'The dependence on big clients will come down'

Worldzen is a focused VC-funded BPO company with an India-centric business model. The company shot to fame with Carlyle announcing a $4 million funding for it earlier this year. David Vick, managing director, Worldzen’s India operations, talks about the company and its plans.

What made Carlyle Group fund a BPO start-up?

Carlyle usually doesn’t fund start-ups. But our combination of the right kind of people, strong focus on areas that have a strong potential from outsourcing perspective, and leveraging India as an offshore destination appealed to them. They definitely saw a value in our business model.

What kind of people… and what are the areas?

We have a mix of people with strong process consulting skills and domain knowledge of the areas that we operate in. The areas are: collections, insurance, and healthcare. 

And we do not work on labor arbitrage alone. We provide consulting to our clients on identifying processes that can be outsourced, how they can be optimized, and combine that with executing these processes offshore, leveraging India’s superior workforce and cost advantage. We, however, are not into pure consulting.

How big is your India operation as of now, and what are the expansion plans?

Today, we run our collections at Gurgaon using a partner’s infrastructure. We have about 45 people there, which would go up to more than 200 in a year’s time. Also, insurance claims processing is being delivered using another partner’s facilities at Noida, where we have about 75 people. This would go up to about 200 over the next year. We will start providing healthcare outsourced services to healthcare providers such as hospital groups, and medical billing providers soon. 

Why have you not invested in a facility of your own?

We definitely plan to own our facility, though I cannot tell you an exact date yet. But for us, optimizing and executing processes that we run, not creating infrastructure, are important. We found good infrastructure that was available but was not being utilized. And we had contracts to execute…

Why did you choose the Delhi region? The conventional wisdom has been that this region is good only for voice, whereas the Southern India is probably better suited for the claims processing kind of work…

The decision was driven more by the collection business, which is voice-based. The other skills like claims processing can easily be imparted by training. Collection is not any other voice process; it’s a much tougher voice process than say, telemarketing. This region has good talent for that. 

Of late, some areas like insurance are seeing more and more companies coming and setting up captive centers. So much so that last year the revenue growth has almost (90 percent) been driven by them. On the other hand, third-party vendors have grown by less than 30 percent. Is it going to be the trend more and more?

Globally, captive centers have coexisted with outsourcing service providers. A disproportionate growth of captive centers at any time does not mean that the BPO service providers would die. 

But yes, a few trends are emerging. One, some big outsourcers who are convinced about the advantages of outsourcing and believe that the service providers would often do a better job, but are a little concerned about security would insist on dedicated facilities for them and BPO service providers would do that. This is kind of middle-of-the-road approach.

Also, the medium-sized business organizations would increasingly account for a higher percentage of revenues for outsourcing service providers. Today, many of them are completely dependent on a few big companies. That will change considerably.