Sourcing Superstars: Amitabh Chaudhry, Infosys BPO

SSON News and Analysis
Posted: 07/09/2012

(Infosys BPO is one of India's leading business process outsourcing providers. A subsidiary of Infosys - one of the great success stories of India's IT boom - Infosys BPO started life in 2002 as Progeon, a 74/26 split between Infosys and Citibank, but was renamed upon Infosys' acquisition of its partner's stake. The company now employs over 16,000 staff worldwide, with operations in India, China, the Czech Republic, Mexico, the Philippines, Poland and Thailand. SSON caught up with MD and CEO Amitabh Chaudhry to get the lowdown on one of the industry's heavy hitters, and to find out his perspective on some of the biggest issues facing BPOs today.)  

SSON: Amitabh, what do you see as having been the biggest changes to outsourcing during your time in the business?

Amitabh Chaudhry: Quite a few, you know. One is that we started off as a company which was very India-focused, very India-centric, and I think what I’ve seen is the globalisation of the business model to a great extent. I think more companies can call themselves more global than before. Secondly, obviously one has seen the combination of IT and BPO and what impact that has made to the marketplace - and especially BPO. Thirdly, the intrusion of technology and what role technology can play to make BPO more relevant and more value-add for the organization.

Fourthly, people talk about cost arbitrage and then quality and innovation; another trend I have seen is that the adoption of best practices, and the benchmarking of best practices. Then people are realising that the very cost-driven model will only get you so far; globalisation, the movement of currency around the world, is forcing people to come up with models which require the ability to take a process globally, and deliver globally. So that’s another trend I see.

I think on the HR front when we started off people did not see it as a serious industry, a serious career. I think people can see that this is for the long term; they can make a serious career out of dealing with global companies, with global best practices, and actually doing serious business. So you see a clear change on the part of the employees, on the part of the stakeholders, and on the part of governments to actually attract more and more BPO companies to their countries: that’s another big change. How we’re being welcomed and how we’re being perceived by all the stakeholders has changed dramatically. I think from an Indian perspective I’ve seen what an impact the industry is having on the job opportunities for the typical graduate. The impact on the economy and on the people who are graduating has been immense. That’s another impact I’ve seen over the last five or six years.

I’m seeing an increased commoditisation of G&A-like processes and more and more being offered like a utility service - or technology taking huge chunks of it out as part of the process - and unless people are well prepared for it, it will become a problem for people to follow the typical time-and-material model. That change is happening now as we speak, and it’ll take another three or four years to pan out, but I see that as a big important change in the industry. I also see what has happened to the dollar: one year back it was in the dumps, and look at what has happened to it in the last 45 days. How do companies respond to those changes?

The last thing is that I think unlike the IT industry, in the BPO industry all the players have been required to mature much more rapidly than what happened in IT  – again from an Indian BPO perspective. I think the global players didn’t pay attention to the Indian IT industry for a long long time; they never saw it as competition. But in BPO they saw it as competition very quickly, they came into India very quickly, they started competing on a very aggressive basis very quickly, so players like us who are only six years old have had to respond and mature much faster. We haven’t had as much time as the typical IT players had. Obviously we’ve benefited from what they’ve learnt.

And that brings me to the last point which is: obviously we are better placed than some of the players which are learning the hard way – but the expected levels of maturity are incredibly high in BPO compared with what’s expected in IT. Those are some of the changes I’m seeing now.

SSON: How are you positioning Infosys BPO to overcome these issues?

AC: We are doing a couple of things. Firstly we have become global much faster than the others. In six years we have gone from zero centers to six globally, and we have a presence in every geographical region of the world, so firstly we attacked the global milieu very very fast - and obviously being part of Infosys helps. Secondly we attacked the platform and the technology - being part of a technology company we attacked that very quickly. So we had platforms more than 24 months back, we have launched two platforms – one on the procure-to-pay side, we’ve bundled our offerings for HR, we’re looking at order management, we’re coming up with solutions on industry processes, stuff like that.

So we’re attacking the platforms in the utility service space much much faster, and we’ve been working on it for some time. And we’re not doing small stuff: we’re looking at actually how we can offer an end-to-end offering to clients. And that’s why people like SAP and Oracle are very willing to work with us because they see us as an important channel for them in future; they can see the business gradually shifting in that direction.

We’ve done a lot of work in the HR area: the kind of awards we’ve won, the kind of practices we’ve institutionalised, the kind of new things we have done in the BPO industry, how we have tried to improve the supply base, how we have tried to run programs differently, how we have tried to hire people locally and train them in a central place. We’ve done a very diligent job in spotting opportunities in the marketplace and going after them with a vengeance; we see potentially for example the Asian marketplace opening up in the next 24 to 36 months. We’re already enlisting in Asia, in a bigger way than what I’ve seen in our history.

We saw the medium segment market opening up and we started investing in that space 24 months back and we are reaping the benefits today. We started investing in the procurement space almost three years back, and now the number of clients in the procurement space is increasing very rapidly. We have done very very detailed exercises in terms of what our broad streams are, how we are placed, how we can capitalise on IT and BPO together, and maybe occupy a market leadership position, and we do that very diligently. Obviously regarding our background it helps being part of Infosys. But you know the demand is there; the question is, which bets you place and how much you invest in those bets and how deliberate you are with those bets, and I think we have been fairly successful with that.

So it’s about being global, it’s about investing in technology and combining our offerings, it’s about investing in platform, it’s about investing in our people, it is about ensuring that we are creating and operating a global delivery model which gives us the flexibility to manage processes across the globe and manage some of these changes which are happening because of globalisation, movement of currencies, rapidly increasing costs.

SSON: Do you think India’s position as a global BPO centre is unassailable?

AC: India will remain a global centre; I don’t see the cost advantage of India is going to go away for the next 20 or 25 years, and I think India will remain the centre of gravity for a lot of players. I would expect China to be another important hub for quite a period of time. My view is that there will be two or three hubs around the world, and people will have spokes, and the spokes will deliver very specific requirements for the clients around languages, around business continuity requirements, around ensuring that you have tools that the client requires where the client wants you to be, enabling you to cater for every client in a different state of cycle – some of them understand outsourcing and offshoring very well; some of them don’t; some of them want the outsourcing to happen quite close to where they are. You need to address all those particular client requirements. The spokes will address that; the hubs will be where most of the processes will go. And you need more than one hub, you know, given how things are changing.

SSON: Do you feel that the Indian government is doing enough to protect BPO operators?

AC: There are two ways to look at it. One is the fact that not doing much is good enough in itself, because then we can do our own stuff. Also we’re very focused on the exports, and the government has been very supportive of that with the incentives and tax breaks it’s been giving. The government could do much more on the education side, which is a big issue, and on the infrastructure side – and by the way that does not apply to our industry alone, it applies to other industries.

But the biggest thing that is missing is the government’s investment in education, how that investment is being applied, and how is that input into education really reaching the people it should reach. And that has been a miserable failure. Now there is a program but how successful it will be will depend on how far the government are willing to go and ensure the dollars are reaching the people they should reach. But we’re not waiting for the government: we’re doing our own thing – in some cases working with the government, in some cases working on our own. But you know, there are issues around infrastructure in terms of rising transport costs, in terms of the fact that the road systems don’t work so people take time to reach where they’re supposed to work; and issues about some of the clearances that are required to set up an operation.

So there are a lot of issues: but has the government listened to the industry? Yes. Is the government willing to listen to the industry? Yes. Things are improving. So there are positives and negatives. We’re better off than what we were four or five years ago. They can do much more - we can go on chipping about it, but I think there is enough scope for positive people to make a difference; and I think with the size and the brand Infosys carries, we can make a difference. That’s how we’re looking at it. We’re not looking to the government to give a whole lot of stuff to us to make sure we can deliver or do well; we’re doing things on our own and if the government is willing to work with us we’re very happy to work with them; if not we’re doing things on our own anyway.

SSON: Let's move back to Infosys BPO; how strategically autonomous are you in relation to Infosys as a parent company?

AC: We are autonomous where we are required to be; we are separate when necessary. We have combined real estate. In most of our enabling functions we are working together very very closely. If we are approaching a client and Infosys’ sales force has a relationship with them, we’re looking to Infosys to help us sell. We’re working hand-in-glove with them. We hire graduates for Infosys. We hire MBAs and engineers. So we’ve obviously looked at where we can leverage Infosys, and Infosys has obviously looked at where it can leverage Infosys BPO.

Now, we’re much smaller than them so we’re in a leveraging position much more than they are to us. But we are working in tandem with them to ensure that we don’t end up replicating any work they’re doing. You know, our teams work with them: our security teams work with them and look at risk as a whole rather than just looking at the BPO risk. In many cases we are housed in the same facilities as theirs. So in Jaipur it’s the BPO which has gone there first but hopefully IT will come there. In the Pune area we’re working in their facility, in Bangalore we’re working in their facility. So wherever it makes sense, we are working together. In China we are working together as one entity but we are in Hong Kong and they are in Shanghai, and for very different reasons.

So the point I am trying to make is: we are separate where it makes sense to be separate, and we are together when it’s sensible to be together, and I think that the relationship has grown stronger and closer the last four or five years.

SSON: To what extent is the kind of work you do – in comparison with the other outsourcing providers – determined by your origins as part of Infosys?

AC: Well, for example for Infosys we are supporting their HR team. We are doing internal recruitment, we are doing visa processing, we are helping them in their interviews – so actually Infosys itself has outsourced a lot of work to us as BPO. The finance team has outsourced a lot of work to us, and we are increasingly looking at what work can be outsourced to Infosys – by the way, our HR department has also outsourced work to our HR group, to get the best out of them. So there is that cooperation that is going on, to a great extent.

But with regards to your question: there are some things that do determine it. Infosys will set a certain revenue profitability level, and we are way way below that, and obviously they expect over a period of time ways we can improve our profitability level. They would like us to work more on platforms, and more on areas, where we can challenge on outcome-based pricing or transaction-based pricing more than time-and-material base where it’s a race to the bottom in terms of the price. They would like us to work in areas where the IT-BPO combination can be very powerful.

In sum, there are certain elements where they would like us to fall in line, but in most areas they’ve given us carte blanche in terms of where we want to expand. An advantage of our companies’ combination is that wherever we’re looking at IT-BPO as a combination, or wherever the technology can play an important role in improving the process, we can put an offering together, and underwrite it, where others can’t, because we have such a huge parent which understands and is comfortable with the technology. And the same works the other way round; today when Infosys is bidding for a contract where there is a bit of BPO work, they can look up to us and given our global presence we can actually support IT more than other outsourcing contractors.

SSON: You mentioned global presence; where are you looking at further geographical moves, if at all?

AC: We are not at the moment looking at any more geographical moves or expansions; we are evaluating some but it depends on whether we can get the right client or not, and whether it makes sense or not, and it’s at the very early evaluation stage. Otherwise our expansion into a new center will depend on a very specific deal; I don’t think on our own we are going to expand into another center because we have enough at this stage. Today for example our Mexico, Manila, and China centers have still not reached a scale where we’d start looking at other centers around those regions. They’re still quite small, and we need to be sure that we get them to be fully capable before we start looking elsewhere. So at this stage, no, nothing.

SSON: How confident do you feel that your KPO [knowledge process outsourcing] division can compete against pure-play KPO firms?

AC: Well it is competing quite well; we have at this stage 700-plus people, so we have grown as well as they have – obviously some of the KPO firms are larger, but as you know, most of the KPO firms are for sale because they are facing challenges on scaling up. They have scaled up in a very different way; their model has been two people here, three people there, five people there. And we’ve followed that model also but because of our relationships with our clients which tend to be deep, which tend to be across IT, BPO, and analytic KPO – I think the kind of KPO we can do for them is much more extensive than what others can do because they’re looking at only one specific area.

So most of the KPO companies face challenges in terms of scaling up; they’ve kept on entering new areas, and in the new areas they don’t scale up. With a client they’re not scaled up to 100 to 200 people. Our capability in terms of who we are and what we offer means our ability to scale up in a client to that number is very high. So over a period of time in the long run, we might have a lesser number of clients but I think we can scale to further levels than some of the large KPO companies. I think we’ll make more money than those companies because our model is all about scaling up while their model is all about more clients with a lesser number of people, which obviously is not our strategy.

So KPO is doing well. The market remains tough because right now the extent of outsourcing by an initial client is still quite small; it still tends to be in pockets, and you end up competing with some of the so-called KPO firms who are very very aggressive on price, who are selling MBA profiles at the price of a typical graduate, which does not make sense. So best of luck to them.

SSON: What do you see as being the real distinction between KPO and BPO?      

AC: I think it’s a brilliant question; I laughed when I read that. The way we define this internally is that if it is knowledge process outsourcing - which by definition means that you are doing higher value-added work - it should be reflected in a simple metric, and that metric is revenue per capita per activity. So the KPO business we take on runs at a revenue per capita of $45,000 and above, while our BPO business is around $25,000. It’s almost double that of BPO. And that’s how we’re defining KPO. If we can create a service offering which gets us that revenue profitability in India – and obviously the revenue profitability differs in other parts of the world – then that can potentially be called KPO. People are recognising the value of what you’re doing.

Now there might be some procurement services which are also coming in at that value, but to be KPO firstly it has to hit that revenue per capita profitability requirement, and we’re focusing on three or four businesses which are around research, which are around analytics, which are around legal process outsourcing, and learning services; these are the three or four areas we’re focusing on. So first define a base, and then around that base provide the four or five services you’re offering.

SSON: How important a sector do you think LPO [legal process outsourcing] will be for you?

AC: It’s already very important; we launched that service around six to nine months back and we’ve had good success, we’ve signed up four or five clients, and one of those is a pretty large client. We believe this market is large, and we’re expecting it to grow – enough research has been done which says the total size of the legal market is $90 billion and a lot of it can be outsourced, so we believe the potential is large.

It’s in the early stages from an outsourcing perspective, but a lot of processing work happens in a typical legal firm or a typical legal department, and a lot can be done to improve it, a lot can be done to make it more efficient - and I think as firms like us enter this business we will start taking large chunks of the work out because we can use technology through the process more intuitively. We are quite excited by the traction we’re getting in the business; although it’s still early stages, we’ve seen the market to be huge. So yes it will be an important sector in our KPO business.

SSON: What are the most important considerations when it comes to hiring new talent?

AC: When you say new talent: what kind of talent? Because new talent can be across the whole organisation. At senior level you have different requirements from junior level, but the basic consideration for hiring new talent is obviously whether this individual will fit into our culture as a company, and will fit into the value-system of the company; and then does this individual have the passion and energy to create something bigger than what we are today? Does he want to be part of the creation, or is he coming for the salary? And salary is obviously important – but does he have the passion and energy?

Then what we really look for is: does this individual – and I’m being a bit blunt here – can this individual be a global citizen, in some ways? We’re hiring someone in India or in Europe but we’re a global operating model; does this individual have the wherewithal to be a global citizen, and can they operate in a global culture? And that’s something which we look at. We also look at - at a senior level - can this person run independently? We’re doing 20 processes at the same time; we do not have time to mentor or supervise everything you do, so we are looking for people who can pretty much run on their own.

SSON: And finally: what’s the most important lesson you’ve picked up during your career?

AC: From an Infosys perspective, one of the most important lessons I’ve learnt is, whatever you do, whatever decision you take, always think of the long term rather than the short term. Whatever decision you take in the short term always comes back to haunt you in the long term. Most of the decisions you have to take for the long term have to be very tough, but as an individual or an organisation you’re always better off deciding for the long term.  

SSON News and Analysis
Posted: 07/09/2012

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