Q: Tell us how Evalueserve started: How did you and how did you do together for business?
Alok Aggarwal: I basically came to the United States in 1980 and got my Ph.D. in computer science at Hopkins in 1984, joined IBM Research Division in 1984 and then was there for 16 years, and I began IBM Research Lab in Delhi and was appointed Director 1997th This was the time when the dotcoms were taking off, it was one of the strategies that we should open a laboratory in India, because we had lostResearchers dot-com start-ups in the U.S.. So I got the charge to a laboratory in India to open up and in 1998, I moved the family to Delhi, I started in the laboratory and in April 1998, it rose to about 35 doctors and 35 masters.
Marc Vollenweider: I am 100% Swiss, graduated as an electrical engineer with the Swiss Federal Institute of Technology in Zurich. Then I joined McKinsey, a greenhorn, as a business analyst, I spent a year at McKinsey - that was 1990 - then in 1991 went to INSEAD inParis for my MBA. Then I rejoined McKinsey and remained in Switzerland and was appointed 1998 to the partners. 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 was also responsible for the so-called McKinsey knowledge center, which was then led an initiative pioneered by Rajat Gupta, the then head of the global consultancy McKinsey.
The goal was primarily towith a research hub that consultants would support across the world with high-speed research can occur. To say a question - how many companies there with them, and these criteria - would send an email to India and some busy bee working on it and sent the answer in a ZIP file, and then had in the morning had come into back office and you have the answer for you. We are up from an initial group of 12 and that up to 120 MBA graduates in the years 1999 and2000th And that was a pure captives, catering only internally to McKinsey. And then I realized that this is an interesting third-party business model, so that is could be why in March / April 2000 I started thinking about my own business.
AA: We met interesting because of a birthday party for the children who wanted the American Embassy School in Delhi. That was, I think, early May 2000. If we are to talk we realized that he was thinking about an aspect ofResearch and Analysis, and I thought of another aspect that is so, why not us an undertaking that all types of research and analytical services, and other high-end service offering, with the knowledge related to know-how? So we made two several times during this period - July / August 2000 - IBM and McKinsey and ended in November 2000 and began Evalueserve (which stands for "Evaluation Services") stands in December 2000.
Q: When you set up one of you it was a McKinsey moneyinvolved?
MW: No, there was a clean cut. Alok and I have the money to our own money, and there is no institutional relationship of McKinsey. We are in private hands, and we believe the great majority, and then we have a Swiss private equity investor, you can call him a SUPER ANGEL ... So in the early years 2001, 2002, 2003, we had to grow a little money, because we became profitable in 2002, which actually pretty good, but if you then at a rate of 100% to grow the largestArticle depreciation is not really office space or computers: it's claims. Since you will be pre-financed, essentially, your earnings because the cost for the people in your balance sheet, they are there, but you do not have the revenue. You have to balance, and then grown at 100% and you need money, although they are profitable. So we took some money into very small pieces, and we had five mini-rounds - maybe even micro-rounds, you know, here $ 100,000 $ 100,000 have: --Over the next five years. We have not taken money since 2005.
AA: Seven and a half years later, we have approximately 2,500 employees worldwide. Of these 2500, about 60 of our customers are engagement manager, so that our business development, we do sales, and with the right hand we keep our customers and with his left hand, we keep our professionals in our back-end research. Because we are keenly interested in customer delivery and client management, all 60 works by participating in home offices, wehave around 28 in the U.S., two in Toronto, Canada, about 25 in Europe, of which 11 to 12 years in the United Kingdom, the United Kingdom, our second largest area is a revenue perspective. Then we have one in Shanghai, one in Hong Kong, in Singapore, one in Australia and one in India. For example, that our team of about 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 around 2130 people in India. China was second with 160, we offer services in Japanese, Chinese and Korean languages and knowledge-building services then in these three languages. In Chile we are in Valparaiso, about 45 minutes from Santiago, we offer services in Spanish and Portuguese, from there, and we cover the Latin American market and the Hispanic market in the U.S., sincegrowing quite fast - it is about 10% of GDP in the U.S. right now and is expected to double within the next 20 years. This helps us not only in these languages and for different countries and cultures and customs, it also helps us in providing 24 / 6 average, than a man who, during the night-time in India or China, we are able are transferred to - in a smooth manner - Work to Chile.
Romania is particularly interesting for us because the place where we are, Cluj is a university town withnot a few people who speak German very well - so we can cover to Germany, Austria and Switzerland, very good. Also we can cover Eastern Europe, particularly Russia, Ukraine, Azerbaijan and so on, in Romania, Poland, Hungary, the area is still pretty fast with the oil outflow from Russia and some other eastern states, and therefore expected to be not very well. So with that we are basically providing knowledge and services, most of them research and analysis, some of themare middle-office work, but all are knowledge services for banks, pharmaceutical companies, health care, technology, media, telecommunications, and so on.
Q: What do you think the biggest challenges that has come over you during the term of the transaction have, and how you have managed to have passed them?
MV: I think it's pretty simple. These 2,500 people must be employed. Marketing and Sales, that the biggest challenge, always, at first - we call it the "double-gap" - at firstthan we are in the people we went in and said "hi this Evalueserve is to do justice, and she said:" Oh, so you want me to outsource my strategic research? " And the gap was number one, because no one had done before: it was a totally new concept, nobody had any idea that this could happen. So that was a big hurdle.
AA: Of course, there did not exist this kind of offshore outsourcing kind of work, time frame until the 2000, 2001. The only company that did it was McKinsey KnowledgeCenter, left more than 120 people at Marc, American Express was doing a certain amount of credit analysis, probably 100 people, and General Electric, from his imprisonment was there maybe 200-250 people, the map analysis. Thus the total number of people at the end of 2000, when we started was only about 500-1000. This industry has grown over 75,000 in India alone, if you are looking for the entire knowledge services and knowledge process outsourcing industry, it has been a fairlystrong growth in a relatively short period of time. And of course, comes with its own challenges, because people do not like robots, the ability, knowledge services industry demands and the knowledge process outsourcing requires a relatively deep and detailed knowledge people need to get a sense of -- They learn by experience and partly because the projects.
MV: And then the second item she said, "and do it from India?" and then we must say: "Yes,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 the challenge. And then the next challenge was to build a scalable sales force. You know, now We have about 50 vendors, and these are obviously very expensive people. So we need a model to find the truly scalable and was economically feasible. And I think the second one, really, really big challenge.
Q: How do you go in the recruitment of thosespecial skills?
MV: Now we know what works. How would these people, for example, an ex-Reuters background or an ex-research background, where they sell themselves for research - would be sellers in the services-for-research, I call it. So those are the kind of people that work very well. Then there is perhaps a little remote, or people who have worked in their respective industries, say in marketing departments or so, and have an angle in the sale - who wants to move inTurnover. So one can say that the common elements that sales angle, there is an understanding of labor, professional services, such as angle, and then there is an industrial corner, and when these three elements work well together, which we then generally successful salesperson as: usually aged between 30-40 years, and roughly in that area of performance.
Q: What makes Evalueserve from the competition?
AA: Four or five things. One of them is our geographic reach in thisTime. We are a more global organization, as I mentioned earlier, we can provide services almost seamlessly 24 / 6, without the employees have the night shift or the night shift. The second is that with the fact that we have 2500 people, we are able to get into areas that other people might not cover, so we have a pretty strong vertical for example, in oil, gas and utility companies now I would say that most of our competitors do not have.
The third is that- I would say that serendipity as I already explained how Marc and I are not together, that we had vision of a great brand, it has happened only by chance more than anything else - we are about 2 ½ years ahead of the competition . We were the first to base this whole KPO services company to define it and restart it as a third party in a very well-defined way, and fortunately we still have, I think I have a two-to three-year benefit compared with most of our competitors. I think the patent drafting,intellectual property rights, we often see some of the comments from our competitors and we say, "Yes, we make the same kind of comments in the years 2005-2006". So we know at what level of evolution, and in what condition are the evolution of these people in.
MW: I think it is a portfolio of services that are very unique in our case, we are purely based on research and analytics, so we do not do business process outsourcing, IT outsourcing, or to do nothing of the - our 2500 people onlycustomized research and analytics. This is how we differ from, say, an Infosys BPO or Genpact have also attempted to have an activity in the KPO space. But we are pure-play. We are doing just that - of course with the required concentration. There are some niche players, and we are broader than those niche sectors.
And I think that our portfolio of services is financial analysis, what kind of space from investment banks, hedge funds, the type of area is, research into companies that moreMarkets, which do what players do, what companies do these kinds of issues, market research, which is more phone interviews, then the statistical data analysis software packages you use to analyze large amounts of data, and finally there Technical analysis, it is about patent analysis. This is a unique offering that much in our case, that have very few other people act synergistically.
Q: What constitutes a "qualified KPO"? And there are no limits to what canto externalise?
AA: It is a very interesting thing. As we are using this word, I think we had a special significance. We are very rarely the word KPO in discussions with our customers, because for me it is a word like "love" everyone loves "all the others, 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 doing low-end finance and accounting, low-end HR outsourcing, credit card processing work andso on. In 2001, 2002 - in 2003 - some from the media and journalists to ask ourselves what we have, we would say that we are providing research analysis, knowledge, analytical services from India, and she would always say, "Oh, BPO're so different - is that a fair way of saying? "And we would say" that's true, but you know, knowledge services differ fundamentally from exactly what a BPO.
Marc and Ashish [Gupta, Evalueserve CCO and discussed India Country director] about it in 2003,and they basically said: "We really are a KPO" because knowledge is part of what we do and the more we are able to impart knowledge, the more we can calculate - considering that BPO fees are fairly well defined, because the processes and are defined by the operators or help desk, the calls are answered, they can not really charge much more. But here, when you wake up the value chain - if the person can ten years of experience in the telecommunications and the ability to convey a deeper knowledge - also from India, weFee $ 75 - $ 80 per hour. In the U.S., the corresponding rates are like $ 400 per hour.
Sun said in August or September 2003 one of the journalists from the Economic Times, the usual question, Ashish, Ashish, and said, "Do you know that we have a KPO, not a BPO," and he told me later. The journalist did not lift it completely, he wrote an article about him and he said, "Evalueserve talks about being a KPO" and I actually - a researcher at heart started doing research - and weFinally, define what KPO was and how great would be the size of the market - about $ 17billion worldwide - outsourcing to low-wage countries like India and the Philippines and China. I gave a talk 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 came to the word of KPO and it spread like fire.
The difference between KPO and BPO is basically the following: BPO, the process has alreadywell defined, such as how to go to a specific call to answer, what are the stages of escalation, it would, and so on. In KPO on the other hand, there is no such process. Therefore you have to go to a patent attorney, for example, and ask the patent attorney, "we want to take a piece of your work and it was not from India," and he will say: "Are you kidding?" There is no way that you do can. The person who helps me out is sitting next to each other and we discuss the attribution of at least 3 or 4 timesone days, which is an art, not science, and there is no process involved. "
The first thing a typical KPO project is actually the person to convince, and to take part in this art, and make a process so that it to India, China, Chile, etc. can be moved, but because it can never completely removed - yes, there's a part of it, the art, that is a patent, the "rock star" or the equity research analyst, who has "Rock Star", ishead - that 15% -20%, still in his head, and he has to come back and be completed for the project that 15% -20% of the person still needs to be completed and will be truly competent in this country or that do specific domain. Thus x versus one hundred minus x, as we call it, where x percent will be done in the U.S. or the UK, and 100 minus x is in the Philippines or India or where ever done, what distinguishes a BPO from a KPO.
Well, first, there is noProcess that can just be thrown on her back and, secondly, knowledge is an important aspect of it, the higher one moves up the knowledge of the chain more, in fact, you can charge for the project, and thirdly, the subtleties of care - advice , reports, etc. - which could be anywhere from 5% would be up to, I say, in some cases 40%, would have made of the front-end person.
Q: Where most of your research going? Is the direction that changes with time - there are several, for example,patent-based technology research now?
MV: It grows proportionally. If you look at the breakdown, we would do about 40 percent of our work in financial analysis, for stock analysis, for example, investment banks or funds, about 25 percent in the area of business research, which is rather "what to do in this market, here is a personal newsletter, here is a company profile, "this kind of work, then we would do about 12 percent of the market, and thethe same size as intellectual property, and the rest is data analysis and knowledge technology. In view of the client division, we have to say again about 40 percent in the financial industry, as I would, 20 percent are professional services - consulting company is to research, law firms - and the other companies.
Q: And that's changed now?
DS: Not really, no - it's actually fairly consistent. It grows more or less in line. It's actually quite surprised, it's not reallychanged. We thought that the investment would research a little bit because of all these sub-prime crisis and are suffering so forth, but that's not the case at all, in fact, the pressure increases awarded to these companies.
Q: So what is the next big hit KPO sector?
AA: I think pharma is very susceptible to them. The problem is that the pharmaceutical sector through is that the cost of producing the drug, and for that purpose by the FDA in the U.S., has been approved, for example, took placerising at an enormous pace. Last year, for example, only 26 approved drugs and $ 39 billion had been spent in research, development and approval. At the same time, the population in most developed countries, aging has been such that it became more and more that the drugs, but it's not so much money that can be used on them. Whether the U.S. moves into a socialized medical system is becoming increasingly irrelevant Days Go By: It's basically already socialized to a great extentwith Medicare and Medicaid insurance programs.
So, these pharmaceutical drug companies must do two things. One, they have to sell to other markets to which India, China and other emerging economies will find on the one hand - but also the people here do not have that kind of purchasing power, so they have to price their drugs lower and the second is that they have somehow figure out ways to reduce the cost of their medicines. First to invent, and then moreapproved - so very, very mature field, would be in the KPO to their advantage.
Q: How do you keep changing the driver behind outsourcing and what are the biggest threats?
MV: OK. Some people say that costs are rising: an increase in salaries and whatever. But in this case, I have a relatively simple answer. I say in our case, we have a very simple strategy: we are in the five lowest cost, highest-skilled locations in the world. This means that by definitionI can prove mathematically that I will always have a cost advantage. Because, right, you'll always travel at the lowest cost, highest skill are locations. So that's going to be OK, I guess.
But the biggest challenges will be to add value for customers. This is not a threat, it is more of a challenge, because customers want more value-addition, more thinking, more - especially in our case - insight. You want productivity, they want global reach, they want 24x5 ... So when we see howThe service level has in recent years, it developed was amazing. Today I can do things that are here completely inconceivable just two years ago. So the speed with which things have developed, is always, actually. It is not only linear, it is even increasing.
The second point is, I think the war for talent. The demands that people are relying on outsourcing players means that they have to train on the ability to more people and develop, and that means you haveto have very, very solid training processes - we have such an initiative called the care of people other career track models, work-life balance, and contains many things. First this is done is crucial. The third issue is leadership. Especially in the new economies, you find that it experienced very little guidance available, so you basically have very good coaches individuals in leadership positions that they otherwise never be in. We have some peopleThat are older than 30 years and carry over 120 people. Now, when I was that age, I carried around 15th So I think that leadership from the inside is creating an important element.
Other than that I do not think it significant challenges, because we tend to say in general than to the players in this space should be working in terms of growing market - because the biggest part of the market has not even been addressed, the work is still done in the company - or may not bedone! I mean the people who work with us the best by actually using us for growth, they use us to reduce costs. Very interesting, you know? They come with new ideas and they use us to accomplish their growth. And these are the people who are really very good. Perhaps the war for talent thing was probably the biggest threat, because if the company did not do that well, they will lose. That's the thing.
Q: Finally, India dominates the offshore outsourcing market and has done so for some time.Do you believe that market dominance in the short to medium term is unassailable, and if not, why not?
AA: India has always been so quick, both in terms of outsourcing, but it is equally important in the area of national industry that is growing very fast. Both industry and outsourcing exports of the domestic industry have the same exposure, where the same or similar kinds of people, and therefore the wages are higher and turnover is quite large. I think even greater than wage increasesThe risk is to wear what we call a "job-hopping".
I think one of the biggest challenges - and unfortunately, because these people who are young, they do not really see it is at this point - is that India will face this cultural shift that seems to be the case among the young people who young people who are the conclusion, just change jobs in an instant a hat - and I would go further, perhaps even without the drop of a hat. You say, "ok that's boring, Let's Moveor "or" I'm always 15% of the next company annual increase of Evalueserve let me, let me raise the float to my resume, get another 15% increase by another company. "
What they do not realize that every time it from one job to another, the last three months, they are not actually doing any work for Evalueserve. And the first three months, they learn the culture and the way the work done on the other society. And so six months of their lives will be wasted when it does notreally learned a lot, and since this is all about knowledge and learning, they are screwed. They do this job-hopping of four or five times, and when they lost more than seven years in the game, they have about two years throughout the process. They have basically thrown completely out of the market.
Because when we look later in their lives, even though we tell her resume to a client, we were unable to send that person uses, the likelihood that the customer will refuse tosay: "You can this person for my job, he seems to be changing jobs all the time, I do not know what kind of knowledge he has, what kind of person he is," and that as a whole - and always again that is not only particularly KPO is about the Indian export industry is generally true that export services industry that has seen IT outsourcing, BPO and KPO exports - probably the biggest challenge for Indian exports services industry.