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Wednesday, February 28, 2007

BPO recipe: Quality and a dash of M&A

Every human initiative has begun slowly, built momentum and then moved on, on its own steam. The Green Revolution in the 1980s in India, the not-so peaceful revolutions in Russia and France. Innovative inventions too have caught the public's imagination - for instance Henry Ford's Model T car got people moving - pun unintended - like no other innovation did.

One man's success has been a great contributing factor to mankind as whole. Similarly, the software industry has seen tremendous growth and each contract or deal it wins, means that the industry will go from strength to strength.

Chief financial officer, MphasiS BFL, Ravi Ramu told CNBC-TV18, "That's quite right. Actually if you look at a services based industry like ours, it's made up of individuals, whether the organisation is 9,000 or 90,000 strong. But one tends to dovetail these individual performances into a solid team effort. That's where the organisation or the brand really gets the glamour into the organisation. That really is a cornerstone."

"Unless you glamourise it, the youngsters who are getting into the universities and schools will not want to get into (a) the BPO industry (b) or the IT industry. This is where the whole building block works. If I can liken it to an Olympic medallist, you know it's what China does and what Russia did so well when it was the USSR, was to pick out 4, 5-6 year olds and the aim was to make Olympians out of them."

The Chinese have perfected the assembly line theory, of putting kids with Olympic winning potential through the grind, so is Ramu advocating that approach? Double Trap Shooter and 2004 Olympic silver medallist, Rajyavardhan Singh Rathore says that even sending children to school is like an assembly line production!

He elaborated, "The pictures that you have seen on the internet of children crying is for gymnastics. Everywhere, around when you have to stretch those muscles, which need flexibility, it is painful. There is no training, which is not painful. I mean it's common knowledge. Denis Lillee said that 'if my muscles are not paining, I haven't done enough'. I mean pain is a part of progress, let's face it."

Ramu reiterated, "I must agree with Raj here because I think one needs an objective. Even as an organisation, you need one to start. Start with an end goal or a medium term goal. It shouldn't be a goal where you say, let's excel. It needs to be let's get the gold medal."

He explained, "For the IT industry, initially, it was difficult to get a phone line in this country. People used to wait six months to get one connection going. Then we had STPIs, which had all these towers, beaming messages and signals across. We did it with individual effort, with entrepreneurship, with drive, just to show that it could be done."

"The problem we have in India and we can see that in other industries is that they don't seem to take the lead. Take the example of Prakash Padukone, I saw him win in London in March 1980, he is a good friend of mind and I remember telling him that there are going to be several badminton champions. Today, we just have one Gopichand and that also was a one- off. So it hasn't become an institutionalised thing."

So, despite setbacks, how has the software industry consolidated? Ramu said, "We have done it in a very simplistic manner and that is by taking India and Indian things to compare and compete constantly with the outside world. Let's actually look at the genesis, we started selling to the best in the world. We starting doing things lower down the value chain and then moved up over 20-25 and 30 years. The BPO industry has had the benefit of competing with the best and having the self-confidence to take on and beat the best, is really what it is all about, it's not the one-offs."

"Also, one has to keep quality in mind apart from cost efficiency. Cost efficiency is not going to sustain us for too long. We have to think global and act local. There is no point in not doing like the Romans in Rome - we've got to go out, globalise but actually play the games that the locals play in business terms."

Ramu adds, "The other way would be to actually have a cultural mix. Our vice chairman is Dutch and he lives in New York. So we started off as, what one of our directors, who is professor of international business, called an 'instant global company'. So we didn't start as an Indian company, in terms of mindset, we started as a global company and built on those blocks."

"For example, two years ago, we went to China and bought a company. It took us a year and a half to really make it profitable. For it not to lose cash, to understand their cultures, we sent a person who was born in Taiwan to lead the team. We didn't send the head of operations from Bombay or Bangalore because we wanted to make them feel part of a team and yet not lose that local element."

Ramu suggests the M&A route is another way for an organisation to become a global player but very few have been successful in this regard. He says, "I think there are two things, first, there are these regulations and then the money factor - you've got to have the currency to do so. Then the other element is the mindset. You know there is this fact that 85 per cent of all M&As around the world failed. So they don't want to be in that 85 per cent bracket. I think we need to get a bit braver and more adventurous, in terms of really globalising."

The Indian BPO industry has also got to fight a perception problem. Ramu acknowledged, "Well that perception is being fought, in the sense that if these MNC companies don't do this, then they are going to lose out to the competition who does. So, if there is a UK company outsourcing to India and their competitor in the US doesn't do so, it's going to be a matter of life or death for the US company."

Written for www.moneycontrol.com

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