PV Kannan - Your business, our profits

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24/7 Customer, a pioneering India BPO, is on the lookout for fresh pastures. So what exactly is it looking for? What are its immediate priorities? Read on…

Despite the rapid mushrooming of BPO firms by the day, few stand tall with their quality processes and customer retention. 24/7 Customer has many first to its credit: first Indian COPC-2000 certified company, ISO-9002 quality certification, obtained nine Fortune 500 firms as customers and achieved profitability within 18 months of operation. Also, this rapidly growing company has been on the acquisition prowl of late. Excerpts from our interview with the founder CEO P V Kannan:




Q: What are you looking for in a company for acquisition?


A: In the coming days, you will probably see one of our competitors being acquired by MNCs. The challenge for us is that since the market is so heated up in India, the valuations you get are sky high. Some SME companies that don’t even have good clients are getting valued at three or four times their revenues. From their point of view they would think that 24/7 has a large cash reserve, so they wouldn’t mind paying higher.




For an acquisition, the prospective company should be of a decent size, have direct customers, scalable model and also have great service reputation. This criteria brings down the list to about 20 companies in India. We have hired Bryan Reed from one of the largest banks in the US to drive both the acquisition as well as the overseas location strategy. So before the end of the year, we will set up shop outside India.




Q: What do you feel about the competition in India and how are your prospects?


A: We are already one of the top five players in the industry today. Once the dust settles down you will get a clear picture about where the big deals are happening. The entry barriers are getting higher everyday and if you look at the new players who set up shop in 2003, they are struggling to cross the 500-headcount barrier. Even IT services firms have struggled to win their own customers for their own BPO setup. Once you break through the 2000-2500 headcount barrier, you can demonstrate your capability to scale up and maintain quality.




Q: Are you worried about the backlash in the US?


A: I wouldn’t be foolish enough to say we are not hit by the backlash. But let me clearly state that global companies are driven by competition and not by national sentiment. Whether it is GE or AOL, most of their revenues are form outside the US. They make decisions in their shareholder’s interests and not the citizens of the US. From that perspective, the decision to outsource doesn’t change. But practical implementation of moving 10,000-20,000 jobs offshore is difficult for the CEO of a Fortune 100 company. Communicating that information and maintaining the morale of their employees is really tough. The jobs will move, but the decision will be carefully taken. For instance, they would be moving their attrition jobs to low cost countries.




Q: How is the moving up on the value chain happening?


A: I have a different perspective this issue. When I started my career in TCS doing mostly maintenance work, out clients said this is the job no one wants to do in the US. In business, you can’t have notions about what is high or low value. The highest value providers are always niche players. So if you want to sell designer clothes, your market would be much smaller than the mass market. 24/7 does not discriminate between high-end or low-end work. The market is still in a nascent stage and it will take time to rethink, redesign or automate the process. Capabilities are still being built, for instance we are still looking for experienced supervisors who understand the industry. To reconfigure the business processes at this point is wishful thinking!




Q: So when the time comes to move up, what areas would you focus on?


A: Our focus is to have a smaller list of customers and satisfy their every single need. We have four core services: inbound customer care, outbound telemarketing, technical support for consumer hardware, credit card terminals, ATMs and claims processing. One third of our business is outbound and the rest is inbound calls. So as of now, we are focusing building these core services.




Q: What are your thoughts on implementing quality standards?


A: Now give me a break, quality isn’t something disconnected to your business process. From day one, we have been quality focused. We were the first in India to get the COPC certification; in fact we brought COPC to India. The challenges of running a BPO are quite different from executing a software program. There you can repair the bug and the end customer will not even know. But we cannot afford to make a single mistake. We have invested very proactively in quality processes, but 1 in 10,000 is going to do something wrong and we have to face that fact.




Q: What are your strategies in managing HR while ramping up the operations?


A: One of the challenges in HR managements is that the demand far outstrips the supply. But that doesn’t mean there is not talent available here. Since we depend on qualified manpower, if there is no supply there is no industry to build on. The reason that Pakistan or Bangladesh can’t take up this job is that they don’t have qualified manpower. So it is just a matter of our capacity to hire rather than the lack of manpower. We have resisted the temptation of rummage only in ready urban markets like Bangalore and moved out to places like Mangalore and Mysore. Today we have a national recruiting network across 40 locations hiring 50-100 people in each of them. Yes, the training cost are higher for rural candidates, but then the retention is also higher.




Q: Why is retention such a challenge for the BPO industry?


A: Most of the youngsters we hire are in the age bracket of 21-25 years and we do talk to these young guys and their parents to think this as a career option. But the stories going around in the media like the one about capital one pulling out of Spectramind hurts the industry’s image. The number of jobs lost in CapOne will probably be replaced a week. But the story builds their perception that this is not a stable career.




When The New York Times wrote about us, they asked our agents, “What is the biggest impact 24/7 made on you?” One of our agents said, “ I have more confidence in myself.” Columnist Thomas Friedman wrote about the contrast in the mindset in the Middle East and in India. Here everyone wants to be like Bill Gates, but there everyone wants to be a suicide bomber. The BPO industry is making everyone confident about India.




Q: Since you have a large cash reserve, how is your spending on infrastructure?


A: we have been very scrappy in our finances. We have reinvested our profits and we don’t build ahead of time. Less then $ 12 million have been invested till now and we have been profitable for quite a long time. Most BPO firms older than five years are all profitable. Now our focus is to cater to our existing customers. We don’t have the capacity to do anything else. So for the next two years, we will keep our head down and focus on satisfying the needs of the customers in hand.





24/7 customer recently launched its flagship academic initiative called ‘Beyond,’ a management skills training program for its employees. Conducted in association with the country’s foremost management institute IIM-B, this initiative nurtures employees’ aspirations for growth.


24/7 customer is trying out some novel methods to woo, discipline, retain and inspire their staff. It has adopted the ‘Boot Camp’ route to give new recruits a taste of the industry. Attrition among employees who have gone through this 10-day residential training program is down to single digits.



Issue BG40 Jul04


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