"Technology gets important over the life of the contract"

Why is Infosys in this business–is it because this is a good new
opportunity or is it because it’s a natural extension of the IT services
business?

It is actually both. The important thing to understand is the cost and the
value proposition. On the cost factor, the proposition would be "come to
India; I will drop the costs." The benefit would be 20—40 percent
savings. But the actual cost would not look like that as there would be
transitional and migration costs in the first year. But it is our expectation
that there should be incremental year-on-year savings. Nobody is talking about
that.

So
how do you get this? There are three ways. One, centralization. We had a
customer who had three service centers for a particular piece of work. By
putting it together, even if he has the same number of people, he has one set of
managers, supervisors, engineers, etc., and has some benefit. The second benefit
comes from process improvement. The third level of benefit comes when you start
using technology. You start automating processes. There, having a close linkage
with an IT company is very important.

Many of our customers are common with Infosys. We–Infosys and Progeon
together–understand their technology. So from the customer’s standpoint, it
is a much better proposition. If we are handling the work and if some piece of
the process needs to be automated, the information can be shared easily between
us. Infosys’ customers are asking for it and it’s a good business; we
support each other, both operations and technology businesses.

And if you really break it down as to how a BPO company provides improvement
to customers over the life of the contract, initially technology will not be
important, but over time it will be all important. So there is a lot of synergy
between the two.

All good companies succeed irrespective of their backgrounds. There must be
some strengths, weaknesses, and neutral areas...

On the strength side, infrastructure is a definite strength. Look at it
practically. If I were to start a new company on my own called Progeon Ltd, I
would have to have back-up power, generator, UPS, transportation, canteen, etc.
The second thing is execution. The whole business is about execution. And half
of my management team is from Infosys while the other half has been hired from
outside. The team from Infosys comes with a strong mindset for delivery and
execution, having done it for years. Our ability to attract people, to retain
them, and create an environment is what we benefit from. We do not have to
figure it out from scratch.

On the neutral side, we have already talked about customer access. On the
negative side, the expectation levels from us a little bit higher, as we are
part of Infosys.

Is there any particular reason why Infosys wants to run the BPO business
as a subsidiary and not as a division? What is your take on acquisition?

This industry is different from IT. It needs to attract different kind of
people, it needs to compensate differently, the level of turnover is different
too, and you need to manage it very differently. Also, it creates focus.

As regards to acquisition, until there is a compelling strategic reason, we
will not acquire. We are looking at acquiring outside of India. We are in
various stages of discussions. It is not a front end. It is going to be a
back-end kind of set up. The country where we will have the set-up, chances are
that we will not have customers there. It is more to provide customers a degree
of continuity of business.

What is your existing customer base and which industry segment is it from?
What is your employee size and what kind of work do you do?

Currently, we have five customers. Three are from financial services, and
one each from manufacturing and telecom. Green Point and British Telecom are
public. As of March end, we have 539 people, up from 426 last December. We are
40-45 people who do voice, and the rest are non-voice. This will change. In
terms of processes, we do call centre, sales order processing, invoice and
contract reconciliation.

A lot of bankers are getting into the BPO space...

This business is attracting bankers because a lot of work is going to come
from the financial services industry. If you look into Progeon’s customer
base, it will fall into five or six pockets. One, banking–mortgages, retail,
wholesale, investment banking, and commercial banking. Two, security–trading,
asset management, mutual funds, brokerages. Three, insurance–both life and
non-life. Four, telecom and airlines–they have some common characteristics,
even though they are different industries.

The fifth is finance and accounting. There are two other areas, which are HR
and healthcare. These are an opportunity, but we need to figure out how to
value-add and build the business case.

Shyamanuja Das and Ch Srinivas Rao