Eat, Pray, Outsource?

SSON News and Analysis
Posted: 07/09/2012

What has the phenomenally successful book 'EAT, PRAY. LOVE' got to do with a BPO industry veteran, a book which is based on a soul-searching adventure across Italy, India and Indonesia... On meeting Ashutosh Vaidya, Sr. Vice President & Head, Wipro BPO Solutions - I drew parallels to the main character. A man who has been clearly devoted to the business for over 25 years, when he is not working, Ashutosh loves to spend time with his family, enjoys travelling all over the world and eating! An avid reader - he has just finished reading Daniel Gilbert's book  - 'Stumbling on Happiness' which he cites as having good insights we can relate to in our day to day life.

Today Ashutosh reports to the Joint CEO for Wipro’s IT business. His experience in the IT industry includes leadership roles in a variety of businesses including Products, Solutions and Services for Global markets.

While recently in London catching up on work with a day at England V Pakistan at Lords thrown in over the weekend, I managed to grab him for a morning pot of tea......

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SSON: Can I just start by asking you to give an overview of Wipro’s business financial position today? When we last spoke to you, your ambition was to see a 30% to 35% growth year on year. But then we hit a recession.

AV: Before the fall in 2008, actually, things were rocketing up. So, at that point in time the market was booming, the stock markets were going up, so every customer you talked to was very optimistic about the future, until the time the collapse in the market was triggered.

In spite of the recession Wipro BPO has had a very solid two years. We have had upper teens growth in both years. So, I would consider us lucky in spite of the situation that the market was in, which affected many customers very badly and some just disappeared. People had almost said 'forget growth, let’s worry about survival.'

One of the things you must note is the BPO business runs customer operations so if a customer's business slows down -  if you produce less numbers of invoices or if you have a reduced number of credit card transactions happening or less people buying airline tickets or computers - the transaction activity falls, and therefore the number of people required to support those activities will also fall. Our business depends on serving our  customers. So, I would say that in spite of that slowdown,  we managed significant growth.

SSON: You’ve been with Wipro for the last 15 years, the BPO playing field has obviously changed a lot in that time. What have the pinnacle moments been for you?

AV: For us it has been Transformation. I know this word is bandied around a little too much, so I am careful in using it, but  from Wipro’s perspective, it is about transformation both within Wipro and for our customers. I would use the term 'profitable transformation.'

Let me expand on that a little bit. If you look at the beginnings of Wipro BPO which started ten years ago. Wipro acquired Spectra Mind, a pioneering but primarily a call centre company which was mostly about straightforward customer service calls.

From there, Wipro started the journey by adding more high-end work. Wipro understands industry domains, and has a deep engagement with customers. So in the first phase we moved away from outgoing calls. Then we started getting into higher-end services – a good example being airline ticketing, which is more complex, there are too many options, many locations and multiple carriers. Successfully handling this potent mix gave us a lot of confidence in our ability to innovate.

Later on we moved into technical helpdesk for high-end products for things like broadband, and BlackBerry, for which you need to understand technology and build a knowledge management system to help you manage the  technology changes. We have also moved into healthcare and insurance. So we changed the portfolio to high-end inbound complex multi-channel queues. Then we started adding non-voice connections, such as financial accounting, accounts payable, etc. and quickly added more complex processes to the portfolio.

In fact, over the last five year there has been a rapid growth in complexity handled and value provided. Apart from the usual things that you get in transaction processing, such as AP/AR/GL, Fixed Assets, etc. We’ve also added other portfolios, which are HRO, Capital Markets, Legal, Marketing and even processes like Pharmacovigilance. In all these services, we have focused on delivering business results, not just cost savings.

SSON: That is a great overview, but in all of that, what has the highlight been for you?

AV: The highlight is the way we managed the change. If you look at the industry, you will find enough players who started out as call centers and remained a call centers. You will find players who have started in financial accounting and continued in financial accounting. For us it has been sort of the metamorphosis from being a call center to a broad portfolio full spectrum global company delivering business value to our customers.

SSON: What verticals are you covering?

AV: Wipro operates in nine verticals. We are in retail, manufacturing, healthcare, transportation and government, Energy and Utilities. We also look after financial services, which is banking, capital markets, insurance. We cover technology, media, telecom equipment/service providers as well. 

SSON: So is the focus now to build on what you have?

AV: That’s right. There has been a lot of debate in the market about IT and BPO services being linked and whether this offers value to the customer. There are people who say the process is different and standalone BPO companies are better equipped to offer this, but we don’t see evidence of that.

Our firm belief is that we must be able to craft these together along with domain expertise. You can’t add value to customers without having a good understanding of the business they are in and so domain knowledge is important.

Significant change is driven by technology so understanding of that is logical. This is a continuing and dynamic process so we see that getting these three horses – domain, operations and technology under the same reins helps us to be more nimble, faster and valuable.

While Operations and IT may have significant level of commonality, Domain and industry knowledge is specific. Thus Wipro BPO will go into those areas where we have domain skill and strengths.

SSON: Who, in your opinion is the leading BPO player in the market and why?

AV: We are amongst the top cadre of service providers. If you had to look at our portfolio, the range is very wide, so the top names are there in competition everywhere - Accenture, IBM, Capgemini, you find them in more pursuits than not. Indian competition includes Genpact, TCS and Infosys etc. It is a battleground where most of us are pitched against each other in all the key transformational bids.

SSON: Who do you think looks up to you and is perhaps benchmarking against you?

AV: I would say if they are not, they should, because we have changed a lot and we have delivered a lot of value for our customers. In the last two years we have been head-to-head against all the competition that I talked to you about. We put up a hard fight and in many cases we have won. I'm sure there must be relatively smaller companies in India and outside of India who are looking at what we are doing. But we are quiet people - we let our work do the talking!

SSON: What key challenges does Wipro face in today’s market?

AV: Our key challenge is growth. The BPO industry and the market has expectations for this industry to grow 30% to 35% year on year, and that has not happened. So I would say the expectation of growth which has not been supported by market realities is probably the biggest challenge. Typically, when an industry is on the up-curve, you have talent from other industries wanting to come and join, so your talent pool is bigger. I guess if the growth returns, growth brings in a whole lot of resources along with that. So you get more capital, more talent and more energy.

SSON: How have you been going about creating that growth at Wipro?

AV: While everybody else was declining, we managed to grow and grow at a fairly decent pace. Given the market situation over the last 2 years, upper teens growth is not something that you can ignore. We managed that, but again, it is less compared to the 35-40% we were used to - people's memories are very short.

Having done that, growth needs to be brought back and taken to a higher level, and we want to do a variety of things there. While we continue to grow, one way is to obviously get more customers on board. To attract more customers,  we need a wider geography spread and more services. Earlier people used to outsource for cost reasons. Now we are going back to our customers and asking if we can show them more value and business results. Essentially, we should not be spending our energy on discussing SLA metrics during the quarter reviews, we should be discussing business goals for the next few months. We can talk about things like improving DSO,  better control on AP, managing cash flow better etc.

Let me give you an example of generating business value. If you are a billion dollar company and we are able to help you bring your DSO down by let’s say eight days, the cost of capital that you will save is huge. Now, firstly you saved money by outsourcing the work to us and add to that the value we delivered by reducing the DSO. If what you generated is equal or more than you were actually spending, you become a profit center - you are no longer a cost center.

We have case studies where we have gone and done that for customers, we have shown them that if you track the benefit of this outsourced engagement, you will find that you have gained far more than the amount we are billing you, so we are actually a net profit for you. So go and outsource some more, give it to us, we will do it better for you, and of course we are in all the geographies - Canada, South America, Australia, Japan and all of Europe.

SSON: Why then do you lose some bids and what strategies are you implementing to overcome that?

AV: Well, there are multiple players in the market and you do lose bids. Sometimes at the time of the bid it is a lot about the articulation, the confidence you are able to give to the customer, the references that they get, the relationship that you have with the client and so on. Basically there are 20 ducks that you need to align before you shoot, and you can’t align those ducks all the time. Also, sometimes it happens that you have four or five pursuits happening at the same time, and you have to pick and choose! 

SSON: Do you win more than you lose?

AV: We do manage to win more than half the deals we pursue...

SSON: When we spoke to you in 2008,  you implied that more customers will start talking to vendors. Has that actually happened?

AV: I think it has panned out that way, but the volume of business has shrunk. So, let’s say you were handling 100,000 invoices or maybe 200,000 credit card transactions in the past, you needed X number of people to do that. Two things happened since the recession – firstly, the number of transactions came down. Those 100,000 invoices reduced to 75 or 80, so consequently the number of people required to do those transactions reduced.

Secondly, during the economic squeeze people demanded productivity and efficiency from everyone. So I am sure you are seeing that in the market, jobless recoveries, more workers, even though the economy has come back, jobs have not. So while the economic activity is back to the same level, there is an expectation that the same job will be done by fewer people. So during the crisis, volumes shrank and people demanded that efficiency be increased.

So while we have more customers coming in and more engagements going on, the size of outsourcing per customer has shrunk. What I predicted back in 2008 did really pan out, we gained more customers and many more customer engagements.

However, if the world had not changed in September 2008, we would have gained more customers with expanding volume. Now we have more customers with lower volume. So the head count has not grown at the same rate as one was expecting, so that’s why we've seen upper teens growth and not 35-40% growth.

SSON: We have seen a lot of Acquisitions over the last 12, 18 months, such as Xerox buying ACS. Do you see Wipro acquiring businesses in a similar way?

AV: Acquisition is always a good tool in the hand of leadership to add to the portfolio. We have always been consistent in our thoughts that we would not get into a deal which is just about adding capacity. We think that we have a great execution indeed, and we can build faster and better than anybody else. When it comes to adding something new, whether it’s a new niche process, a new market area or a new domain, where we don’t have expertise and there is a good IP, a good process available, we will go for that asset. We haven't found a suitable option, but we are always on the lookout.

SSON: Do you feel that the current market is putting you under pressure to acquire?

AV: There is no pressure. We will do it when it makes sense. Just because there is something on sale you shouldn't have the pressure of walking down the street to buy it unless it makes sense to you.  The same thing here. You look at your portfolio, you look at what’s available in the market, if there is a fit and it adds value to what you want to do, obviously.

SSON: Can you define what the perfect asset would be?

AV: There are industries that are growing, so for example with Health Care reforms in the US, there is going to be a huge surge in that segment. Something similar is going to happen in the UK. Governments will want to become more nimble and lean. Cost cutting exercises will happen in governments. Financial services have always bounced back.

In telecom, we are seeing a huge usage shift from text heavy to smartphones to iPads everywhere. So we think that technology will come back, telecom will continue to boom. I am sure there will be people who will come up with great new processes, great new ideas or some new geography which has not yet fully bloomed. So if there are assets and ideas, we will go for them.

SSON: Speaking of geographies you are currently leading Wipro’s quest to build its footprint in international areas which we’ve discussed, spreading from Shanghai to Brazil. What are the challenges of doing so, and where next?

AV: We had just about built our Brazil center when we last spoke, we also had centers in Shanghai, the Philippines, and one center in Poland. Since then we have five in Eastern Europe and two in China. We have two in the Philippines and two in Australia. So in the last two years we have added one center every month and a half - 15 centers in 24 months.

We have also had huge people growth, at that time when we spoke there were about 300 people, now we have 3,000. Our employees come from diverse cultures, geography and languages.

In some of the geographies we went into, Wipro was not a known name. Say you go to a small town in Romania, or you go to a place in Japan,  people don't know Wipro, so the challenge is to make sure that we become an attractive, good employer for people, where people want to build their careers and feel comfortable that it’s a space where they will learn and have their own skills as well as contribute to the customers business. It is also about the way you transfer that to colleagues in Romania, Slovakia, Poland and Brazil. The challenge is trying to integrate people in a fast turnaround time - we don’t have the luxury of time to say "okay guys, come and let’s spend six months together, let me tell you about Wipro."

SSON: Why should an organization go with Wipro over your competitors?

AV: We will deliver business value, not just cost savings. We believe in open transparent outsourcing. Our team is an extended part of the customer’s organization and so long as the customer also believes that businesses won’t stay static.

We have the ability to change business process direction very nimbly based on the customer’s need and we have the willingness not to get bogged down with contractual T&Cs. We also offer all the good stuff in BPO that we talk about - low cost, seamless global delivery, the highest level of accuracy with great turnaround time and so on.

We model ourselves as business partners, we are willing to look at your business directions and adapt to business direction changes over four to five months timeframe.

SSON: It was recently reported that the US government may crack down on foreign business’s visas, which could potentially affect IT service providers. How do you think this will affect Wipro?

AV: This move should have little impact on Wipro BPO because our reliance on visas is relatively less and for our onsite operations we rely very heavily on local hiring and recruitment.

SSON: If you were to take a look into your crystal ball, what future predictions would you make for Wipro and the BPO industry?

AV: I'm afraid you will come back to me after two years and hold me to those predictions... [laughter]...it's easy to make predictions when nobody is there to catch you!

SSON: I'm not going to do that! Obviously globally things change,  let’s say things continue as they are, what lies ahead for Wipro and the BPO industry?

AV: Outsourcing growth has enough legs to carry on much further, there is tremendous growth ahead. I don’t think most businesses have thought about or touched all the areas that they can outsource, such as pharmacovigilance and marketing, which I mentioned earlier. Outsourcing companies are capable of giving business value far more than what customers have thought about.

In a variety of business functions, whether it is sales, marketing, HR, production, supply chain, you name it, there is a significantly larger portion of business that can still be outsourced, which is not yet happening.

SSON News and Analysis
Posted: 07/09/2012

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