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Business World, New Delhi
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9th
December, 2002. |
One way of doing that is to let the
customer teach you. That’s how
Vijay Rao of Epicenter, a 1,000-man
call centre that specialises in collections,
learnt the ropes. He started with 20
people, and his first client, an MNC
bank, played coach for about six months.
Rao explains that collections is a specialised
game, “Bill Gates could have gone
on a vacation and not paid up. A regular
customer may have discovered that he
has cancer just about when the agent
calls up or somebody may have lost his
job. So the agents have a lot of leeway
to defer payment schedules and break
it up. They also need a lot of skill
to be able to sympathise and cajole
or hustle and push”
This business is also a lot tougher
because the customer monitors about
20 performance ratio beginning with
simple ones like dollars collected to
promises made (if a customer promised
to pay up $100 and he pays up only $30).
The outsourcer is not price sensitive
while giving out orders. Back of the
envelope calculation shows that if an
agent conducts $600-1000 an hour, a
one-hour downtime would mean a lose
of a million dollars. This is nothing
compared to a dollar per hour here and
there that a call centre could charge.
In other words, the outsourcer will
trade off between execution and price.
Rao’s business broke even in just
eight months. But the waters are getting
choppy for him too. His margins are
attracting several other start-ups.
US giants like NCI Information systems
Inc, Outsourcing Solutions Inc, National
Collection Office, Record Management
Hawaii and Risk Management Alternatives
International could also head this way
as more Indian companies start snagging
their customers with lower costs.
Rao’s Epicenter is not a stray
case. NIIT SmartServe, the business
process outsourcing (BPO) offshoot of
the beleaguered training firm, will
also learn from its customer. “We
just told our client that we did not
have domain expertise. But after conducting
due diligence on us, they decided to
teach us the process,” says CEO
Venkatesh Iyer. The former head of NIIT
Ventures, Iyer, after sifting through
several business places convinced the
NIIT brass to get into BPO.
He has signed on a deal with Mysis,
a UK-based insurance processing company,
to outsource all of one process to India.
The agents working on the process here
will have to be certified as insurance
agents in the UK; that should take nine
months. That also means the customer
will be ‘stickier’ than
a vanilla telemarketing customer.
Basically, NIIT SmartServe will check
if each policy sold by an independent
financial advisor (insurance agents
and others) in the UK complies with
the requirements of the quasi-government
insurance regulatory authority them.Mysis
is going to make sure that a process
controller from its end will be stationed
here and monitoring on a real-time basis.
The policies will come to India as digital
images.
As regulations increase after the corporate
scams abroad, expect more of such business
here.
However, as risk increases for the client,
they may extract a price is the contract.“Contracts
like these, where the customer is outsourcing
an entire critical process, also increase
risk and they may also want corporate
guarantees, indemnities, or liabilities
on revenues,” explains Iyer. He
also cautions that there are long legal
issues involved. “For instance,
we had to make sure that we are not
liable to lawsuits from the end customer
who buys policies,” he points
out.
Avinash Vashistha of neoIT points out
that customers may want even more. “Customers
now know that companies here do not
have exepertise in BPO and they will
have to come here and teach people both
domains and processes. In some cases,
they are going to want to setup joint
ventures or take equity stakes. This
allows them to have control over their
intellectual property.” These
are precedents.GE has a stake in Patni
while Satyam had to set up a joint venture
with TRW in return for a $200-million
outsourcing contract over the years.
Even in the BPO industry, Household,
one of the largest customers of Intelenet,
the TCS and HDFC joint venture, has
taken a 10% stake. Spectramind, too,
had given some equity stake to American
Express, though that has now been bought
out of by Wipro.
There are other ways to acquire domain
expertise as well. Cognizant has hired
Raju Bhatnagar, till recently the CEO
of e-Funds, an offshoot of the financial
services company Deluxe and a large
BPO player in India. They have them
identified niches like loan applications
processing and mortgages. Smaller banks
in the US sell mortgages and, in turn,
securitise these loans to deep-pockets
like Goldman Sachs that have no capacity
to manage or process these individual
transactions. So they, in turn, outsource
it to companies like Ocwen and ACS.
Cognizant is now building templates
in loan processing and also another
four to five processes in finance. Then
some in healthcare like adjudication
of medical claims. It is yet to take
these to customers. Two years after
relationships with these clients are
established, it will see if processes
that have not currently been outsourced
are ‘offshorable’.
New opportunities are also likely to
emerge as change occurs in the economy.
In other words, completely new processes
could emerge. NIIT’s Iyer points
out that a big opportunity is emerging
where US broking houses have to move
from a T+3 settlement – here deals
are matched and settled in three days.
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