The CFO who presided over the prolonged breakup of Motorola into two companies, which was finally completed in 2011, is now more focused on growing than downsizing.
A year after his sudden exit from Motorola Solutions, one of the entities created in the split, Ed Fitzpatrick landed in July as the new finance chief at Genpact, a business-process-outsourcing (BPO) firm whose primary expertise is in finance and accounting. It’s a smaller operation: with revenue of just over $2 billion, it’s almost exactly a quarter the size of his previous employer. On the other hand, while Motorola Solutions’ sales have been essentially flat over the past few years, Genpact’s doubled from 2011 to 2013, although the growth has slowed this year.
“I think anytime you get to a billion or two in sales, the level of complexity is such that it really doesn’t matter much if it’s $2 billion or $20 billion,” Fitzpatrick says when asked about the difference in running finance at a smaller company.
He adds, “It might have made sense for me to step up to a bigger firm, given the experience I’ve had,” which included two years in the top finance seat at pre-breakup Motorola — experience may come in especially handy since he’s now CFO at a company that sells services to CFOs. “But the main thing is not the size, it’s the opportunity in front of you. First, will it be intellectually stimulating? Then, is this company going to grow? Is there an opportunity to generate a lot of value for shareholders? And as a sidebar, if you do that you should generate a lot of value for yourself.”
He notes that the prospect for growth “is a scenario that wasn’t always easy to come by in the businesses where I’ve been in the past.” Aiding that prospect is that Genpact is an “annuity” type of business: customers typically renew their contracts, as it’s “a pretty involved process to outsource finance and accounting work.”
It’s hardly a secret, of course, that outsourcing particular business processes to companies that specialize in them is an increasingly popular strategy, designed to boost both effectiveness and efficiency while freeing up time to focus on the core business. “Think of all the IT outsourcing that has taken place in the past decade,” Fitzpatrick points out. “Next came HR processes. Now finance is getting more into it, and in more meaningful ways than accounts payable and receivable outsourcing.”
Genpact offers services like statutory reporting and account reconciliation, for example, as well as order-to-cash and procure-to-pay. The company is also ramping up its financial planning and analysis wherewithal, having just hired Paul Burton, an executive with long experience in data analytics and information management, away from IBM to run that end of the business.
Most of the services are handled within customers’ technology systems, but some of the financial planning and analysis is performed on an external platform. That begs a question: to the extent potential clients opt against using Genpact, what role does the desire to keep sensitive information in-house play? “That’s something a CFO or controller would ask about,” says Fitzpatrick. “In fact, they have to ask that question. We’re talking about the ‘keys to the kingdom,’ after all. What they find is that we do secure the information.”
Those stakes might be highest for very large companies, but that’s the segment of the customer base that’s providing a growing share of Genpact’s business, Fitzpatrick notes. That just makes sense, he says: if the value proposition is enhanced efficiency and effectiveness driven by the scale of Genpact’s operation focused squarely on finance and accounting, the larger the client is, the greater the opportunity to exact those results.
Genpact has particular strength in certain verticals, like life sciences, banking and retail. To keep growth going strong, Fitzpatrick will be evaluating acquisitions that would advance its positioning in those fields. It did one such deal in April of this year, buying Pharmalink Consulting. The transaction was in the “low $100-million range,” he says. That’s the kind of “tuck-in” deal the company is looking for — “something that can be done with existing cash or existing leverage, not a transformative type of acquisition that would require other capital or balance-sheet [adjustments].”
Fitzpatrick took over finance from Mohit Bhatia, who took a new role in the company as senior vice president of internal transformation. Bhatia is leading the charge in a major revamping of Genpact’s own internal business processes, including the implementation of a new, single-instance ERP system.
Bhatia, like most of the company’s operations team, as well as most of Fitzpatrick’s finance and accounting team, is based in India, even though headquarters is in New York City. But it made sense for Genpact to hire a U.S.-based CFO, because a preponderance of the company’s investors and customers, as well as analysts that follow it, are in the United States. “It’s a lot easier for me to reach out to them, as well as the press, than it was for my predecessor,” Fitzpatrick says.
He also has more experience dealing with Wall Street, as Genpact, which was a General Electric business unit until its 2005 spinoff, went public just seven years ago. And he’ll be looking at whether his understanding of the controls that were in place at Motorola, given that it’s farther along the maturity spectrum, could prove to benefit his new employer.
Fitzpatrick is counting on Bhatia to stick around. The internal initiative is expected to take at least two years, and “he’s very operational in nature, so we’d like to keep him as long as we can,” he says. Bhatia’s presence has also been a big help in moving Fitzpatrick along the learning curve much faster than he’d have been able to otherwise. “Anytime you start a new job there’s some level of discomfort, because you don’t know what you don’t know. He’s been terrific.”
Interacting with Genpact staff in Guragon, India requires a touch of nimbleness. The nine-hour time difference from New York means Fitzpatrick sometimes is on calls as early as 5:30 a.m. The day started even earlier on a couple of occasions when his boss, Genpact’s New York-based CEO Tiger Tyagarajan, was traveling in Asia. But Fitzpatrick likes the way his day normally divides. His staffers in India start late and knock off about 9 p.m., which is noon New York time. “Then I have the second half of my day to get absorbed in doing the things I need to get done,” he says.
Fitzpatrick says that regardless of Genpact’s success to date, “it’s still early days” in the finance outsourcing world. “I’d say we’re on the 20-yard line. But the 50-yard line isn’t that far away.”