Low-Cost Work Has Its Limitations
With top export markets US and Europe under recession, Indian tech firms are now focusing on the domestic market for back office and IT services. However, they need to shed their labour arbitrage-based positioning and focus more on outcome based engagements with the domestic customers. IBM’s general manager for managed business process services (growth markets) Randy Walker said in an interview with ET that Daksh acquisition is helping his company replicate the model across the globe and remain competitive. Excerpts:
What kind of role is Daksh playing in your other markets?
Acquisition of Daksh brought expertise in the processes. We have taken the process expertise and have developed that in our global delivery centres in China, Brazil and Russia. At the same time we brought lot of assets from Daksh to our research and analytics for innovation. We are also sending Daksh team to our new centre in Egypt. At Telstra, we are using smart supply chain by using our IT and process innovation. We committed to our clients savings; if we save them more money we share it, if we don’t save then they don’t pay us.
Is there any labour arbitrage in your growth markets?
There is no labour arbitrage in growth markets such as India and China, in lot of cases it is reverse arbitrage as our people cost more, but we can drive efficiencies around scale. What our customers want is committed business outcomes and we give them procurement savings, whether it is in finance and accounting or HR. The value proposition for major markets such as the US and Western Europe is still labour arbitrage.
Then what kind of models are you working on?
The Bharti model is an example for a good model. We get paid when Bharti grows. Another large insurance company in India is going into the market with micro-insurance for the masses, which has very low price point and can reach out quickly. We are handling the entire back office for them. We host the infrastructure, do re-engineering and claims package. We get paid per transaction, like the Bharti model. Running the whole back office gives us lot more flexibility. As companies don’t break their businesses, you need to have capabilities in all the areas.
Is this model applicable in other markets as well?
Absolutely, we have replicated the Bharti model with several other Telecos on smaller scales.
Companies that focus on export market are looking at domestic BPO opportunity whether it is Telecom or BFSI. How is that shaping for you?
The companies who are doing business in the US and UK look at Indian market with focus on how cheap you can go. That is a race to the bottom, and there no innovation in that. We are very selective in emerging markets. As you go cheaper, you focus less on adding value to your customer, due to which you can’t build long-term relationship.
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