HarVa: Creating Value within Rural IndiaPublished: May 17, 2012 in India Knowledge@Wharton
Sohna Road in Gurgaon in the North Indian state of Haryana runs adjacent to National Highway 8, one of the most prosperous real estate stretches in the country. Sohna Road itself is flanked by luxury residential projects of all kinds -- golf villas, penthouses, mansions. There are also towering glass facades of multinational corporations. Barely a few kilometers away, it is a different picture altogether. A potholed road leads to Tikli, a hamlet in the Badshahpur block of Gurgaon. Here, basic amenities like water and electricity are considered luxuries.
For 32-year-old Suman Mehra, the HarVa BPO (business process outsourcing) center at the junction of Tikli and Aklimpur village is a window to the outside world. Mehra came to know about HarVa through a public announcement in the village and has been working there for the past 18 months. “Being a matriculate [10th grade], I was eligible for the job. When I discussed the proposition at home, my mother-in-law totally rejected the idea. But my husband supported me and convinced everyone else in the family,” recalls Mehra. HarVa gave her free training for three months and, finding her suitable, gave her the job. Every morning, after sending her two children to school, Mehra walks down to the center -- it takes her around 30 minutes. There, she does data mining and ad posting work from 8 a.m. to 4 p.m., six days a week. “I had never imagined that I’d step out of home to work and even earn as much as my husband,” she says with a sense of pride. Mehra’s husband works as a driver in nearby Gurgaon and earns around US$160 a month. She adds that her 12-year-old daughter and 10-year-old son are very happy about having a "working" mother.
Twenty two-year-old Jyoti Jangra, too, has been working at this HarVa center for the past one-and-a-half years. She has three younger siblings and her father works as a carpenter. The US$120 a month that she earns at the center counts a lot in the family. But what will happen when she gets married and moves away? “I am sure the experience that I have gained here will help me further my career in some other enterprise,” Jangra says.
The HarVa center in Tikli operates from the first floor of a nambardar’s house. (A nambardar is the person who records birth and deaths in the village.) Spread approximately over 1,000 square feet, the center has a capacity to seat about 70 BPO employees. A similar number of computers are lined up. While the average number of employees at the center is 60, at times there are as few as 10 women at work. “This is the harvest season and therefore a lot of them are back at their farms to lend a helping hand,” notes Ajay Chaturvedi, founder-chairman of HarVa.
Looking Beyond Consumerism
The thin attendance doesn’t bother Chaturvedi unduly. The HarVa center follows a flexible model of employment. Employees are paid on a transaction basis. More importantly, for 38-year-old Chaturvedi, HarVa is about setting up self-sustainable rural eco-systems in village clusters and, as the name suggests, harvesting the value of rural India. (Hara in Hindi means "green.") “Ours is a productive model based on creating value from within rural India. It is not a selling-based consumerist model,” he says.
A graduate in technology management from the School of Engineering and the Wharton School at the University of Pennsylvania, Chaturvedi worked with leading firms like IBM and Citibank in the U.S. for over a decade before deciding to return and focus on rural India. Chaturvedi’s family owns large tracts of agricultural land in Northern India, and his own rural journey began when he realized that farmers in low produce areas preferred to move to the cities and take on jobs like that of drivers and peons instead of tilling the land. Chaturvedi felt that if these farmers were given access to better means of farming they could get back to their lands. This would require various interventions, like assisting them to get government subsidizes on drip irrigation, educating them on better farming methods, providing better market linkages, aggregating their output, getting them better prices and so on.
But when Chaturvedi started down this path, he found that it was very tough to convince the male farmers. The biggest stumbling block was that farmers in low produce agricultural areas typically tend to be in a negative cash flow situation. The men needed a stable monthly income for their family. They needed to be convinced that their future was secure. This set Chaturvedi thinking and led him to launch a network of rural BPO firms which could employ women. “We are looking at the bigger picture of digital distribution,” says Chaturvedi. “My whole objective is to set up rural digital distribution in low produce agricultural areas and sell the value [created within] outside rather than selling in.”
Rajat Kathuria, professor of economics at the New Delhi-based International Management Institute and external consultant at the Indian Council for Research on International Economic Relations (ICRIER), considers HarVa to be a “very well thought combination of social and economic entrepreneurship.” According to Kathuria, HarVa’s main innovation lies in its involvement of the local community. “The support of villagers is integral for business continuity, and also a key reason for making it sustainable and scalable,” says Kathuria. "If executed well, HarVa's vision will enable many local communities realize their ambitions.”
Perry Venugopal, who is working on a case study on HarVa under the guidance of Michael Hay, professor of management practice in strategic and international management and entrepreneurship at the London Business School, considers HarVa’s model to be unique. He notes: “HarVa's model [differs] from other rural-focused social ventures because its business model is not based on selling products or considering the village inhabitants as paying consumers. Instead, it is more about understanding the nature of resources in a village setting and adopting the right approach to maximize the value -- thus creating a social and economic benefit for both the villagers and the consumers who benefit from the services that the village provides.”
BPO and More
So how does the HarVa model work? The rural BPO center, Chaturvedi says, is the starting point. Here, women with qualifications as basic as eighth grade are given three to four months' free training on process-oriented jobs like data entry, data mining, ad postings and social media marketing. The fundamental thinking is that if a process is simple and defined well, then anyone with adequate training can do it. Post training, these women are absorbed within the organization. This ensures that the family gets a steady monthly income. In addition, the HarVa centers have helpdesks for farmers and also offer education and career counseling for students, including helping them to get student loans, by connecting them with the relevant service providers. HarVa is now also tying up with financial institutions to offer microfinance to the villagers. It has recently piloted its microfinance initiative and will soon be launching it as a full-fledged service.
HarVa was registered in 2008 and set up the first center in 2010. To accelerate the operations and minimize the learning curve, last year Chaturvedi acquired two other rural BPOs – SourcePilani and Drash Services. At present, HarVa has a total of 11 centers. Of these, four offer all three services (BPO, farming helpdesk and student counseling) and are called "digital huts." The other centers currently offer only farming and student services. In due course they will also start BPO activities and become full-fledged digital huts. Till now, HarVa has serviced 25 BPO clients, including the animal husbandry department of the government of Haryana, Clickindia.com, an online classified advertisement positing site and JobConcierge.com, an online job search service. At present, HarVa has a roster of six clients and 300 employees, most of them women.
Chaturvedi is aiming to set up 100 digital huts and employ 10,000 women over the next three years. He sees huge opportunity to source work from local companies. “We are not just a BPO firm. We see ourselves as doing 'XPO' work – where the X can be anything that can be outsourced,” he says. He cites an example: across India, outside local government offices it is common to see people offering their services to type out documents. “We can offer the same service at a fraction of the price.”
Jason Lee, founder of JobConcierge, says that his experience with HarVa has been very positive. “I did have concerns regarding the quality and effectiveness of their team before we started outsourcing to them. But we set up very specific processes for specific job titles, and I found them to be extremely capable.”
On the farming front, until now HarVa has aggregated around 100 acres of farmland under the community farming model to grow cash crops like aloe vera, lemon grass and chamomile in a more productive manner and also help the farmers get better prices. As it goes deeper into the rural community with its different services, HarVa hopes to have a larger network of community farming. The idea is to get into specialty produce that can fetch higher margins. This activity may eventually get spun off as a separate organization under the name of HarVa Farms.
With its linkages in the rural community, will HarVa also become a distribution channel for FMCG companies looking to reach into the hinterland? No, says Chaturvedi. He believes that treating the rural economy as a consumerist economy is a huge mistake. “Then you are not tapping the real value of rural India. You are only selling into it,” he says.
So how will HarVa make money and be self-sustaining? Chaturvedi says that until now he has invested Rs. 1.5 crore (US$280,000) in the venture. While initially there were some high net-worth investors, Chaturvedi parted ways with them because of differences in approach. The venture now is fully self-funded. Sailesh Giri, chief information officer (and founder of Drash, the rural BPO firm which was acquired by HarVa), says that 60%-70% of the cost is towards putting in effective and innovating technology solutions for the centers. Says Giri: “As CIO, my biggest priority is to find and implement technology that’s based on low-cost innovation.”
According to Chaturvedi, it costs around Rs.15-20 lakh (US$28,000-US$37,000) to set up a digital hut, and each unit can become profitable within a period of four months. For the year ended March 2012, he says, HarVa has notched revenues of Rs. 3.5 crore (US$652,000) and is a profitable venture. Currently, all the revenues are from the BPO operations. Chaturvedi estimates that in a year from now, BPO will account for 50%-60% of the revenues, student helpdesk will account for around 30% with the farming helpdesk and microfinance accounting for the rest. Over time, microfinance is expected to rake in bigger revenues, but it will get hived off as HarVa Finance, a separate organization.
A Bumpy Road Ahead
Even as Chaturvedi is planning for the future, he realizes that the going will not be all smooth. “It is like trying to put a road map where there is no road at all,” he says. One of the key challenges that he has identified is attracting and retaining good managers. “This is the primary reason that we have not been able to grow to 1,000 employees by now, as was our initial target,” admits Chaturvedi. Adds Giri: “We are devising ways to address this by training local people.” HarVa tried to overcome this constraint by taking the franchise route for its BPO operations and at one time had as many as 15 digital huts. But it decided to drop this model because of the difficulty in ensuring quality. In order to prevent its managers from leaving for greener pastures, Chaturvedi has given them a stake in the organization. To drive productivity, he has linked their compensation to the profitability of their unit. He is also looking to strengthen top level management.
Meanwhile, other questions remain. Sridhar Mitta, founder of NextWealth Entrepreneurs, a social entrepreneurship organization, believes that HarVa “seems to lack focus for a start-up.” Mitta says: “HarVa talks about rural BPO, community farming, microfinance, etc. Do they have commensurate resources for doing so many things?” Mitta further points out that “there is no evidence about [HarVa’s] scaling capability and the ‘real value harvested from rural India’ in absolute terms."
According to Venugopal, given the diversity in India's villages, the key to the sustainability and scalability of HarVa’s model is not having a one-size-fits-all approach. The need is to adopt a flexible framework. Says he: “In theory, [Chaturvedi] is adopting this approach, but only time will tell the long-term sustainability of this venture.”
Kathuria echoes a similar sentiment. “Replicating a similar model in other states and villages is entirely possible but not with a one- size-fits-all approach.” But he notes that the HarVa team has learned from its mistakes to arrive at the best possible business model. And “trial and error,” he points out, “is as good as any approach in an uncharted environment.”