The business process outsourcing (BPO) industry has seen mixed effects from the recent economic downturn — some big clients like Bear Stearns went belly up, while other companies started outsourcing to cut costs. But BPO firms must have a global presence and serve customers at multiple points of their business lifecycle, says Sandip Sen, president (Americas) and global chief marketing officer at Aegis, one of India’s largest outsourcing services providers. Sen, the founder of call center firm Customer First Services, talked to India Knowledge@Wharton about his strategies to stay competitive and brand-building plans for Aegis, a $700-million, 40,000-employee firm with operations in 15 countries.
An edited version of the interview follows:
India Knowledge@Wharton: How are things coming along in the outsourcing world these days? How did the recent economic crisis affect the outsourcing business and where are the opportunities?
Sandip Sen: The outsourcing business has had a paradoxical relationship with the economic crisis. A lot of the large firms… were outsourcing [and] some of them got into trouble. I’m talking particularly of the Bear Stearns’s of the world. Obviously the outsourcing they did got affected [when the companies closed or downsized], but what happened as a result of the crisis was people looked at their balance sheets and said, “We need to [become] more efficient [and] reduce costs.” A lot of the firms that were not outsourcing or at the very early stages [of doing so] looked at both outsourcing and off-shoring [relocating a process from one country to another]. A lot of companies [that] were not in the outsourcing paradigm came into outsourcing.
The other thing is that companies like us have globalized. We are today in multiple countries and multiple geographies. We are very big in India and the Indian economy still grew in spite of the economic crisis. We are big in, for example, South Africa, which [also] saw growth. That helps you mitigate your risks; the U.S. is not the only player in the market. I saw two trends. One was of companies that were not outsourcing very much either forced to outsource, or [to think more seriously about] outsourcing, or embracing that paradigm. [The second was] if you are completely diversified, then you have different markets that are growing at different levels; so overall we didn’t do that badly. The industry didn’t have the kind of growth that it had in 2007. But in 2010 you will see much more robust growth for the industry.
India Knowledge@Wharton: Can you give me a greater sense of Aegis’s operations and the verticals in which you are active? Where do you see the opportunities going forward?
Sen: We said …we’ve got to be global in the global sense of the word. We kind of “follow the sun” as we call it. We have operations in Australia. We have operations in the Philippines. We have operations in India, Sri Lanka, and in Africa we have South Africa and Kenya. We have [operations] in the U.S. and in Central America. We have about 40,000 people in all these locations.
A primary paradigm is what we call customer lifecycle management. From the time the customer comes into the system to managing him to customer service to customer retention to collections to customer data analysis — we do [it all]. And within this paradigm of customer lifecycle analysis we are doing a lot of work for telecom, financial services, healthcare, travel and entertainment. Those are really the big verticals. There is growth in each of these sectors. Telecom is booming in most of the world, [especially] in India and Africa. [The] financial services [sector] is growing everywhere and even in the U.S. there is a greater propensity to outsource financial services — again, because of [the] cost and efficiency. Health care is huge — over 32 million people are going to [newly acquire] insurance over the next 10 years.
So for us, the scope is global. Frankly, our motto has been: wherever there is economic commerce between people, you need BPO. Our aim is to [do business in] 195 countries. We are currently at 15 [countries] and we are moving … to new geographies. In each of these markets we see huge scope as we go forward.
India Knowledge@Wharton: Could you give me an example, say in the telecom space, of the kind of jobs coming your way? How do you compete with some of the larger outsourcing companies that have been building their brands in this space for a long time?
Sen: In telecom, we have been doing this for a fair bit of time in the U.S., Australia, the U.K. and India. Again, on the customer lifecycle, we do the entire pitch. We do a lot of customer acquisitions through a variety of ways, whether it is voice or e-mail or direct mail. We [offer] customer support. We do tech support. We do a lot of back office [work]. Tomorrow if you want to say, “Hey, I need a cell phone connection,” — let’s say a prepaid connection — then there is a lot of activation that needs to be done before your cell phone starts working or you are active in the system. We do all of that work. We then do collections. We do customer retention. So, we do the entire process for telecom.
[As for] the other question you asked, in a lot of countries like India we have huge recognition. In the U.S., we are a multinational company, but we are based in India and we are Indian-owned. We have 5,000 people in the U.S. We have got to build the brand a little more [and] let people know that this is a 40,000-person company and a company that has 5,000 people in the U.S., which really even the big IT majors like Infosys or Wipro will not have.
India Knowledge@Wharton: How are you going about building your brand?
Sen: In a variety of ways. One is to look at industry formats. Recently there was [a meeting of] the International Association of Outsourcing in Florida — we are very prominent there. [Secondly], we take part in a lot of niche industry events. In health care, we took part in a couple of conferences, [and in] telecom [on debt collections]. Thirdly, I spoke at a Frost & Sullivan conference; we are very big with Nasscom [National Association of Software and Services Companies]. Using industry forums, industry bodies, trade exhibitions and, of course, being present at a school of learning like Wharton are all helping to build the brand.
India Knowledge@Wharton: One of the points made at the Wharton India Economic Forum is that in the BPO space, much more of the competitive advantage is shifting toward value-added services and building greater value through providing new and innovative services to clients. To what degree do you see that happening in your portfolio of services, and could you give us any examples?
Sen: This [talk of offering] value-added services is a bit of a cliché. The trick is to do both. Today … the lowest-cost is not the [only] value proposition [for prospective clients]. In fact, India is not low-cost anymore. There are countries that are lower in cost than India. But there is a market for doing the kind of work where you get huge economies of scale. There are good margins in the business. What we have done in India to keep the cost advantage is, for example, move from a Tier 1 city to a Tier 2 city. That’s a business — there is no good or bad business. [You have to ask] — Is the business profitable? Does it make sense? But having said that, it is important to have a much more holistic relationship with the customer and therefore you need to do much more than what you are doing.
Just to give you an example … In the financial services sector, we started with customer support and voice but now we do claims processing. We do things like medical coding or medical billing. Once you have been engaging with the customer you have a foot in the door. Maybe it is not of the highest value, but it allows you to work with the customer — understanding his process, understanding his business. [Then] you can then do much more of that business. We started as a call center. Five years back, 100% of our business was in call centers. Today [call center services] is about 65%; [the other] 35% is in back office processing and data analytics…. With your existing customers and new customers, give them a variety of services so that you have a holistic relationship with them, a relationship at multiple points. That makes the business more [profitable] in the end.
India Knowledge@Wharton: You raised an interesting point about managing your costs by moving away from Tier-1 cities to Tier-2 cities and also the fact that in the outsourcing business India is no longer the lowest-cost provider. As you move from say one center to another, do you find enough people with the skills that are needed to do the kind of work you do? Also, globally, which are the emerging centers for BPO services that offer the best value for money? What does this mean for India?
Sen: Yes, you need to choose the right centers. In some of our centers, for very specialized work, we have taken people from outside who stay there. For example, we wanted to do some work [that involved] French-speaking for some European company. We realized, whether we do it in Bangalore or a smaller city like Mysore, it is still difficult to [find employees with the right language skills]. So we [recruited] a lot of people from Ivory Coast, which is a French-speaking nation; it doesn’t matter whether we relocate them to Bangalore or Mysore. You need to do a little bit of management, but you need to choose the right city. There are low-cost cities that have good universities. Two [are] in the south — Mysore and Bangalore. [They have] good university systems and students.
The other [opportunity] is in countries like Sri Lanka, Vietnam, Kenya and Ghana. We have an operation in Kenya, which is another low-cost country [with] good affinity to the U.K. We have just been exploring Ghana and looking at operations in Egypt. So some of these are … low-cost markets [that] can … be a challenge to the cost structure in India.
India Knowledge@Wharton: How serious is the policy challenge these days especially when governments start funding businesses, which seems to have happened quite a bit in the aftermath of the financial crisis? Politicians are always concerned about jobs. Has that made the policy environment any more difficult for BPO companies these days?
Sen: There is a little bit of a challenge here, but there is also a little bit of difference between rhetoric and reality. Politicians of any stripe — anywhere in the world — are concerned with public opinion and, therefore, we need to be sensitive to it. But also companies, whether government-funded or otherwise, have to be profitable. There are two divergent strains of thought. Outsourcing has continued, but we believe also that if you are off-shoring [business] from the U.S. you should have a presence in that country. So we have grown our U.S. presence. We believe there are certain kinds of jobs that have to be in the U.S. because of security reasons [and] because of policy reasons. And, frankly, when in Rome, be like [the] Romans. It will not fundamentally affect the shift to outsourcing but we are sensitive. We believe that if there is a country where there is a lot of business — like the U.S., for example — we need to have a big presence in the U.S. and we need to see how to grow that presence. That’s what we are doing.
India Knowledge@Wharton: If you were to look out over the next four to five years where do you see Aegis going and where would you want to be?
Sen: Aegis is [becoming] more global. We want to be truly global for two reasons. One, there are opportunities in every market. As opposed to other companies, we look at the local market in these countries. One of the reasons we have grown is that we are by far the largest BPO in India. So we have taken the Indian market. We are very big in the South African domestic market and that is a growing market. So we have multiple geographies. First, to give customers a choice, say to a U.S. customer [about] where he wants to be. The second is to grow the local market.
We have been growing in size. [We want] to be over $1 billion [in revenues] — but not so much for the number per se. We currently are about $700 million. If you are large, if you have the scope and the size, then you get a seat at the table for any major outsourcing that happens. That’s really our scope — to be credible and large in size and to be truly global.