Over the past year, Bangalore-based outsourcing firm Brickwork India, led by Vivek Kulkarni, the founder and chief executive officer, has been working with the University of Pennsylvania’s Center for the Advanced Study of India (CASI) on a health care research project funded by the Bill and Melinda Gates Foundation. The aim is to help consumers, especially women, in the southern Indian state of Karnataka assess the quality of maternal and neo-natal healthcare offered by hospitals and clinics with less than 200 beds. The study is expected to help empower women to make more informed decisions while choosing a health care facility.

As part of the project, CASI and Brickwork developed a questionnaire with help from the Indian Institute of Management, Bangalore (IIMB), St. John’s Medical School and Hospital in Bangalore and health care researchers at the University of Pennsylvania. The survey was completed at the end of August; it involved extensive discussions with patients, health care providers and insurance companies. CASI director Devesh Kapur notes that results from this research will be used to create a health care rating system that will be rolled out over five years. He credits Brickwork with having played a key role. “Brickwork’s strength has been its organizational and networking capability, and Vivek’s ability to think of the practical pros and cons in implementing a project of this nature,” Kapur says.

Pankaj Chandra, director of IIMB, agrees. “This project is a tough nut to crack,” he says. “It requires collating data in a difficult environment and creating systems and practices that can help the government in making the right decisions. Brickwork’s strength lies in the quality of its team and in Vivek’s vision.”

While at present Brickwork is helping with the health care study, Kulkarni believes this opportunity could be leveraged for deeper involvement in the sector. “We would like to study and understand the various aspects of the health care sector in India and then see what opportunities are there for us. We may set up a separate rating agency to assess health care facilities in India,” he says.

In addition to Brickwork India, Kulkarni has set up Brickwork Ratings, a credit rating agency licensed by the Securities and Exchange Board of India (SEBI) last year. A veteran of the Indian Administrative Service, Kulkarni held various positions in government for 22 years before leaving in 2003 to become an entrepreneur. He has served as Finance Secretary for the state of Karnataka; division chief at SEBI; head of advisory services at Credit Rating and Information Services of India Ltd (CRISIL), and IT Secretary of Karnataka.

It was in that last role — a position Kulkarni held between 1999 and 2003 — that he helped put Bangalore on the global technology map. While companies such as Infosys and Wipro Technologies had already set up operations in the city, Bangalore did not have the cachet it now has as India’s answer to Silicon Valley. Kulkarni and his team worked hard to attract global giants such as IBM, Accenture, Microsoft and GE, among others. Ernst & Young set up a tax center in the city. Dell established a customer service operation that employs more than 1,000 people. “Every week, we had one foreign company come to Bangalore to set up operations,” Kulkarni recalls. “Our objective was to show these companies that India had talented manpower that could serve their needs. During those years, Bangalore grew like anything. We built 12 million sq. ft. of space and created 100,000 jobs. The government’s tax revenues grew by 40%.”

Opportunities in Outsourcing

Kulkarni’s first foray into entrepreneurship began in November 2003 when he co-founded a technical support center called B2K with Lathica Pai, a software engineer. B2K (for Bytes to Knowledge) had clients such as Microsoft and Yahoo, but Kulkarni was disenchanted because of the routine nature of the work. Two years later, he sold his stake in the company. What continued to hold Kulkarni’s interest, though, was a division within B2K that offered remote executive assistant (REA) services to individuals and small businesses. After moving out from B2K in December 2005, Kulkarni developed this division into a full-fledged operation as Brickwork India. “Outsourcing companies from India typically cater to the needs of large and medium businesses. At Brickwork India, while we do take on outsourcing work for large firms, our primary focus is on small businesses and individuals. We see huge business potential in making the benefits of outsourcing available to them,” says Kulkarni.

Ghanshyam Dass, a senior advisor at KPMG, believes that Kulkarni has zeroed in on a sound value proposition. “Individuals all over the world are looking for the cost and delivery advantages that outsourcing and off-shoring offer. This is a large and untapped segment and by focusing on this, Vivek has hit upon a sweet spot,” says Dass.

How do virtual or executive assistant services work? Consider Steven Smith, a certified business coach from Australia and founder of Reality Consulting. Smith has been a client of Brickwork for the past year, and the firm provides a virtual assistant who assists with tasks such as maintaining his blog, scheduling training sessions and meetings with clients, distributing his e-newsletters, communicating with business prospects and so on. “I don’t have enough work in my business to justify a full-time personal assistant. I treat this REA service as a way of having half a staff member, and I don’t [need] them sitting in my home office,” says Smith. “I queue my work up at the end of the day and see it done when I come in during the morning. Having Brickwork assist my business has freed me up to focus on getting more business.”

For other clients, virtual assistants from Brickwork provide services such as preparing company profiles of potential customers. According to Kari Roberts, sales manager at the U.S.-based software firm E2open, “Although a lot of this work can be done internally, they (Brickwork) have greater access to databases and it is more cost effective to outsource than to do it in-house.”

This cost arbitrage has been driving demand for offshore back-office services for years. The market is massive — US$120 billion — and highly fragmented, according to Kulkarni. As a result, Brickwork faces competition from rivals. This includes companies like Get Friday and Ask Sunday, which are based in India and offer virtual assistant services at prices comparable to Brickwork’s. There is a difference, though. Get Friday and Ask Sunday not only take on business tasks for their clients, but they also do personal tasks like ordering flowers and gifts, scheduling visits with doctors, finding a lost dog and so on. T.T. Venkatesh, director at Get Friday, says: “Every person is a possible client because everyone has something that they can outsource, even if it is something trivial.” Brickwork, however, plans to focus on business-related tasks and not take on personal chores for its clients. According to Sangeeta Kulkarni, Vivek’s wife and chief operating officer at Brickwork: “We want to add more value to our delivery and take up more challenging tasks, and we are clear that we will operate only in the business space.”

Up the Value Chain

When Brickwork started, the firm offered secretarial services like database management, email management, bookkeeping, data entry, formatting documents and so on. Over the years, it has moved up the value chain to offer services such as business research, investment research, procurement consulting, India strategy assessment, and legal and IT services. While the basic services are provided by graduates, for premium services Brickwork has a pool of postgraduates, management professionals, chartered accounts and even PhDs. In addition to an in-house team of 200, Brickwork has a panel of 50 consultants who are specialists in various industries. These consultants contribute to projects that require specialized domain expertise. Some 70% of Brickwork’s revenues come from premium services while the rest is from its basic services.

Ashok V. Joshi, vice-president and head of business development, says that at any given time, Brickwork typically handles 125 to 150 clients. Rates range from US$8-US$14 an hour for basic services to US$15-US$25 an hour for premium services. Clients can choose to engage either on a subscription model or on a fixed-bid basis, depending on the scope of the work. A dedicated primary virtual assistant is assigned to each client and, in order to ensure continuity of work in case the primary assistant is unavailable for any reason, Brickwork follows a “buddy” system.

“When large companies outsource their work, their requirements and formats are pretty much standardized,” Kulkarni says. “In our case, every client has different needs and every project is different. Also, unlike in a typical BPO environment, each of our REAs works directly with the end clients. The quality of our REA’s interactions with the client is very involved and the service is highly personalized. The interaction, therefore, needs to be very collaborative. This makes our job highly challenging.”

There are other challenges, too. The very nature of the work, for instance, makes it difficult to scale aggressively. According to Amitabh Chaudhry, chief executive officer and managing director at Infosys BPO, “There will always be space for niche players with domain expertise who are targeting specific segments. They are flexible, can move fast and offer personalized service but they will always have issues of scalability.” Chaudhry adds that employee retention is also a challenge for such companies because the options for growth within such small organizations are limited.

Then there is the issue of reaching out to the wide and diversified base of prospective clients. In its early years, Brickwork relied on customer referrals and being written about in different publications. A mention in Tom Friedman’s The World is Flat in 2006 and Timothy Ferriss’ The 4-Hour Workweek in 2007 gave the company recognition worldwide. But now, as it looks to grow further, marketing will be a challenge. “Funding can also be an issue for small niche players like Brickwork,” says Dass of KPMG. Meanwhile, client expectations are increasing. Says Roberts from E2open: “Brickwork needs to be more proactive and suggest methods to improve the deliverables instead of us always providing that guidance.”

To remain ahead in the game, Kulkarni says Brickwork is looking at building domain expertise in specific industries. “Until now, our thinking was that we would cater to any business requirement of any client. Now that we have done a gamut of work, we want to consolidate our experience and expertise and offer more specialization.” Adds Rajesh Pai V., assistant vice-president and head of research services: “We don’t want to get into a pricing war. Our aim is to work on improving our efficiencies and quality.”

Pricing Pressure

The current economic slowdown and increasing unemployment has seen greater competition for Brickwork from popular websites like elance.com. At elance.com, the price from individual service providers is as low as US$5 per hour in some cases. In the past six months, Brickwork has been forced to drop its prices by as much as 20% to 50% across its portfolio of service offerings.

Another initiative from Brickwork to service its clients faster and to improve its own profitability has been to focus on reusability. In its IT services division, Brickwork has developed an open source e-commerce product called openeShoppy for setting up e-commerce websites. At present, Brickwork is testing this out on a beta run with six clients. Says Rajesh R.R., delivery manager, IT services: “If a client wants us to develop an e-commerce website, it will be easy for us to do so using this product since we have developed it ourselves and it will also be more cost effective for the client.” Rajesh adds that more such products are in the pipeline. Another area that Rajesh’s team is working on is iPhone applications like organizers and schedulers. Brickwork is looking to offer these applications to individuals or even post them directly on the Apple Store. These will be added revenue streams for the company.

Entrepreneurial Lessons

During the course of his transition from government official to entrepreneur, Kulkarni says he has learned several lessons. The biggest mistake he made initially was that he “recruited very talented people from top educational institutions in India,” he says. Though these people “had very good qualifications, their loyalty to the organization was lacking. They kept leaving to take up other jobs, and each time one of them left, they created a vacuum. That is a difficult situation to deal with when you are a start-up. I learned that recruiting employees from middle-tier institutions was much better for us.” During the recent recession, Brickwork gets invited to recruit students from top-tier schools. Burned by his previous experience, though, Kulkarni has been hesitant about revising his hiring practices.

Another key lesson — which Kulkarni believes could benefit all start-ups — is to recognize that integrity is crucial in creating lasting relationships with clients. “We have a strict policy of billing only for hours that our remote assistants have worked for their clients. If a client is on a flat-rate plan and the assistant has worked less than the number of hours per week, those hours are credited to the client’s account, and we make up for them next week.” This policy has helped Brickwork maintain its client relationships despite increasing competition.

Kulkarni believes Brickwork’s future will be driven by continuing to focus on the niche of small firms and individual clients as well as specialized projects such as the health care survey conducted with the University of Pennsylvania. “The health care project taught us vital lessons,” he says. “We focused on maternal care and neo-natal care, and it helped us understand the strengths and weaknesses of public and private hospitals and clinics. In some cases, we found horrifying practices — such as mothers being charged Rs. 1,000 (US$20) just to see their newborn children; the rate for a male child was Rs. 1,500 (US$30). What we learned will allow us to develop a rating system for hospitals and clinics — and help solve such problems.”