OUTSOURCING: Transplanting Success

In 2004, when the London-based Colt group opened its operations in India,
everyone passed it off as another Western company setting up its captive BPO arm
here. One year down the line, Colt has made it clear that it is not just that a
few processes that are being moved to India-COLT India is a key part of the
strategy aimed at reducing costs and providing new services that would be
uneconomical to provide from Europe.

For a company which is recovering and struggling to become profitable after
the telecom downturn that hit Europe a couple of years back, starting another
offshore operation is seen more as a cost than anything else. But Colt has been
trying to implement a model where almost the entire work would be replicated in
a talent-rich but cheaper country. And, as Barry Bateman, chairman, Colt says,
to some extent the development of the Indian operation, in the short term, will
have an adverse impact on costs. However, over the longer term, the Indian
development will lead to significant reduction in costs as well as enable the
company to benefit from the substantial talent pool which exists in India.

"The idea is to integrate and standardize India with Europe and vice versa. India is not merely an offshore center for Colt" Andy Kankan, managing director, Colt India

Colt currently has 4,000 employees, with 440 people working at the India
center. The India operations has been developed as the 14th center for Colt. The
other 13 are located in various parts of Europe. Though, initially, an
investment of Rs 20 crore was planned for India, officials put the current
investment figure to be much higher.

A Unique Business Model

For any telecom company the growing Indian telecom sector is a very
lucrative market. But, resisting the temptation to do business here and add more
customers, Colt has concentrated on shifting the workload here. Also, for a
struggling company handling 52,000 customers spread across Europe, the plate was
already too full to add more customers in India. So, at the moment, the company
is concentrating on delivering services from here.

Unlike
the call center operations outsourced to India by other carriers, Colt is trying
to keep these operations in the respective European countries. They are moving
specialized jobs to India. In a nutshell, all the nonvoice activities are being
moved to India. "The idea is to integrate and standardize India with Europe
and vice versa. India is not merely an offshore center for Colt," said Andy
Kankan, managing director, Colt India. He claims that of the jobs moved here
almost 60 percent are related to operations, which include remote management and
monitoring of the networks in Europe.

Why Not Outsource To a Third Party?

While Colt has been making noises about cost cutting and becoming profitable
in the next three years, it has preferred to open its own office in India rather
than hire a third party. Tanuja Randery, managing director strategy and business
transformation, Colt outlines three major reasons for this. She says the work
involves proprietary type of knowledge and the company was not very comfortable
in handing over these to a third party. Also, 60 percent of Colt's core work
would be shifted to India and no third party would be able to handle such jobs.
"Another reason for having an India arm was to avoid the union resistance
in Europe. As this center is a part of the Colt group and we have expats working
for us here, no one complains about job losses etc," said Randery.

"Strategies are easy to come by but execution is difficult without a control tower, and it is all about sweating the assets to maintain a successful balance sheet" Tanuja Randery, managing director, strategy and business transformation, Colt

The presence of Fidelity, which has invested heavily in the company, in
India, gave a sense of confidence to start here on their own. In fact, Colt
India, till a few months back, was sharing the building with Fidelity in Gurgaon.
So, up to a certain extent, Fidelity helped Colt establish itself here.

The Way Ahead

The company is already showing signs of revival and has chalked out major
expansion plans in India, which would compliment its European operational
strategy. Colt hopes to become cash-flow positive, for which the success of its
Indian operations would be instrumental. As for the India operations, by end of
2005, another 160 people would be added. And by 2006, almost 25 percent
(approximately 1,000) of the company's workforce would be in India.

Though the company does not have any plans to tap into the Indian market, it
is looking at opening up a test lab and an R&D center. Also, its Frankfurt
network operating center (NOC) would be closed and moved to a location near
Delhi. All this is expected to be executed by 2007.

According
to officials, during the downturn, Colt realized the complexities that had been
building over the years, making it difficult to innovate and leverage on
available asset resources. "We have realized that we cannot do everything
and be everybody. We are going back to the basics and would rely on solid
execution towards the road to success," Randery added.

Unlike many companies who had sunk millions in fiber optics and failed, Colt
has been also sitting on a mine of fiber but was quick to wake up to the
changing market dynamics. From no growth, the company has now registering a 10
percent growth, just by leveraging its existing assets and also investing almost
30 million pounds in system upgrades to make the company technologically sound.

"This has been an year of investments and not of returns. But India, and
programs for simplification, have been undertaken as part of a strategic
decision. We would now have customer-centric approach and would focus to grow
organically," Randery said.

Colt India has been an example of how India can be leveraged as a base to cut
down on costs. The Colt model proves that not just back-office jobs but things
like remote network monitoring and relocating NOCs here can be done
successfully. The huge talent pool can be tapped and the Western working skills
can be integrated with it, to produce good results.

On the other hand, Colt as a telecom company makes other operators sit back
and think about leveraging on product innovations and their existing assets
rather than loading the network with unprofitable business. And, as Randery puts
it, "Strategies are easy to come by but execution is difficult without a
control tower, and it is all about sweating the assets to maintain a successful
balance sheet."

Anurag Prasad