SSON speaks to Susir Kumar (MD & CEO, Intelenet) and Suresh Ramani (President – North America Sales & Operations, Intelenet) about outsourcing trends for the next year, accretion of bound centers by BPO and how changes in the U.S. healthcare represent opportunities for Intelenet.
SSON: Let’s alpha with a attending at BPO generally. We’re just seeing the aback end of a all-around recession – how has this afflicted Intelenet over the accomplished few months?
Susir Kumar: OK. A BPO is basically the aback end of a company’s operations, so we handle their customers’ transactions. Through the recession aeon we accept seen, for example, banks arising a basal bulk of acclaim cards; banks giving beneath mortgages; the new accounts that are accepting opened up accept reduced. We are the back-end adherent of these audience of ours: the volumes advancing in from these audience of ours accept in actuality gone down, so if we were arising 60,000 cards a ages for a accurate applicant it conceivably went down to as little as about 5,000. We became acutely anxious about arising any added loans [while] humans were just not accommodating to blot money or buy things, and all of that had a cogent appulse on the bulk of affairs and the bulk of calls advancing in.
What we aboriginal saw in this antecedent appearance of this accomplished recession was aggregate reduction, and a accomplished lot of companies accepting acutely anxious about whether they would survive through this appearance of recession or not. So anybody started strategizing about how to survive. We had a set of companies which anticipation by demography assertive accomplishments they would survive, and afresh we had a set of companies which were appealing anxious about their survival. So in some companies we in actuality saw some desperate measures accepting taken, and now humans were not assured the acceptable outsourcing deals. They were allurement us “Tell us how you can advance the bulk accumulation process? I apperceive you can accord us 50% abridgement of costs afterwards 18 months: is there a way that you can accord us 30% appropriate now?” So it was a absolutely new apprehension that came in, and I anticipate afterwards the aboriginal six months of recession we saw a lot of companies advancing out with the question, [so] we had to change our bulk hypothesis or our offers to audience and prospects… Afresh we started observing, over the next six months to about nine months, that these companies were authoritative faster decisions: in the accomplished it would yield annihilation amid six to 18 months to yield a accommodation on outsourcing or offshoring, but during this appearance we were seeing companies demography decisions as quick as maybe two or three months.
We noticed that audience who had outsourced just about 15% or 20%, were all talking to us about how they could admission the outsourcing/offshoring percentage, and get their costs down; so we aswell went afterwards every aggregation that had outsourced just a baby component, and we told them that “yes, in this case you are extenuative $5 actor a year, or $10 actor a year; actuality is addition befalling breadth you can advance and admission the ambit of offshoring and outsourcing, and you could save potentially bifold or amateur the bulk that you are currently saving.” The third affair that we saw was, [before the recession] humans would not accomplish an offshoring or outsourcing accommodation if the extenuative was, say, beneath than 40%. In the new ambiance we saw that even if we gave a bulk hypothesis of accumulation of 15%, humans would accomplish a decision. Three years aback we would never go to a aggregation if the bulk hypothesis was just a 15% saving.
I anticipate appropriate now we are in this appearance – breadth from the basal our audience accept in actuality been growing about 5 to 10%, so we accept already apparent added cards accepting issued, added mortgages accepting given, added humans traveling; in the biking articulation that we handle, we are seeing a lot of appeal advancing up. And in the endure six months a lot of of the companies that accept downsized their own activity force, are all assertive that there is traveling to be some advance in the next six to 12 months. Albeit, these companies are not assertive that this advance is traveling to be sustainable; humans are about accept that 2012, is breadth they will see a advance according to what they saw in 2007-2008. So the bulk hypothesis that we are alms to our audience is: ‘you guys accept appear out with a plan for next year that talks about 10% advance adjoin the bottom; rather than you architecture your own accommodation and humans why don’t you attending at alive with us, because you can about-face on the tap or about-face off the tap with us, admitting it’s added difficult for you guys to do it in your ambiance breadth it’s big-ticket and added regulated.’
SSON: Searching advanced then, Susir, what now do you see as the better challenges adverse outsourcing providers? And how are you accession Intelenet to affected these?
SK: Just to accord you a summary: over the last, say, 18 months to 20 months, we’ve in actuality apparent a abridgement or a abbreviating of our absolute business of about 10% to 15%. But there is new appeal which is offsetting this shrinkage, and net-net we are still seeing a 10% growth. The acceptable annual is that humans are authoritative faster decisions and searching at outsourcing more. Because of these assorted affidavit and the actuality that we are giving them accommodation as a bulk rather than just cost, there has been a advance in our existing-to-new business, to the admeasurement of about 25%, which afterwards offsetting the 10%-15% abbreviating still accounts for 10% net growth. So that’s the basal band of the accomplished thing.
People are aswell negotiating more. And humans accept in actuality activated the bazaar in the endure 18 to 24 months and aggravating to clasp a little added out of annual providers like us. If they came in through this appearance of recession and asked us for a 5% or 10% discount, we gave it to them because these are abiding relationships, and we accept to alternate in some anatomy in their time of difficulty. Now this is acceptable a new barometer for pricing.
We accept aswell abstruse in the endure 18 months or 24 months to run the operations added efficiently. So what we accept been cogent the audience in the endure 18 months is, “ok, you guys wish a 10% discount, we’ll accord you a 10% discount. But don’t behest to me in agreement of breadth the operations should be run from, what should be the bulk of control, what should be the affectionate of technology – you acquaint me what is the end aftereffect you want, in agreement of efficiencies, in agreement of turnaround times, in agreement of accuracy, and let me adjudge how and from breadth to run the operations, and I’ll accord you the 10% discount.” So what has happened in the endure 18-24 months is we accept been accustomed the abandon to adjudge how to run and from breadth to run the operation.
Net-net, admitting we accept bargain the price, we accept been able to get the aforementioned allowance as what we were accepting in the past..
Another big claiming is that humans are allurement for added and added financially structured deals, rather than the approved outsourcing which is a per-FT bulk or a per-transaction price; it’s acceptable a little added complex. They are allurement us to armamentarium the redundancy, they are allurement us to armamentarium the start-up costs; there are a few audience that are allurement us to yield an outcome-based pricing, and we’re demography added and added of that. I anticipate from a accident perspective, we are now appropriate to agency in if at all we accept adjourned the back-up – and if the arrangement is say over a aeon of 5 years, if it in actuality gets concluded afore that, afresh we will not accept to awning the absolute allotment of back-up that we accept done.
Companies are aswell advancing and cogent us, “guys, just yield our operation lock banal and barrel, and you guys adjudge the onshore/offshore mix, etc: this is what we wish as outcomes.” And what that agency to us is investment; demography over the accident of pensions of these advisers and costs associated with just adjustment that new business that we buy out with our business, and so on and so forth. In the endure six months we accept done about 5 acquisitions of just the back-end operations of a company. And that consistently has the claiming of affiliation – and the risks.
SSON: That’s an absorbing point: at the moment we’re seeing a lot of BPOs affairs into aggregate casework captives, for archetype Cognizant and UBS: is that something on your calendar for 2010?
SK: Yes they are, and actually, one of the advantages we accept is we’re not a listed company, and accepting a allotment of Blackstone, we do accept admission to capital. If you admission a aback appointment of an absolute company, what you charge is capital, and an adeptness to yield the appulse on your P&Ls for the aboriginal six months or a year of affairs out the company.
For example, if I were to buy the aback appointment of an absolute company, the aggregation would apprehend a abridgement of costs of, say, 20%. In the moment that you buy it and you alpha announcement 20% beneath the next day, you’re in actuality incurring a accident in your books, because the bulk anatomy and the way the operations are advised needs you to spend, for example, 100 and you’re alone in actuality announcement the applicant about 90. There’s a aperture in your P&L. Alone afterwards about six months to one year you will alpha abbreviation your costs, you will alpha architecture efficiencies in the processes and so on and so forth, and you will be able to accompany down your costs from 100 to, say, 80 or so – and because the applicant is paying 90, you alpha authoritative a accumulation of 10. What this agency to us is it will appulse on our P&L accounts for a aeon of one year. But because we are not listed it absolutely doesn’t bulk to us; and the acceptable affair is, commonly if you do a transaction like this we ask them for a lock-in – to accommodate us a charge of business for a aeon of time. And as I told you we did about 5 affairs in the endure six months: all of those 5 affairs accept appear with a acquirement charge for a aeon of time. You will see us do added and added of these kinds of deals both onshore as able-bodied as offshore.
SSON: Who accept you done affairs with over the endure 5 months?
SK: We accept done one transaction with one of the ample banks, we are about to accomplishment off a transaction in the UK. We bought two captives from biking companies, we bought one bound from a absolute ample bank, we about to buy one absolute ample bound from a carriage aggregation in the UK and we accept aswell bought addition aggregation in the retail space, analytic big: about 200-300 seats.
SSON: Affective on, Susir – let’s yield a attending at healthcare? We are active this a US healthcare alternation with Intelenet, can you accord us some acumen into the plan you are accomplishing anon in this space?
SK: There are two things. Firstly, Blackstone has about ten companies in the healthcare amplitude in the US, either on the provider ancillary and the payer side. Secondly, we are searching appear the authoritative changes that are demography abode in the US: The new regulations will beggarly if a accepting in the US goes and applies for insurance, that accepting has to be accustomed an allowance policy. Today they may just go and acquaint a chump that they will not accord allowance advantage at all. The Obama administering is aperture up allowance in that, earlier, allowance companies could alone accommodate allowance for humans in a accurate administering – which could be a accurate state, for archetype the accompaniment of Arizona. Now they accept accustomed these allowance players to accord allowance behavior above the United States.
So demography Arizona afresh for archetype – say there were four ample allowance companies giving bloom insurance; all of a abrupt now there are companies from New York that are arising polices in Arizona, there are companies in Texas arising behavior in Arizona. The bulk of companies in actuality accouterment allowance awning has gone up by advantage of this new regulation. So in suammary, they cannot abjure humans advantage and the antagonism has in actuality gone up. By advantage of this we accept that both the allowance payers and allowance providers will accept an association on their bulk and profitability.
A new cipher is aswell accepting prescribed. If you attending at any medical analysis or action in the US or above the globe, it needs to be codified. For archetype if anyone is diagnosed with four ailments, anniversary of those needs to be coded; or if some anaplasty has been performed on a accurate accepting afresh this afresh needs to be coded. This coding helps to accumulate medical records, and aswell helps to pay the allowance aggregation and the hospitals – so allowance companies use this cipher to plan out how abundant to pay for hospitals based on whatever ailments they have. Now this cipher is ability a change from what is alleged an ICD9 to an ICD10 which increases and changes the way things are codified.
So what does all of this beggarly to companies? Firstly, they will charge to retrain their humans in coding, they charge to change the systems that they use for coding and, because the bulk of codes has gone up, they charge to get added humans into coding. The government will adviser payers and providers to accomplish abiding the coding is done properly. All of this will could could cause a huge appulse on the healthcare companies in agreement of costs and advantage so our bulk hypothesis at this point in time is that we can appear in and advice with codification. You don’t charge to alternation humans at your end, because we can either get these humans onshore in the US or we can advice you with an adopted solution. If you accommodate an adopted solution, the bulk comes down – or it helps with the new affair we accept in agreement of antagonism and the accepted access. As we accept admission to the ten companies in the Blackstone portfolio, we are already accomplishing plan for a few of them, we can just advantage this ability and get above the accomplished market. So the acumen we are absorption on the US is, one, to yield advantage of the new situation, and two, to advantage the ability we are already architecture by advantage of accomplishing plan for a few of these Blackstone portfolio companies, both on the payer and the provider side.
Suresh Ramani: I anticipate if you were to draw a ambience of breadth US healthcare has been commonly and breadth it is moving, I anticipate there is could could cause for worry. If you attending at the blot in 2008, they spent about $2.4 abundance on healthcare – which is about 17% of GDP – and of that $2.4 trillion, 80% of that went to 20% of the citizenry of the US of the insured. That bulk today is traveling to double, aural the next eight years the blot on healthcare will be about $4.5 trillion. So you can see the exponential advance and with all the reforms which Susir has talked about, such as accepted admission and traveling alfresco the accompaniment to insure, the accident appetence of all the providers is traveling to go up.
The added big section is the unfunded mandates which are the conversions of ICD9 to ICD10 which as a program, I think, whether added countries accept adopted, the US has to adopt, and that will be a adjustment which has to appear into aftereffect by 2012. So, these are afresh costs that the providers and payers charge to absorb.
Another big basic to this is in agreement of the reimbursements which will appear down, because the Obama administering wants about $400 billion out of the blot to pay off the deficit. So if all this is traveling to happen, the payers accept to focus on their operating costs if at all they are to survive – or there will accept to be a adventure of alliance or abolishment out of the 1,800 payers in the American market.
There is aswell the affair of authoritative compliance. With all these changes, it is difficult to accumulate processes up to date; as a aftereffect healthcare allowance carriers are not affair obligations to the state, to the federal government – and they are paying huge penalties. So Intelenet can footfall in actuality and fix these problems. The a lot of important section to that is not alone do we argue but we in actuality apparatus action improvements. The added section to this is that we get solutions which are both BPO and technology accompanying so there is action enhancement that we focus on and an enabler to that is outsourcing or offshoring. So acutely three things: authoritative compliance, active down operational costs and convalescent quality, I anticipate are our three pillars, if you will, of our annual delivery.
SSON: Susir, you talked about the casework that are accepting outsourced: processes and acquiescence etc, and you mentioned coding. What added casework do you apprehend the healthcare industry in the US to outsource to you?
SK: There are two sets of humans in this space: providers – basically hospitals and payers who are the allowance companies. On the providers’ side, there are aswell companies which accommodate medical accessories – so afresh addition huge market. For example, the casework we accommodate for hospitals are coding, announcement services, acquaintance centermost support, claiming monies from allowance companies – if somebody goes through a action afresh we charge to ensure that the doctor writes it on a anatomy and the anatomy is scanned and it comes to us – we charge the machine, we charge to do the appropriate coding, we charge to forward it to the allowance aggregation to analysis that it is covered. If it is not covered by the allowance and it’s a deductible amount, we charge to go afterwards the insured. Afresh we charge to accession a bill and say the payers claiming what we accept invoiced, we accommodate and abutting those issues. Afresh there are complaints, and complaints management. On the payers ancillary we accept invoices, we pay invoices, and we accommodate accounts.
SSON: Are you accouterment these casework from onshore or are you accouterment from locations in India?
SK: There are audience who are allurement us to do some section of plan onshore in our location, or in near-shore locations, or offshore. So, we are alive with all of the models. We are alms audience both India and the Philippines. The Philippines has a lot of nurses who are either searching at traveling to the U.S. or who accept alternate aback from the U.S. So that is a big basin that we are borer into to say that “if you plan with us in the healthcare space, it may be an added acquaintance for you guys if you seek a job in the U.S”. Or for humans who accept appear aback from the US, if they already apperceive the nuances and systems there, they can be readily active in an ambiance such as the Philippines. We aswell accept a website in Poland, afresh a acceptable website from breadth we accommodate casework in healthcare.
SSON: You are acutely searching absolute carefully at the US healthcare space; do you apprehend Intelenet possibly accretion into added countries?
SK: We accept had a applicant from the UK for the accomplished 8 years. But as there is a huge appeal now from the US, we are all focused on the US. [But] we will be traveling above the US to added geographies. India itself is a huge market. The bulk of humans who are accepting covered beneath allowance in India is huge; everybody now wants awning and there are a lot of healthcare companies, both on the provider and payer sides, advancing into India. This is a absolutely new bazaar for us.
SSON: So why do you anticipate new barter – aural the US or India added down the band – should assurance with you as adjoin to any of your competitors?
SK: I did acknowledgment to you that we accept about ten companies in the Blackstone portfolio, all of whom we’re alive with appealing carefully – and the plan that they accord us covers about the absolute ambit of plan that healthcare allowance companies attending at outsourcing. Now these companies accept not been acclimated to offshoring and outsourcing as abundant as the cyberbanking casework sector, and one big affair they will attending for is, “are you guys absolutely accomplishing this, why I am searching at outsourcing?” And we are able to authenticate an absolute reside case of the plan they’re assured to outsource. Aswell what we accept done is decidedly added our administration of healthcare, so we accept of backward recruited about bisected a dozen humans who are some of the best-known humans in the healthcare industry in the US; these are the guys who in actuality physique applications for healthcare companies. We’re aswell leveraging, through the Blackstone portfolio, networking with humans who are in actuality alive in the companies, to see how they can plan forth with us, to physique solutions for some of the companies in the U.S. We accept a affairs breadth we can in actuality acceptation humans who are alive with healthcare companies as allotment of the Intelenet team.
SSON: What added sectors do you anticipate will accommodate you with the greatest ambit for amplification over the next few years?
Suresh Ramani: I anticipate there are some key areas that are traveling to abound in the US market. One is utilities and the additional is government spends, but healthcare makes the better advance pie. Acutely speaking for us as an alignment the US contributes about one third of our revenues. We’re appropriately broadcast in the Indian bazaar as able-bodied as the UK market. On an all-embracing base we see the cyberbanking industry afresh moving, not at an advancing pace, but at a reasonable clip over the next 18-24 months; we can see some acceptable absorption in the marketplace. And we are absolute able in the cyberbanking and cyberbanking casework space. We accept today abutting to about 8,000 humans alive in this market, and accomplishing all the types of processing that you can anticipate of accomplishing for a bank. In short, if we had the money, we would be a coffer ourselves!
Another breadth of advance for us is biking and hospitality. Susir started off pointing out that humans are not travelling so much, but it’s a bulk of time: if the abridgement starts searching up, there will be appeal for biking as able-bodied as hotels. So that’s an breadth breadth we already accept invested, both onshore and adopted and we accept abutting to about 3,000 humans in that space, so that’s afresh a focus breadth for us.
Telecoms is a focus for us abnormally in the Indian market; that’s a aurora industry, with every ages about 1 actor barter accepting added in the Indian bazaar space. Telecoms annual for abutting to about 10% of our revenues today. And of advance we are accepting into new markets: Australia, we accept a attendance there, and we aswell do plan for account companies from Australia. The Middle East is afresh a acceptable befalling that we see for banking. And Europe of advance with Poland advancing in. We aswell accept a centermost in Mauritius which caters for French opportunities. And all this will accord us an character of accepting a all-around amateur amid in these markets who aswell can do plan for these markets from bargain destinations. So acutely we are affective abroad from a cast character of an Indian-based BPO provider to a all-around BPO provider.
SSON: And is accepting businesses in those locations a key antecedence for you?
Suresh Ramani: Absolutely. Like, in the US we already accept two centers up and active with abutting to a thousand people; we accept a accomplice active in Australia. Susir talked about accepting a website in the UK now. So big markets, yes, absolutely I anticipate that’s a advance engine for us. We wish to be present with a reasonable citizenry in anniversary of these countries.
SSON: Breadth would you like to see Intelenet in 5 years’ time?
SK: What we’re absolutely aggravating to be is a one-stop boutique for all the things associated with outsourcing and offshoring. There are companies who wish multilingual solutions; there are companies who wish multi-geography solutions; there are companies who wish consultancy solutions; there are companies who wish technology solutions; there are companies who wish absolute business action solutions, which ability be either in agreement of costs or in agreement of efficiency; there are companies who wish analytics. So aggregate which is a affliction about the business action side, is what we wish to absolutely provide. That’s our focus; in the next 5 years that’s what we wish to be: a aggregation that can design, a aggregation that can put in the accordant technology for implementing the design, and a aggregation that can assassinate the business process. So we are searching at a one-stop boutique for all the things associated with the business process.
SSON: Comparing yourself with added Indian BPOs such as Wipro or Tata – there’s affluence that accept emerged out of India – how would you put yourself at the forefront, as an organization?
SK: If you attending at Wipro and TCS – all the IT companies, all the ample Indian IT companies, they are predominantly focused on IT and BPO is a sub-segment of it. If you attending at the allotment of acquirement that comes from BPO adjoin IT, BPO is a absolute baby component. Compared with the IT companies, we are a focused BPO aggregation – and I anticipate that humans who are gluttonous a ample impact, like telecom companies or retail companies or cyberbanking companies, who accept a lot of annex on acceptable operations to get in new business in new markets, they in the continued appellation would rather plan with a focused BPO aggregation than an IT aggregation that has got a subset of BPO, bulk one.
What we do is basically bolt on technologies which can physique efficiencies into the processes that are outsourced or offshored – so we accept scanning solutions, workflow solutions, ERM solutions, etc. Admitting the access that an IT aggregation takes is to physique a solution. So that’s a aberration amid the two of us. There are instances breadth we lose deals to some of these IT companies; there are instances breadth we win deals adjoin them. It depends how the applicant is searching at it: if they wish added IT and beneath BPO they’ll go to companies like TCS or Wipro. If they’re searching at specialized BPO services, they appear to us.
There’s aswell traveling to be antagonism from the Accentures and the IBMs of this world; but I anticipate there are aswell issues with them in agreement of cost, in agreement of flexibility, in agreement of speed, and that they’ve become too big, and we anticipate absolute acutely we accept an advantageous position adjoin these guys because of the admeasurement and ability and acceleration and the adaptability with which we can bright transactions. That’s breadth we accept apparent we accept been able to win deals adjoin these guys.