Specialty mortgage firm GreenPoint Mortgage s five-year, $30 million deal to outsource some of its back-office and customer service tasks to India-based Progeon is a lot like the loan business itself. A mortgage loan involves trust that a homeowner will pay back his or her debt, a clear contract to enforce that commitment, and a calculation that the result will be profitable.
Novato, Calif.-based GreenPoint has faith in Progeon based on previous work with Progeon s parent firm Infosys, an IT services firm headquartered in Bangalore, India. GreenPoint and Progeon have spelled out their concerns, including data security details, in a contract. And GreenPoint expects to shave its loan servicing costs by 20% to 50% with the overseas outsourcing strategy.
In addition, GreenPoint sees in India a possible home for more of its operations. For example, GreenPoint CEO S.A. Ibrahim can imagine a time when U.S.-based mortgage brokers can call to ask about GreenPoint products any hour of the day or night, and talk with a knowledgeable company representative sitting in Progeon s Bangalore facility. “Twenty four-seven is coming to the mortgage business,” Ibrahim says. “All of the sudden, the broker can interact with us around the clock.”
GreenPoint s deal with Progeon is part of the blossoming field of business process outsourcing. Seeking to cut costs and possibly improve quality, U.S. and European corporations are sending work overseas, including duties such as data entry, accounting and contact center services. India has jumped to the forefront of this industry for reasons including its large population of educated English speakers, its low wage levels, and improving infrastructure.
Another factor gets at GreenPoint s decision to go with Progeon: India has established a reputation for quality software development and consulting services, and some of those internationally known companies have entered the BPO world. Progeon s parent Infosys – which employs more than 9,400 IT professionals and has annual revenues this year of $545 million has provided IT services to heavy-hitter clients including Boeing, Apple Computer and Gap. Two years ago, GreenPoint hired Infosys to improve its technology and re-engineer some of its business processes. The experience helped make Ibrahim a believer. Infosys impressed Ibrahim with both its competence and its impeccable character.
Of course, trust has to be a two-way street for a business partnership to work. Progeon also came to have confidence in GreenPoint s senior management, says T.V. Mohandas Pai, Progeon s chairman. Linking up with GreenPoint worked for other reasons as well, Pai says. “Progeon focuses on the financial services vertical and hence it made sense for us to work with GreenPoint. To add to this we found a meeting of minds when we realized that the GreenPoint management was looking at offshore BPO as a strategic opportunity to further its business & rather than just another cost-saving opportunity.”
Progeon is trying to secure a place higher up the so-called value chain than other business process outsourcers who may focus on handling simple back-office transactions. It calls its service “business process management”, which suggests greater sophistication than “business process outsourcing.” The company s ideal client, Pai says, is a customer interested in a long-term relationship involving knowledge- or skill-intensive work.
Through Infosys s earlier contract with GreenPoint, Progeon had already developed a good deal of knowledge about the mortgage firm s operations. And that put another feather in Progeon s cap from Ibrahim s point of view. “The challenge of having to bring in a totally new partner and explain our business would have been far greater,” he says.
Comprehending GreenPoint s operations is no small matter. GreenPoint Mortgage – whose parent is New York City-based financial services firm GreenPoint Financial – calls itself an “alternative” lender. GreenPoint loan candidates may not have ideal credit histories or plenty of cash but they have complicated financial situations. Often, they are immigrants and self-employed individuals. To serve this niche market, GreenPoint has come up 150 different loan programs and constantly develops new ones.
At this point, GreenPoint is retaining all its high-end decision-making tasks in the U.S. But the work being shipped to India is nonetheless complex. From the same loan document, Indian workers may need both to snag information for a payment-collection system and grab data for other forms that allow GreenPoint to lump loans together and sell them on the secondary market. “It they don t have an understanding of the mortgage business, they will not succeed,” says Rajiv Kuchhal, Progeon s head of operations.
The Progeon-GreenPoint relationship was announced in June, and its implementation continues to require a great deal of back-and-forth communication. Three international calls a week between the parties are common, focusing on technology, operations and process issues. One hiccup has involved Progeon s training program. Progeon was spending too much time on computer navigation skills and not enough on the way the mortgage process works, says Raghu Krishnaiah, GreenPoint executive vice president and managing director. But Krishnaiah gives Progeon good marks for sniffing out possible problems: “They are being very proactive in identifying ways to minimize potential issues so that they don t occur,” he says.
Security is one of the key issues in GreenPoint s deal with Progeon. For one thing, U.S. law requires financial services firms to protect the privacy of consumers personal information. What s more, U.S. consumers are wary about their sensitive credit histories zipping around the world. When the Santa Rosa Press Democrat newspaper reported on GreenPoint s move to ship work to India, readers were afraid their confidential data would be less safe abroad.
To prevent any lapses, Progeon has tackled security from three different angles. First, the firm has established a separate facility for the GreenPoint account. Physical access to the building is given only to employees with authorized identification badges. Second, Progeon has created a secure computer network that s not connected to the rest of the Progeon or Infosys systems. For redundancy, the network connection to GreenPoint s U.S. offices runs along two fiber optic cables one ultimately stretching under the Pacific and the other under the Atlantic.
Finally, Progeon is taking steps to make sure GreenPoint s intellectual property doesn t walk out the door with a Progeon employee. Progeon requires its workers to sign non-disclosure agreements and submit to background checks. Discussions are also held with employees about the meaning of intellectual property as well as the importance of keeping client business information private.
GreenPoint zaps all its documents to India in electronic form, but paper records may be created in the Progeon office. Here, Progeon has developed a zero-tolerance policy involving paper shredders. “There is no reason for paper to go out of that facility,” Kuchhal says.
Both Progeon and GreenPoint have also considered future risks when it comes to data security. After all, GreenPoint is sharing information about its business that could be a valuable weapon should it fall into the hands of a competitor. And it s possible to imagine GreenPoint and Progeon parting ways a few years from now while another mortgage firm signs on with Progeon.
No worries here, GreenPoint officials say. It s all part of the contract they have signed. In fact, the contract negotiations weren t even very sticky. That s partly because Infosys already has charted a course when it comes to some of these security topics. For example, Infosys has found a way to work on projects for both Nortel Networks and its data-networking competitor Cisco Systems. “If this were exploring the Oregon Trail,” Ibrahim says. “(the path) has long been established.”
Exact terms of the GreenPoint-Progeon deal haven t been disclosed. But GreenPoint expects significant cost savings, which relate primarily to wages. Kuchhal says infrastructure costs and upper management salaries in India are higher than in North America, but front-line workers compensation is much lower. Progeon employees handling GreenPoint s back-office tasks can expect to earn just $200 to $300 a month, Kuchal says. On the other hand, he says, that wage level in lower-cost India is equivalent to someone making $2,000 to $3,000 a month in the U.S.
So far, Progeon has hired about 25 people for the GreenPoint account, but that number is slated to grow to more than 100. Progeon, which launched in April of this year, has a staff of 285 overall.
What about GreenPoint s employees? Is the company concerned that cutting U.S. jobs for cheaper overseas labor might spark anger within its ranks and in the broader public? Ibrahim says it s unclear what effect the Progeon deal will have on his 2,550 workers, because GreenPoint expects to grow as a company. GreenPoint enjoys a 3% market share in California, Ibrahim says, but just a 1.5% share elsewhere. Most of the work being transferred to India affects employees in GreenPoint s Columbus, Ga. offices. But the company is looking to expand operations in Columbus, a move it believes should ease the need for lay-offs.
At the same time, GreenPoint is hoping its outsourced operations in India will flourish. As Ibrahim sees it, each transaction completed by a Progeon employee will enhance his or her expertise in the mortgage business. In the future, this could result in this workforce being prepared to handle more challenging tasks, such as fielding calls from U.S. mortgage brokers around the clock. That s an appealing scenario for GreenPoint, because 85% of its loans are made through brokers. And with an electronic loan application process, brokers are likely to get used to doing business with GreenPoint at all hours, Ibrahim says.