Hirdaramani Group has joined other diversified Sri Lankan companies that have set up shared services operations. But rather than running the operation alongside headquarter functions, it has spun off shared services to a separate Group firm, H-Connect. This article was published in the Echelon Magazine, one of the leading business magazines in Sri Lanka

1. July 2015 55
By Isankya Kodithuwakku
Hirdaramani Group has joined other diversified
Sri Lankan companies that have set up shared
services operations. But rather than running
the operation alongside headquarter
functions, it has spun off shared services to a
separate Group firm, H-Connect.
Incorporating
thebackoffice
In the outsourcing industry,
the term “your mess for less”
refers to the lower cost of con-
tracting out support services.
Firms are finding the term
is as useful to describe the
impact of outsourcing central-
ized back office units – also
referred to as shared services
operations – which are spun
off to boost the efficiency of
the individual units and the
Group of which they are a
part. Shared services units are
usually set up by diversified
and dispersed corporations to
manage day-to-day finance,
procurement, logistics, HR
and so on from the headquar-
ters (HQ).
Chief Executive of
H-Connect Dilush Perera
has been involved with the
shared services operation
since its pilot project in 2012

2. July 201556
Besides managing shared services,
corporate headquarters perform
more important ‘parenting’ roles like
strategic planning, enforcing corporate
governance and administrative roles
like filing taxes and raising capital.
The largest Sri Lankan businesses –
the giant apparel companies and diver-
sified firms like JKH – have begun to
set up shared services units. However,
worldwide, shared services spanning
businesses are being progressively un-
plugged from the corporate HQ. So for
firms here to combine their splintered
finance, procurement and HR divisions
into one will suit the business’s needs
for clarity and lower cost. However,
to create a HQ-based unit to do this
makes little sense because that would
burden the group management.
Corporations are dealing with this
by parceling out shared services to
where it can be done best. Often they
are offshored to cheaper locations like
Sri Lanka. Large firms here are adapt-
ing this strategy, setting up shared ser-
vices subsidiaries to handle both Group
and outside work.
H-Connect is apparel manufacturer
Hirdaramani Group’s shared services
operations, which has centralized most
of the finance work. What started as a
pilot project in October 2012, consoli-
dating accounts payable seven months
later, now manages over 90% of the
Group’s Apparel sector’s finance trans-
action volumes. The shared services
operation will eventually be the back
office for the entire group.
Hirdaramani is synonymous with
apparel, but has diversified over the
past few decades. Hotels Hilton Union
Residencies and Vivanta by Taj , luxury
wristwatch retailer Chatham, jeans
brand LiCC and stock brokerage First
Guardian are all group-owned ventures
outside apparel. Because the back
offices of the subsidiaries functioned
independently, the group had become
a vast machine with non-value-added
activities and a lack of uniformity.
As expansion continued, shrinking
costs and inefficiencies became para-
mount. However, instead of running
shared services alongside more impor-
tant headquarter functions, Hirdara-
mani Group leapfrogged by spinning
off shared services and incorporating
H-Connect. H Connect is group owned
but already offers accounts
outsourcing solutions to
third parties too, because
it’s an independent firm that
provides services for a fee to
even its parent.
Hirdaramani established
the shared services unit to
improve customer service
and control environments,
increase management
information accuracy, make
transactions transparent and
achieve process excellence.
The group wanted to do all
this without adding to costs. It also
felt an independent shared services
unit may help strike a better balance
between group objectives and business
unit requirements.
“We need to focus on value addi-
tion,” says Dilush Perera, the Chief
Executive of H-Connect. “Though we
expect finance units to follow the same
processes, some businesses don’t do
this. But bringing it under one compli-
ance head drives that behaviour.”
H-Connect reconciled more than
100 bank accounts through automated
bank reconciliation, and today a team
of four handles these. The company has
so far automated only the accounts pay-
able, but expects to automate collection
too. A first necessity was a document
management system (DMS). Because
purchasing one was costly – the com-
pany found it costs over $200,000 – H-
Connect worked with Hirdaramani’s IT
company, H One, to develop a system
that could be integrated with the
group’s enterprise resource planning
(ERP) system. This cost only a quarter
of what it would’ve paid for a third-
party DMS.
Shared services
In a case study published by Sri Lanka’s IT
and BPO industry umbrella association
SLASSCOM, H-Connect identified
customer satisfaction as one of the
system’s biggest impacts.

3. July 2015 57
“You need to bring technology
along with shared services,” says Perera.
Because the technology partnership is
crucial, the two firms are located in the
same building. H One is also a Hirda-
ramani subsidiary and partners brands
like Microsoft, Adobe and Kaspersky
to provide infrastructure and business
solutions, and also offers IT consulting.
The pilot project was launched in
the group’s biggest sector, apparel, after
H-Connect standardized finance pro-
cesses, transferring accounts payable,
receivable and bank reconciliation.
The transition involved finance, stores,
administration, human resources, mer-
chandising and export departments.
When a company’s operations are
distributed, it is difficult to see things
as a whole. But a document manage-
ment system provides visibility into
any aspect of the firm. “For example,
when we want to know the number of
suppliers in our database, this system
provides it in one go,” says Perera. “If
we want to know how many 100%
poly-cotton yards we buy per month,
we can find out because we bring all
that information to one location.”
The system also allowed the group
to standardize its payment terms. The
group discovered that different facto-
ries had been buying from the same
suppliers on different terms. Central-
izing this function enabled the group to
find the best rate given and negotiate it
for all the companies.
Since the DMS records all invoicing
and payment, factory users can log in
to it to track an owed payment. There’s
no longer a need for telephone or email
follow-up. In a case study published
by Sri Lanka’s IT and BPO industry
umbrella association SLASSCOM,
H-Connect identified customer satis-
faction as one of the system’s biggest
impacts. For internal customers, the
DMS introduced greater transparency
and payment tracking compared to the
previous system handled by individual
factory based finance teams. For exter-
nal customers, the shared services unit
provided an efficient follow-up mecha-
nism and quicker turnaround.
Hirdaramani first toyed with the
idea of a finance and accounting shared
services unit in 2000. However, accord-
ing to the SLASSCOM case study, the
group’s directors decided to decentral-
ize a year later when it became clear
that the plan wouldn’t succeed, as it
was just a “lift and shift” solution rather
than true centralization.
Starting small in 2012, H-Connect
has now grown to more than 100 peo-
ple. The company aims to grow to 200
to 300 heads soon and to over 2,000
people in a few years, according to
Perera. Dealing with people’s insecuri-
ties about change has been a challenge
in introducing and scaling the system.
Some finance heads at factories were
reluctant to release experienced finance
personnel to support the project. So H-
Connect recruited a project team and
explained the benefits of the project to
the dispersed finance teams. “Rather
than forcing them to change, we had to
show them its benefit. At first, teams
weren’t convinced, but they eventually
asked us to take over their burdensome
tasks to manage.”
H-Connect is now expanding to
cover human resources services such as
payroll. It will then move into project
management and consultancy. It cur-
rently has a small consultancy team,
which it plans to grow.
H-Connect says its success will
be correlated to its ability to convince
stakeholders of the benefits of out-
sourced shared services. As a result, it
actively focuses on reducing interest
and transaction costs. For instance,
bank accounts can be merged, leading
to reduced transaction costs. A docu-
ment management system generates
reports, highlighting areas that require
attention and pending tasks. It high-
lights weaknesses in processes too.
At the end of the first year, cus-
tomer satisfaction was at 76%, with
that percentage of respondents saying
that, given the chance, they wouldn’t
want to take back the now outsourced
shared services. “That was just the first
year result,” says Perera. “I’m sure we’ll
improve as we go on.”
Hirdaramani’s began as a retail
store on Chatham Street, specializing
in one-day suit delivery for passen-
gers and sailors on ships docking in
Colombo harbour. The shop eventually
expanded into garment manufactur-
ing in the seventies. Though the group
expanded overseas after some factories
here were destroyed in the 1983 riots,
it never stopped investing in Sri Lanka.
Today it has over 20 factories island-
wide, with the two most recent being in
the former war-torn Northern Province
in Pudukuduririppu and Vavuniya. H-
Connect services all of these units.
In the short term, H-Connect will
move to a new location in Colombo,
which will eventually accommodate
200 to 300 people. But the company
has conducted a location study on the
talent pool and accessibility with an
aim to relocate in the long term. It is
considering a location in the western,
southern or central province.
“I don’t think the biggest talent
pool is in Colombo,” says Perera. “Our
garment factories were initially set up
close to Colombo, but as we grew we
had to either bring the talent to Colom-
bo or set up factories outside Colombo.
We went with the second option. Even
for the BPO industry, there’s a lot of tal-
ent coming from outside the city.”
H-Connect has also begun to
outsource its services. It now has two
clients – a US auditing firm for which
H-Connect does tax and accounting
work and an entertainment industry
client for which H-Connect provides
research and analysis services. The
company thinks that this side of the
business will grow rapidly.