTICES IN CHANGE MANAGEMENT   

Communication is key. Aviva Global Services used the intranet to communicate frequently with employees, erring on the side of over communication.

Quick reaction. These are times when rumors can fly thick and fast and undo a lot of hard work. The team should be able to respond to anything as quickly as possible.

Choosing the time carefully. Communicating at the right time about the transfer will determine how employees receive the news. Announcing it early might become irrelevant to people while delaying it might cause panic.

Plan in advance. Plan activities well in advance and involve people at all levels. It is important to engage employees to make them feel a part of the organization. The Aviva Global Services team started working on the countdown about six months ahead of the scheduled transition.

Living with differences. You have to learn to live with different expectations of people. However it is important to communicate frequently about the fairness in the system and set rational expectations. The best way to handle this is to win over the leadership first. For instance, the leadership team at Aviva was informed well in advance about the imminent transfer and given the option of going back to 24/7 Customer.

Expectations in every center are likely to be different. The back-office market is less mature in Colombo therefore expectations would be very different. The employees at the Colombo center are also much more qualified. It is a much smaller team and they are more nationalistic and therefore their sensitivities are likely to be different.