The corporate pain reliever
By Venkatachari Jagannath | 05 Jun 2006
Chennai: If you ask Susir Kumar, CEO, Intelenet Global Services Private Limited about his business, he will in all likelihood remark, "We are in the business of relieving pain."
Before one can assume Kumar's business to be pain balms or ayurvedic massage parlours, he elaborates, "We manage those non core operations, which turn out a pain for the company."
Simply put, the Rs115-crore equity Intelenet is a 50:50 venture between HDFC and Barclays Bank, UK, and a leading business process outsourcing (BPO) company in the country.. And Kumar is planning to make Intelenet as the pain reliever for the global corporate world with his multi-pronged strategy.
The idea is to grow the company's international as well as the domestic business pie through acquisitions (domestic and overseas), alliances (overseas) and consultancy services. "Our plan is to increase the total headcount to 20,000 by 2009 from the current 9,500," he adds.
The first strategy is to mine more business from one of the promoting companies, Barclays. As of now, Intelenet has deployed around 1,000 employees to service Barclays and earns around 8 per cent of its $65 million revenue. "By 2009 we hope to increase the Barclays revenue to 20 per cent of our turnover deploying around 6,000 employees."
The next strategy is to grow the domestic business, which Intelenet entered six months ago by acquiring a 51-per cent stake in Sparsh, the BPO business of Spanco Telesystems and Solutions Limited.
The domestic business is now turning favourable as telecom costs are coming down and the competition is forcing corporates to tone up their customer servicing. In addition, the domestic business helps an existing BPO to utilise its assets more efficiently.
"The international business is handled mostly in the night shift and the domestic business during the day. This mix would reduce our operational costs. Further our revenue would be a mix of Indian rupees and foreign currency, which would protect the company from forex volatility," explains Kumar. The other advantage is for the employees who could be rotated on day / night shifts instead of continuous night shift.
For Intelenet, the options of growing the domestic business are two — setting up a green field project and second, acquisitions. According to Kumar, the company is in the process of making an acquisition. "The negotiations are on and an announcement will soon be made." He adds, "We would go for acquisitions till our headcount touches 10,000 and later grow organically to reach the employee figure of 20,000 by 2009."
Revenue from domestic operations at the moment is negligible. However, this is expected to grow rapidly in the coming years. The company expects to earn $25 million by 2007 out of the target turnover of $100 million. According to Kumar the revenue per employee in the case of domestic business will be around Rs25,000.
The third strategy is to increase its international business. After the initial flood of business, Indian BPOs experienced a slowdown. However, the times are improving as the second wave of outsourcers from the UK and the US hitting Indian shores.
Outsourcers who hit Indian shores in the first wave of were "mature" outsourcers. After seeing the results other corporates in the US and the UK are favourably inclined towards Indian BPOs. Several of them have plans to set up shop in Europe, China, India and South Africa. "Many of them wish to see our facility. This offers us an opportunity to showcase our service offerings, both international and domestic," says Kumar.
The company would not only serve its international customers from India, but also go overseas by acquiring units in the US and the UK and striking alliances in other places. With Barclays taking over a bank in South Africa, Intelenet is in the process of acquiring a BPO there to serve the bank''s clients. "We are looking for BPO units with a turnover of $20 million. Our kitty for acquisitions is around $50 million." Intelenet plans to offer services globally with multi-lingual capability both in the offshore and domestic segment.
The fourth strategy is to go up the value chain by becoming a solution provider instead being a service provider. Big international companies now want not only their operational costs to go down by hiring a BPO but also demand the latter to provide an integrated solution onshore and offshore. They want to be relieved of the pain of shopping for the solution first and then the service provider. "Given this trend, a BPO which restricts itself to being a service provider stands to lose big business to companies like Accenture and IBM," says Kumar.
Intelenet also plans to strengthen its analytical teams to offer consultancy services as some of the BPO orders need consulting services.
The final strategy is to strike alliances with software companies and other BPOs. Explaining the rationale he says, "An industry trend is BPO projects now being a part of software projects. There are software companies which are not interested in running BPO operations." And Intelenet would like to partner with such companies so that the software part of the project would be taken care of by the IT company and the BPO business be run by the Indian company. Intelenet is in the process of signing two such alliances with overseas software companies.
Meanwhile, it is expanding its Indian operations; it has acquired a 50,000sq-ft facility for Rs25 crore in Chennai to house 750 employees and is looking out for a similar sized facility in Chennai.
On staff attrition rates, Kumar says, "The attrition rate in the US projects is around 50 per cent and in the case of the UK-based clients is 30 per cent. The average term of employment per person is around two years."
