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Sourcing Superstars: Alok Aggarwal & Marc Vollenweider, Evalueserve
SSON: Tell us how Evalueserve started: How did you meet and how did you start doing business together?
Alok Aggarwal: I came mainly to the U.S. in 1980, has my PhD in computer science in Hopkins in 1984 Joined IBM Research Division in 1984 and was there for 16 years, I started IBM Research Lab in Delhi, and was appointed Director in 1997. This was the time when the dot-coms took off, so one of the strategies was that we open a laboratory in India, as we lose researchers were dot-com start-ups in the USA. I was open so the charge to a laboratory in India and in 1998 I went with some family to Delhi, I started the lab in April 1998 and grew to about 35 doctoral students and 35 master degree programs.
Marc Vollenweider: I am 100% Swiss, graduated as an electrical engineer with the Swiss Federal Institute of Technology in Zurich. Then I have at McKinsey as a greenhorn, as a business analyst, I spent a year at McKinsey – that was 1990 – was then in 1991 at INSEAD in Paris for my MBA. Then I rejoined McKinsey and stayed in Switzerland and got elected partner in 1998. Then in 1999 I moved to India with McKinsey as a partner in the consulting practice, where I was responsible for the health care practice, and many other things. And then I also got the responsibility for the so-called McKinsey Knowledge Center, to the Time had led an initiative pioneered by Rajat Gupta, the then global head of McKinsey.
The goal was to come in substance to a research hub that the Consultant support would be all over the world with high-speed research. So you say had a question – how many companies were there with them and these criteria – you would Send an e-mail to India and some worked Busy Bee at her and sent the response back into a ZIP file and then in the morning we had again come into the office and you have the Answer for you. We went from a first group of 12 and ramped up to 120 MBAs this between the years 1999 and 2000. And that was a pure captive, only to catering McKinsey intern and then it was clear to me that this could be an interesting third-party business model, so therefore in March / April in 2000, I was thinking about setting up started my own company.
AA: We met, interestingly, because of a birthday party for the children at the American Embassy went to Delhi School. That was, I think, early May 2000. When we got to talking we realized that he thought about an aspect of research and analytics, and I was on another aspect to think so, why do not we create a society that all types of research and analysis services, and other high-end offering services related to Expertise, knowledge? So we both met several times during this period – July / August 2000 – and quit McKinsey and IBM began in November 2000 and Evalueserve (which stands for "Evaluation Services") in December 2000.
SSON: When you set up, it was McKinsey's money?
MV: No, it was a clean cut. Alok and I put the money in our own money, and there is no institutional money from McKinsey. We are in private hands, and we consider the large Majority, and then we have a Swiss private equity investor, you could call him a SUPER ANGEL … So in the early years 2001, 2002, 2003, we needed some money to To grow as we become profitable in 2002, which is actually pretty good, but if you are still growing at a rate of 100% real depreciation of the largest item no office space or computers: it is demand management. Because you pre-finance their income primarily because the cost of the people in your balance sheet, they are there, but you get not the revenue. You have to balance, and then grow at 100% and you need some money, though you're profitable. So we got some money in very small pieces, and we had five mini-rounds – maybe even micro-rounds, you know, here $ 100,000, is $ 100,000 – over the next five years. We have not given money taken since 2005.
AA: Seven and a half years later, we have approximately 2,500 employees worldwide. Of these 2,500, about 60 of us are client Engagement Manager, so that we do, Business Development, Sales, we do, and with the right hand we keep our customers and with the left hand we keep our professionals in our back-end research centers. Because we are very involved in client delivery and client management, all 60 works from home offices, we have about 28 in the U.S., two in Toronto in Canada, about 25 in Europe, which 11 or 12 are in the UK, the United Kingdom is our second largest territory of a revenue perspective. Then we have in Shanghai, one in Hong Kong and in Singapore, one in Australia and one in India. So this is about our team of around 60 people.
Our back-end offices, the real brick and mortar offices in China, Romania, India and Chile – as "BRIC" We call them "CRIC and mortar" … India was the first one we opened in December 2000, We currently have approximately 2130 people in India. China was second with 160; We provide services in Japanese, Chinese and Korean languages and related services Knowledge then in the three languages. In Chile, we are based in Valparaiso, about 45 minutes from Santiago, we offer services in Spanish and Portuguese from there, and we meet the Latin American market and the Hispanic market in the U.S., which has grown very fast – it is about 10% of the GDP of the USA right now and is expected to double within the next 20. This helps us not only in these languages and covering different countries and cultures and customs, and that helps us also in the provision of 24 / 6 average for instead of the people working at night in India or China, we are able to transfer – smooth – with a view to Chile.
Romania is particularly interesting for us because the place where we are, Cluj, is a university town with very few people who speak good German – so we are able to to cover Germany, Austria and Switzerland quite well. We can also cover Eastern Europe, especially Russia, Ukraine, Azerbaijan and so on, Romania, Poland, Hungary, which is quite fast-growing drain the oil from Russia and some other eastern states, and therefore to be expected to do very well. So with that, we basically the creation of knowledge services, most of them research and analysis, some of them are middle-office work, but all are knowledge services for banks, Pharmaceutical companies, health care, technology, media, telecommunications, and so on.
SSON: What do you think were the biggest challenges have you encounter during the life of the business, and how you have managed to get past them on?
MV: I think it's pretty simple. These 2500 people must be employed. Marketing and Sales, this is the biggest challenge, always, at first – we call it the "double-gap" – At first when we walked in, we meet people went and said "hello this is Evalueserve," and she said, "Oh, you want me on my strategic research ? Outsource "And this abyss was number one, because no one had done this before: It was a totally new concept, no one had any idea that this could happen. So that was a huge hurdle.
AA: Obviously there are not still exist this kind of offshore outsourcing kind of work until 2000, 2001 time frame. The only company that was doing was McKinsey Knowledge Centre, with around 120 people did when Marc left, American Express, a certain amount of credit card data analytics, probably another 100 people, and General Electric from his captivity was done, perhaps other people do, 200-250 Map Analytics. Sun total number of people at the end of 2000, when we started, only about 500-1000. This industry has grown to about 75,000 in India alone, if you seek the entire knowledge services and Knowledge Process Outsourcing industry, it has a fairly strong growth in a relatively short period of time. And of course, comes with its own challenges, because people do not like robots, the ability to the knowledge of the industry and services requires the knowledge process outsourcing industry is requiring a fairly detailed and deep knowledge people need to get a feel to get it – you learn through experience and partly to make the projects.
MV: And was the second item then they said, "and you do this is from India? "And then we have to say," Yeah, it works really well from India. "This is really the double abyss. And in order to overcome this, to start a new concept that was really the challenge. And then the next challenge was to build a scalable sales force. You know, now we have about 50 sales staff and they are obviously very expensive people. So we have a model that actually had to find scalable and economically feasible. And I think, was that the second, really, really big challenge.
SSON: How do you go in the recruitment of these specific skills?
MV: Now we know what works. So these people would with, for example, an ex-Reuters background, or an ex-research background, where she was to sell the research – Seller in the services-for-research domain, I would call it. These are the kind of people that work very well. Then there is perhaps something more remote or people who have worked in their respective industries, such as in marketing departments or so, and have an angle in the sale – who are moved into sales should. So one can say are the common elements that a sales angle, there is the understanding of how professional services are working angle, and then there is an industry Angle, and if these three elements work well together, we then usually aged successful sales people like: usually between 30-40 years and about in this space of possibilities.
SSON: What distinguishes Evalueserve from the competition?
AA: Four or five things. One of them is our geographic reach at this time. We are more of a global organization, as I mentioned earlier, we can service almost seamless 24 / 6, without employees the night shift or the night shift have. The second is that with the fact that we are to bring 2,500 people, we are in a position in areas that do not cover the other people, perhaps, we have a pretty strong vertical for instance in oil, gas and utility companies now that I say most of our competitors do not.
The third is that – I would say it serendipity as I have, as Marc and I together, it is not that we had some big brand vision says that it has happened simply by Chance more than anything else – we are about 2 ½ years ahead of the competition. We were the first to start this whole KPO services business, define it and run it as a Third in a very well-defined way, and fortunately we still have, I think, have a two-to three-year advantage over most of our competitors. I mean patent drafting, in intellectual property, we often see some of the comments from our competitors and we say, "Yes, we have the same kind of comments made in the years 2005-2006 ". So we know at what level of evolution and what are the development of these people in.
MV: So I think it is a portfolio of services, the case is very unique in our, we are purely research and analytics-based, so we do not every business process outsourcing or IT outsourcing, do nothing of the – of our 2,500 employees only customized research and analytics. This is how we are against, say, differentiate an Infosys BPO, Genpact, or one that also try to have an activity in the KPO space. But we are pure-play. We do just that – focus too obvious with the necessary. There are some niche players, and we are wider than those in niche sectors.
And I think that our service portfolio, investment research, what type of the area of investment banks, hedge funds, this type of Area, business research, more like, do what the markets is what the players do what companies do these kind of issues, market research, the phone is more interviews, then data analysis, the more statistical software packages that you use to analyze large amounts of data is, and finally there's technology analysis to patent Analytics. This is a unique offer that highly synergistic in our case, that is, very few other people.
SSON: What counts as "KPO"? And there are no limits to what can be outsourced?
AA: It is a very interesting thing. When we came with this word, I think we had a very specific meaning. We very rarely use the word KPO in discussions with our customers because it has become for me a word like "love": everyone loves "each other, but what does the word" love "mean?
What happened was when we started, there was a lot of call centers and BPO companies who were with low-end finance and accounting, low-end HR outsourcing, credit card processing work and so on. In 2001, 2002 – in 2003 – a part of the media and Journalists would ask us what we did, we would say that we know provide research analytics, analytics services from India, and they would always say "oh, so you have another BPO – is that a fair way of saying?" And we would say: "That's true, but you know, knowledge-based services are fundamentally different from just what a BPO.
Marc and Ashish [Gupta, Evalueserve's CCO and India Country Head] discussed this in 2003, and they basically said, "We are actually a KPO" because knowledge is part of what we do and the more knowledge we are able to deliver, the more can We charge – considering that BPO is the fees are very well defined to accept, because the processes are clearly defined: the operator or help-desk calls that can they are not really free, much more. But here, if you go to the value chain – if the person has many years experience in the telecommunications ten o'clock and is capable of deeper knowledge – even in India we can offer $ 75 – $ 80 fee per hour. In the U.S., the corresponding rates of more than $ 400 per hour.
So in August or September 2003 one of the journalists from the Economic Times asked the usual question Ashish, Ashish, and said: "You know, actually we are not a KPO, a BPO, "and he told me later. The journalist did not raise it completely, he wrote an article about it and he said," Evalueserve talks Its a KPO "and I actually – as a scientist at heart – from research and define what was, we finally KPO and how large the size the market would – about $ 17billion worldwide – outsourcing to low-wage countries like India and the Philippines and China. I gave a lecture at Bell Communications in New Jersey in December 2003 and we wrote a paper in April 2004, and fortunately within a year the media in India took up the KPO and word spread like fire.
So the Difference between KPO and BPO is basically the following: BPO is in the process already well defined, how, how do you go to a specific call to answer, what the level of Escalation that it be and so on. In KPO on the other hand, there is no such procedure. So you go to a patent attorney, for example, and ask the patent attorney, "We want to take a part your work and do it from India and he will say: "Are you kidding? There is no way you can do it. The person helping me is from next door sit and we discuss the depreciation with each other at least three or four times a day, that is an art, not science, and there is no process involved. "
So the first thing, in a typical KPO project actually is the person to convince and take part in this art, and a process of making it can to India, China, Chile to be moved, etc. But there will never be completely removed – There is indeed a part of it, the art is that patent, the "Rock Star" or the equity research Analyst, who is the "Rock Star" has in their heads – that 15% -20% complete still in their minds, and it has come again, and for the project, that 15% -20% may remain to be completed by the person who is really competent and in this country or the particular domain to do it. So X versus minus one hundred x as we call it, if x percent in the U.S. or the UK is done, and 100 minus x is in the Philippines or India or where ever done what distinguishes a BPO from a KPO.
Well, firstly there is no process that can be just thrown back over her; Second, the knowledge is an important aspect, the higher you get the knowledge chain, the more indeed is responsible for the project, and thirdly, some polish – advice, opinion, etc – which could be anywhere between 5% I would to say in some cases 40%, should be made through the front-end person.
SSON: Where is most of your research going? If the direction of change over time – gives it more, for example, technological patent-based Research Now?
MV: It is proportional growing. If you look at the breakdown, we would do about 40 percent of our work in investment research, analysis for equity, for example, for investment banks, or for funds, and roughly 25 percent for research into companies that more like "What does this market, here is a customized newsletter, here is a company profile," that type of work, then we would do to us over 12 percent of the market research, and about the same size in intellectual property, and the rest is data analysis and knowledge technology. With regard to the client division, we have again about 40 percent in the financial industry, I would say about 20 percent, professional services – consulting firms, Research institutions, law firms – and the rest is corporate.
SSON: And is that a change at the moment?
MV: Not really, no – it's actually pretty consistent. It grows more or less in line. It's actually pretty surprised it has not really changed. We thought that would suffer the investment of the research bit because of all these sub-prime crisis and so on, but that's not the case, yes, it increases the pressure on these Companies to outsource.
SSON: So what will the next major KPO sector to be taken?
AA: I think Pharma is very vulnerable to him. The problem is that the pharmaceutical sector is going through, that the cost to manufacture the drug and getting it approved by the FDA in the U.S., has increased, for example, in an enormous pace. Last year, only 26 were approved as drugs, and $ 39,000,000,000 was spent in research, development and approval. At the same time, the population in most developed countries, the aging has, so it has more and more need for the medication, but it is not this kind of money that can be spent. Whether it is socialized, the U.S. moves into a medical system increasingly irrelevant as Days Go By: it's basically already to a large Part of Medicare and Medicaid programs, socialized insurance.
So these pharmaceutical drug companies must do two things. One, they must find other markets for sale, including India, China and other emerging economies are on one side – but again there are not the people on this type of purchasing power, so they must their medication lower price, and the second is that they find out somehow, ways to reduce the cost of their drugs. First to invent and then always approved – so very, very ripe area where KPO would be advantageous for them.
SSON: How do you think drivers behind outsourcing and change the What are the biggest threats?
MV: OK. Some people say the rising costs: increasing salaries and what have You. But in our case, I have a relatively simple answer. I say in our case we have a very simple strategy: We are the highest in the five lowest cost be qualified sites in the world. Which means that by definition I can mathematically prove that I'll always have a cost advantage. Because, really, you're always going are in the lowest cost highest skill locations. This is to be OK, I guess.
But the biggest challenges will be to value add for customers. This is not a threat, it is more of a challenge, because customers want more value-addition, more thought, more – especially in our case – insight. You want productivity, they want the global reach, they want 24×5 … So, if you have, as the service level has in recent years developed look amazing been. Today I can do things that are here are quite unthinkable even two years ago. So the speed with which things take, actually developed. It is not only linear, it is even still increasing.
The second point is, I think the war for talent. The requirements that people rely on outsourcing means players, they need the to develop the capacity to train more, and people, and that means that you are very, very solid medical training processes – we have for example an initiative called the Care for people who are different career track models, work-life balance, and many things. Getting this done is of crucial importance. The third thing is leadership. Especially in the new economies, you find that there is very little experienced management is available, you have to essentially coach people very well in leadership positions, otherwise they would never in. We some people who are aged over 30 years and run about 120 persons. Well, when I was that age I run about 15 minutes. So I think the Preparation of these leadership from within is an important element.
Other than that I do not think there are big challenges, because when we usually inclined to say, the players in this space was supposed to cooperate in the sense of the growing market – because most of the market is not even directed, the work that still in there doing business – or not done is! I mean the people that work with us best, we actually use for growth, they will not use us, costs lower. Very interesting, you know? They come with new ideas and use them to us, to do their growth. And these are the people who actually use very well. Perhaps the War for talent thing is probably the biggest threat, because if the company is not doing so well, are losing them. That's the thing.
SSON: Finally India dominates the offshore outsourcing market and has done for some time. Do you think that unassailable dominance in the short-to medium term, and if not, why not?
AA: India is rapidly growing so, both in terms of outsourcing, but just as important in the area of domestic industry, which has risen very quickly. Both Exports outsourcing industry and the domestic industry have the same exposure, where the same or similar kinds of people, and therefore the wages are higher go and abrasion is quite large. I think even larger than the wage increases the risk of attrition is about what we call "Job-hopping '.
I think one of the biggest challenges – and unfortunately, because these people are young, it is not really realize at this point in time – that India is the face of this cultural shift that seems to happen among the young, the young people who are studying, just change the job at the drop of a hat – and I would still continue, perhaps even without the drop of a hat. They say "ok this is boring, let's move or" or "I am getting a 15% increase by the next company, let me my annual increase of Evalueserve, let me float my resume around to get another 15% increase by another Companies. "
What they do not realize that every time they move from one job to another, the last three months are do not really any Work for Evalueserve. And the first three months they are learning the culture and the way to work on another company to do. And so six months of her life is wasted, where they do not really learned a lot, and since this all about knowledge and learning, they are screwed. They do this job-hopping four or five times and by the time it about seven years in play, they have wasted two years in the entire process. They have basically thrown completely out of the market.
For if we look later on their resume, even if we say to her resume to a client, we wanted to send that person were to be used, the probability that the customer will refuse will say: "You can not with this person for my work, he seems to be changing jobs all the time there, I do not know what kind of information which he has, what kind of person he is, and that as a whole – and again, that not only particularly KPO, that's true about the Indian export industry in general, the export industry, IT Outsourcing, BPO and KPO is exports – probably the biggest challenge to the Indian industrial services exported.
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