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Improved Incentive and Commission Management

at HDFC Life Increasing the flexibility of your Sales Force Management Solution

October 2011

Doreen Koselowski, Virtusa

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Virtusa Service Offering

Incentive and Commission Management

(ICM) at HDFC Standard Life - Mumbai

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The largest US SAP for Insurance

Competency

90+ SAP Consultants

25+ US SAP Implementations

Full Service provider for SAP Implementations

Virtusa’s Financial Transformation Business Unit

Partnerships with Leading ISV

Business Unit Overview

• Main Focus on SAP Contract Accounting - Incentive and Commissions Mgmt, Tax and Revenue Mgmt, Collections and Disbursements, SAP Financials

• Unmatched combination of skilled resources, SAP for Industries expertise, and a global delivery model.

• Our US-based consultants have an average 6+ years of relevant SAP implementation experience.

Focus on High Value Consulting • Our people are the best people in the market

• Our projects are the most efficient in the market

• Our customers recognize Virtusa as the #1 in our Core SAP service offering

• SAP Consulting Services

• Technology

− SAP PS-CD,

− FS-CD,

− FS-CM,

− ICM,

− FS-PM,

− FI-GL

• SAP Application Management and Support Services

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Virtusa delivers high value SAP for Insurance consulting services at a competitive price…

1 Value provided to buyers through SAP for Insurance Transformations 2 Cost for buyers

High

Cost2

Low

High Low

Val

ue

1

IT suppliers

Large IT consulting Companies

Pure offshore suppliers

Virtusa’s ICM/CD/RI

Offering

Better

• Unmatched combination of skilled resources, SAP for Industries expertise, and a global delivery model.

• US FS-CD/ICM/FS-RI practice ensures high quality off-shore delivery.

• Preferred SAP Partner for SAP for Insurance.

Cost Effective

• With our hand-picked and highly-specialized consultants we will require fewer resources than other integrators in the market.

• Our projects are the most efficient in the market with the right on-site/off-shore mix.

• Product Expertise – many of Virtusa’s employees are former SAP developers and managers.

• The Virtusa SAP FS-CD/ICM/ FS-RI projects are the fastest in the market.

• We leverage project accelerators and code libraries to the maximum extent possible and do not ‘reinvent the wheel’ wherever possible.

Faster

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Virtusa Service Offering

Incentive and Commission Management

(ICM) at HDFC Standard Life - Mumbai

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HDFC Life’s Program: Maximizing the ICM value proposition by deploying a highly flexible and easily adaptable commission system

Internal

Employees

Distributors /

Broker Dealers

Agents/

Producers

Accommodates ALL compensation calculations requirements in a single solution / Single source for all information

Reduced TCO

Shared Services, Common

Platform, Reduced

Maintenance

Increase Speed to Market:

Quickly implement new / adapt

existing Incentive Schemes

Improved Reconciliation,

Faster Close

Reduction of manual adjustments of calculations due to system restrictions

ICM

Rel.1 Q2 2011 Primary

Compensation

3rd Party

Companies

Rel. 2 Q1 2012

Incentive and Bonus Compensation

LIVE

Rel. 3… Q2 2012

Rollout of additional Incentive Schemes

Virtusa’s HDFC ICM Implementation is the first SAP ICM implementation in Asia and one of the fastest SAP ICM implementations worldwide (7 ½ months)

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Primary Goal – Deploy Rel.1 in time, quality, within budget and flexible enough to adjust to ever changing business requirements

Agents/Brokers: 70.000 active Agents /Brokers/Corporations (300.000 terminated) Processing: average of 50.000 Policy Transactions per day

Data Migration: 2 years of compensation history

30 Mio transactions to migrate 370.000 Brokers/Agents and Corporations Timeline: 7 ½ month from start of Blueprint to Go-Live

Subsequent releases are slated to go-live during Q1 2012 and Q3 2012.

Release 1

Challenges:

• Highly aggressive timeline

• HDFC’s highly agile way of running their business requires easy adaptability of the System

• Large data volumes for both data migration and daily processing

• No prior SAP experience for most of the HDFC team

• Resource crunch from HDFC side due to ongoing operational issues with the legacy system

• High Resource fluctuation on the Client side

• No internal Change Management Process in place

• A multi-vendor environment (i.e. Hosting, Interfaces to Incoming and Outgoing Interfaces, Data Conversion, and Reporting all different)

• Project team spread out across 2 different countries and multiple time zones (US, India)

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Identified project specific approaches which helped deliver high quality results at a competitive price and accelerated timeline (1/2)

Global Delivery Agile Delivery

• Introduction of 2-3 person TAC- teams that work around the clock on the same deliverable – ensure smooth handovers daily

• Building up project specific ICM off-shore teams takes time – plan for it

• Spend the time on training the project team early on

• Start heavy loaded on-site and increase off-site % over time.

• Have 1-2 team members onsite at all times

• Do it right the first time, no short term solutions that will become long term solutions

• Ensure early and continuous delivery of functionality.

• Ensure reusability of code and ensure customizability instead of hard coding.

• Involve business during realization phase to avoid long periods without tangible results.

• Implementation of small building blocks that are re-usable over and over again.

• Gained invaluable flexibility and speed to market in developing new cutting edge commission schemes and new ways of managing the Sales Force.

• Automatisation of ALL manual workarounds and adjustment entries that needed to get passed on a daily basis (thousands of adjustment entries were passed manually per month)

• Built up a team of off-shore resources with deep ICM knowledge. Will benefit in upcoming releases. • Focus on core future functionalities rather than rebuild the present state, and make sure everyone shares the

vision

Results HDFC Transformation

Process Standardazation

• Focus on process standardization while keeping the business value proposition intact.

• Leverage ICM’s build in flexibility • Allow reasonable change due to

changing requirements, plan for changes and ensure the system is flexible enough.

• Standardize the reporting and enable users to individualize it

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Reusability Interface Development

Testing

• Latest Technology Trends (e.g.

Mobile, SOA) & real-time data processing add very limited value to financial transformation initiatives.

• Use batch interfaces which are optimized for mass data processing

• Enable manual data upload and data manipulation for testing/error handling purposes

• Developed one universal inbound pre-processing framework which is used by every feeding system as well as for data migration

• Parallelize the testing of data migration and ongoing interface saves a lot of time and waiting times were reduced • Defect fixes and ongoing changes after go-live are relatively easy as only one set of coding has to be changes due

to the modularization used. • Using the same concept over an over again reduces training and ramp up time significantly

Results HDFC Transformation

• Don’t wait for interfaces to be ready to simulate Legacy System feeds before the legacy system integration is ready for testing, build test tools.

• Do diligent unit testing throughout the development phase

• Insist on scenario based testing documentation and monitor the progress closely

• Ensure efficient and complete regression testing

• Define one global interface and re-use for all Source systems

• Use the same concepts across the system so users can adapt easier (Reports, transaction processing, Master Data)

• Focus on re-using code (not configuration) across the system, build small functions of code that do only ONE thing and that are just assembled differently over and over again for different functionalities

Identified project specific approaches which helped deliver high quality results at a competitive price and accelerated timeline (2/2)

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Release 2 Highlights

• Most Incentive Schemes are calculated manually based on hundreds of Excel sheets – highly manual, time intensive and error prone process

• New Incentive Schemes are launched very quickly (within 3-4 days) and the appropriate data has to be accumulated from all kinds of system and spreadsheets

• Payment Data is manually entered into the Payroll, Procurement and Reimbursement systems

• 70+ distinct Incentive schemes / contests for 25 different roles of Internal Employees in 3 different channels with 6 hierarchy levels each

Business Challenge

• Implementing a single commissions system (SAP FS-ICM) that handles all the Primary commissions as well as all the incentive schemes and contests

• Single source of truth for all distribution network related information and dynamic determination of all KPI’s from all kinds of data sources during the incentive calculation

• More accurate Incentive payments; no underpayments and overpayments; less exceptions and manual errors

• Ability to segment producers and implement targeted new incentive schemes on short notice

Virtusa Solution

• Setup of new Products and changes to commission rates can be done by business users

• Substantial reduction of team size required to handle the compensation handling within HDFC

• Greater visibility / audit ability for the incentive calculation process

• Daily reporting of Target achievement and projected incentive payouts

Business Benefits

• Highly customizable system (setup of new incentive plan, products, commission schemes, agent roles, channels…) only requires table entries – no coding changes required

• Integration with HCM will enable date specific determination of Internal Employee Hierarchies and associate the business to the correct Managers

Solution Architecture

HDFC Phase 2 Highlights Implementation of 25 distinct incentive schemes in 5 ½ months – Blueprint to Go-Live

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Ongoing HDFC Business Value Proposition

• In your Incentive System can you…

Roll out a completely new compensation scheme

within 3-4 days?

Add new products and all compensation rules in less than

a day?

Pay Key Agents or Corporations daily?

Set up a new Distribution Channel and/or new agent types/roles within a day?

Implement new persistency based claw

back rules for select groups of agents in 2 days?

Launch a new Contest in 2 days?

Publish the current Target Achievement and resulting

incentive compensation daily?

Integrate with your procurement system to let

agents choose non-monetary rewards based

on points earned?

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Advice for those starting a new Project: DO

• Enable the business lead to change existing processes • Expect and anticipate change • Have a clear vision and communicate this early • Work in small teams • Build the right team • Ensure early involvement of the business team • Break up Large Projects into smaller subprojects

DON’T

• Let tight timelines take away from the right way to do it • Let exceptions define the process – determine the WHY, not the HOW • Let people point fingers across corporate silos/vendors • Underestimate Data Migration and Data Cleanup • Underestimate the amount of involvement required by finance, operations, and IT

teams especially during testing

Starting a New Project?

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Questions?