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'Innovation will displace people'

CA Sudhir Halakhandi (PRACTICING CHARTERED ACCOUNTANT) (13401 Points)

17 January 2009

https://economictimes.indiatimes.com/Interview/S_Nagarajan_Founder_Director_24x7_Customer/articleshow/3991437.cms

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shailesh agarwal (professional accountant) (7642 Points)
Replied 17 January 2009

'Innovation will displace people'

17 Jan 2009, 0248 hrs IST, N Shivapriya, ET Bureau

S Nagarajan, Founder

Director, 24x7 Customer

One of the few privately-owned BPOs that’s surviving the downturn, 24x7 Customer, is a name that frequently crops up in discussions of a stake sale. Private equity firm Sequoia has been an investor in the firm since 2003 and is said to be keen on exiting part of its holdings. In an interview with ET, founder director, S Nagarajan, says the firm is in no rush to go public.

What is the BPO business environment like now?

Large clients who are not sure are waiting and watching because they themselves don’t know if their jobs will be there. Volumes have slowed down. And especially for the next two quarters, volumes for some work such as outbound telemarketing could come down. But in other works like collections and customer services there is no issue. These are growing.

What kind of margins can you get for voice-based outsourcing work today?

Margins can vary from 15%-35%, depending on the service and geography. You don’t have to be a low-cost player because you are doing voice. Just like there are different kinds of non-voice work — starting with low-end data-entry to analytics at the high end — pricing varies depending on the complexity of the job.

At the low end you could just have a directory service where people call in to find out where a movie is playing, at the mid-end you could have technical support or telemarketing, which involves sales skills. At the high-end there could be actuarial work and claims processing.

Unlike other BPOs, you have stayed focused on customer service...?

Because our business is customer-facing, there is a lot of voice involved but we will not expand outside of customer life cycle management. That’s our focus area and we will offer all services in this spectrum — voice or non-voice. At one end it could be customer acquisition and the other customer analytics.

Many BPO firms, earlier focused only on exports, have now entered the domestic market. Is this something you are considering as well?

Our cost structure is not built for the domestic market. Right now, we do not have any plans to enter this market.

Companies that get a majority of their revenues from financial services clients have been hit particularly hard...

Our customer base is fairly well-diversified — just a little more than half our clients would be American. The rest would be from UK, Australia and Canada. And they are from BFSI (banking, financial service and insurance), communication-media,technology and e-commerce. In last two quarters, business from ‘telecom and utilities’ has overtaken BFSI.

At one point in time, the plan was to take 24x7 public...?

We’re not in a rush to do anything. And this is probably the worst time to take such a decision, if you look at the valuations at which some of listed BPO firms are trading. We are cash positive and profitable. We have a good line of credit. If we raise more capital, we’ll be diluting our stake and also become liable to more investors.

What about exit then?

The opportunity and potential to build a large global company doesn’t come everyday. Our motivation is to build a company that’ll last longer than our lifetime. So we are not in a hurry to exit. But as a businessman I can’t say I will not accept any offer. We have enough staying power to weather the storm and keep growing until the next opportunity to go public comes. Even going public is just to give an exit option to one or two of us or our investors.

Is there competition from newer players such as Aegis (from the Essar group) that are expanding aggressively?

There is enough room for all players — we’ve just scratched the surface. Just like India is now accepted for its IT knowledge, it is only a matter of time before everybody accepts it as the world’s back office. Obama can undo a lot of damage by getting the economy back on track.

Even though his election campaign had an anti-offshoring tilt, there is not much that he can do about offshoring. The world is very small. America can’t expect to sell their products to us and us not to sell services to them.

That’s what I told Tom Friedman when he interviewed me in 2004. I asked him to look around the room — the computer was Compaq, the phone Avavya, printer Cannon... the only thing Indian was me. Innovation is going to displace people. That’s the reality.