Sourcing Superstars: Neeraj Bhargava, WNS Global Services

SSON News and Analysis
Posted: 07/09/2012

WNS Global Services began life as a British Airways captive center in 1996; since then it's blossomed to become one of India's most successful BPO providers, and the country's first to list on the NYSE. Co-founder of WNS (Holdings) Ltd Neeraj Bhargava has been the firm's CEO since 2004, during which time he's seen his company expand to over 18,000 employees worldwide, generating annual revenues of over $450 billion. To launch our series of interviews with the heads of the world's key sourcing players, SSON got some words of wisdom from the man himself...  

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SSON: What have been the biggest changes to the outsourcing space while you’ve been involved? 

Neeraj Bhargava: I’ve been involved in many ways with outsourcing for nearly two decades: the last eight years with WNS, and prior to that the bulk of my career was spent with McKinsey & Co where I worked with numerous IT services companies and other areas of outsourcing. If I were to look back at, especially, the last five years or so, there have been three big changes that have happened in the outsourcing space.

First of all it’s no secret that it’s truly turned global. We’ve seen the advances that have happened in communications technology and in general the rise of global trade and integration. People have got very comfortable running parts of their operations in other locations, which therefore resulted in the rise of India now, the rise of Ireland a bit earlier, as a key shared services or outsourcing location, and the increasing usage of locations like the Philippines: these are all things that have really accelerated significantly in the last five years. So outsourcing as a global phenomenon is a very big change.

The second big change is that it’s become more widespread, with companies across different industries embracing the trend. About five years ago, it largely involved the financial services players and the telecoms players, and to an extent technology companies and the IT area who were the major early movers in outsourcing. Now multiple industries, multiple categories of trade - not just large companies - and quite often private equity companies - are playing a very big role in pushing their investee companies into outsourcing. So the trend is now widespread, and in some ways, the development of WNS as a company as we expand the industries that we address reflects the evolving trend in the market.

The last point is that outsourcing has become a very specialised industry, and therefore people who are successful in this area are very focused around doing this well. Our WNS clients are increasingly demanding more industry expertise coupled with operational expertise and therefore, like any other industry, as it starts to mature, people who are very specialised and can develop unique solutions for their clients are the ones who become very successful.

SSON: What do you see as your biggest challenges day to day?

NB: WNS has been fortunate to take advantage of opportunities that have allowed us to grow at around 40 per cent year on year, and even in a difficult economic market we foresee ourselves growing quite steadily over the next couple of years. If you just look at some pure numbers here we were just about a $15-million company in 2002; we finished last year with revenues in excess of $450 million. So it’s just the level of growth that we’ve experienced and what we see going forward, our biggest challenge is in managing growth, preparing the company in the sense of having the right organisation, and the right capabilities to take advantage of the opportunities that are coming to us. And overall I think that we are at the early stages of outsourcing; there is much scope for creative outsourcing solutions and sourcing functions or processes that we have not tapped yet.

Recent studies by McKinsey & Co and some of our industry associations suggest that the relevant market is about $250 billion. Right now the market that we are tapping is barely $10-$15 billion, so we still have a long way to go. And the biggest challenge continues to be managing growth and preparing for what is coming.

SSON: Are you worried about the credit crunch? 

NB: I think the credit crunch and what is possibly recession, high inflation, does create a difficult environment for our clients or our prospective clients. They’re seeing a lot of dramatic changes in their business. That creates two issues simultaneously: first, the need to cut costs and focus on core business; and second, they perceive that need to be more acute. That is, in fact, very positive for our business. The flip-side to that is that there is also a lot more pressure on dealing with day-to-day issues, there will be more M&A activity, people have less money to spend on change: these are distractions that sometimes constrain them from taking outsourcing decisions. So it’s a bit of a mixed bag.

But overall I think if you looked at what happened after the last recession, in the early part of this decade, that was very positive for us... So our view is that in general people have been a bit shell-shocked by the rapid changes in the economy, but at least in the US people have begun to understand that they need to make the rapid, sustainable change represented by outsourcing, so organizations are compelled to pursue a broader range of outsourcing options. We think that Europe is following the same pattern.

SSON: You have an increasingly diverse operation now and are growing rapidly year on year. Where do you see your next expansion taking place?

NB: Overall we’ve been very public about this: WNS will have a global footprint. In that context, what we’ve done so far is keep India as a very strong base for us but on top of that we’ve added more onshore operations in the UK, we’ve added Romanian capabilities, we’ve got capability in Sri Lanka, we recently completed a joint venture in the Philippines as well. This is a fairly diverse footprint already but there are three other missing pieces: we need a presence in Latin America, to deal with opportunities there as well as Spanish-language requirements in the US; we would be silly not to consider China as an important location to enter given all the opportunities that are there in that market; and last but not least is - as we’ve done in the UK for some specific operations – having some onshore operations in North America as well.

So we have three areas where we will fill in some gaps, but at this point in time, we’re very focused that in the next twelve months our biggest priority is to ensure that our recent expansions in the Philippines and Romania gain scale rapidly, and we’re focused on ensuring that these locations grow at the same rate as what we already have established in India, Sri Lanka, and the UK. Our sense is that the expansion into the other three geographies – which are imminent – will occur in the next fiscal year.

SSON: You mentioned Romania: why did you decide to go there?

NB: Romania presents a very rich opportunity for WNS to tap into a workforce who can work in all the four major European languages: Italian, French, German and Spanish. We find a very good population of professionals who can work in all those languages. So that was one point. The second is that the employee culture of those working in business services, coupled with the fact that there were some early movers who had set up shop there and whose experiences had been very positive, was positive, and to top it off, there are many parallels we found between the business culture in Romania and what has emerged in parts of India. We have been very impressed by what we see; it’s a pretty important expansion for us, and it’s the springboard for what we can do more broadly in continental Europe.

We don’t rule out going into other countries because in general the pattern we’ve seen other outsourcers follow in Europe - which is something we feel is right – is that you don’t need to build gigantic sites in one location, you probably need to establish a cluster of smaller sites. So Romania is not the only place we’ll establish a location in Europe looking forward. But given important attributes, whether it’s the availability of skills, the optimum ecosystem to develop operationally focused companies, in every dimension we felt that the best mix is present at this time in Romania and that’s why we decided to go ahead with this location.

SSON: How do you differentiate yourselves from other BPO providers?

NB: I think one very important differentiation is that we’re totally focused on running business operations. We compete with a number of global BPO providers who have a mix of BPO, IT and consulting; we do feel IT and consulting are important but for us they are not something we’re pursuing as independent or large businesses, but they are capabilities we have to better deliver our BPO operations, so we have IT platforms that we’ve invested in, and in fact even acquired companies in the IT space; our sales process is very consultative in nature; but we’re very sharply focused on being a BPO company, running business operations.

Our clients in general like our very sharp focus on their operations, not selling them systems implementations or consultancy that could stretch out their path to value from outsourcing. In fact, in one case one leading global outsourcing company that was very focused on ITO was an incumbent in a potential client and bidding for their BPO processes, but we actually managed to win because of our very much sharper focus on BPO delivery. So that’s one big differentiation.

The second thing is the fact that we’ve leveraged offshore locations very, very aggressively for the last twelve years of the existence of the company. Our ability to run very high-quality operations offshore is often superior to what you see companies even much larger than us are able to do, because we’re insiders, we’ve done this for a long time, we’ve got a good brand-name in places like India and Sri Lanka, and are able to hire the right talent and make them extremely productive. The ecosystem that we’ve built around our company is extremely strong, and our offshore capabilities help us stand out very clearly.

The last and very important point is that I think that when you run operations the culture you create is also extremely important. We’re a very entrepreneurial company, very customer-friendly in terms of how we operate; we do believe that culture is an important competitive weapon for us in terms of adapting our ways of working to those of our clients, truly "extending their enterprise" as our tagline says. We are focused on ensuring that their operations – often hundreds or thousands of miles away from where they’re based – are run in a manner in which delivery is very predictable; and we’re really a very friendly company to work with. This may seem like fluff: but let me tell you the feedback we get all the time is that this company is a real pleasure to work with and in many ways that image helps us stand out.

SSON: What do you see as the boundary between BPO and KPO, and are you planning on moving into KPO in any big way?

NB: Well, actually we are among the largest KPO players worldwide, period. We invested in that business four or five years ago. Fifteen per cent of revenue comes from what is popularly known as KPO. We’ve made acquisitions in this area and have a very diverse business which encompasses every aspect of analytics from financial analytics through sales and marketing analytics to spend and purchasing-related analytics to more advanced FD&A work that we do for our finance and accounting clients. Our KPO practice now is over 1,500 people who are very deeply linked into our various industry practices. So if you were to look at what we’ve done there, WNS’ KPO offering is clearly ahead of the market in terms of size, diversity of offering and industry. That’s very big for us.

The reason we’ve been very successful there is that right from Day 1 when we physically land a client for BPO services we bring numerous analytic tools and other methodologies that we have developed over the years as the first tranche of the WNS value-add, with our KPO teams working very closely together with our BPO teams to add value. More recently, what we are experiencing is, as we add clients, instead of leading with BPO, we’re leading with KPO and then cross-sell BPO services. We’ve been very successful with this approach.

SSON: Let’s talk about India. India’s dominance of the BPO space is looking pretty robust. Do you feel it to be unassailable? 

NB: I think for the next five years India will remain a dominant offshoring location. If you look at pure demographics today, the sheer number of English-speaking graduates coming out of the ecosystem that was set up to develop BPO companies, gives companies a premier opportunity to scale up operations. And, interestingly, as the Indian economy is softening, the rupee is depreciating so some of the alarming situations we had around foreign exchange over the last twelve months have experienced relief.

Another point is that if you look at resourcing on a comparative basis, there’s a lot of talk about resource crunch in India but I can’t see any other country as being different in any way. We’ve got resource crunches in the Philippines, we’ve got resource crunches in Eastern Europe as well, wage inflation is universal, currency "tremors" exist everywhere: so what is different? So if you look at pure demographics, India stands to remain the dominant player in the next five years. China is very interesting because demographically they have many similar characteristics; however the lack of professional English-language capability is what has constrained the market. My sense is that China, with the growth of English-speaking schools there, over the next five to ten years could become very compelling: but I don’t think it will happen within the next five years.     

SSON News and Analysis
Posted: 07/09/2012

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