Experiment and then choose the right business model

Date:   Sunday , March 04, 2012

Rohit Kapoor is the President & CEO of EXL (NASDAQ: EXLS), a leading provider of Transformation and Outsourcing services to Global 1000 companies in multiple industries including insurance, banking, financial services, utilities, transportation and travel. Since the company started its operations in 1999, he has held various roles including CFO and President & CEO. Prior to joining EXL, Rohit was a business head at Deutsche Bank and led a marketing team that serviced clients in Europe, the Middle East and the Indian Sub-continent. He also managed the venture capital and private equity investments of several Ultra High Net Worth clients in start-up companies both in the U.S. and Indian TMT sectors. Rohit successfully raised several rounds of venture capital funding for various companies and he was also involved in the structuring of their investments. Earlier, he worked for eight years with Bank of America - five of which were in Private Banking in New York and three in Corporate Banking in India. Rohit holds a B.Tech from IIT Delhi and an MBA from the IIM Ahmedabad, India.

The leap into IT

I started my journey in marketing and product development with Nestle. From there I switched over to banking, with Bank of America in India. Then I was fortunate enough to get relocated to the U.S. to start a new business for the bank. Setting up that business, hiring new people for it and developing it gave me a lot of learning opportunity. It was at Bank of America that I met and worked with Vikram Talwar, and later both of us went on to found EXL. The whole journey has been really fascinating and for the last 12 years, building up a company in the BPO space was a very rewarding experience. My time with the bank gave me the opportunity to be part of several private equity investments and many of these where in IT Services companies. This gave me the initial exposures into this arena, how these companies are setup, their business model, and more. One of the main things that I realized is that IT companies are highly customer centric organizations. They were keen to listen to their customers and providing high value services to their customers with a great deal of care and attention. These companies also were highly flexible. This knowledge helped me a lot in creating EXL as there was not much differentiation that you could create during the early stages of a company. The differentiation would really come through the mindset and the approach the company took towards its clients and whether you buildup a reputation among your clients.

Lesson learnt

Choose the right business model. It is important to note that business plans often change when it comes to practicality. We started EXL as a non voice based processing company. But several experiences and customer engagements later totally changed our business model. There were several incidents that stayed with me over the years. For our first customer what we did was email processing work. It used to cost them $3 per email, while we offered the same at $2 per email, so they made a considerable saving and we made considerable profit. Then dotcom bust happened and the pricing collapsed to a few cents per email. This taught that if you are in the commoditized space of business then the pricing is going to be the sole criteria for decision making and it is not going to be a sustainable business. We lost our entire profit in this and we decided not to go for emailing processing and the call center work. Hiring, retaining talent, development of the talent, and motivation the employees have always remained as an issue. Presently we are facing another serious challenge in the form of volatility of Indian Rupee. This is creating major issues for us in bidding with our customers and managing our expenses. All these issues teach a lot of valuable lessons to an entrepreneur.

Industry Trends I bet on

Presently several new trends are popping up in the industry. For example, the health care industry is witnessing many regulatory changes because of the Obama Care that is being introduced and the requirement for healthcare companies to reduce their cost. This in turn will cause a big macro trend that will help the BPO players to benefit and be of strategic importance to the healthcare industry. A second major trend that is happening is the shift toward the cloud. More and more companies are now moving on to the cloud and this is going to enable the BPO players to serve their clients from anywhere in the world. We are also witnessing a shift towards big data and analytics. Having analytical capability and helping a customer become competitive has become a big advantage for BPOs.

Vision for EXL

We at EXL are hiring, training and developing our domain knowledge in the healthcare vertical. For example, we set up an office in Philippines, where we hired Doctors, Nurses and other medical professionals in order to support our clients in the healthcare industry. We are also doing something similar in analytics. We have acquired this capability about six years ago; today we have no less than 700 analysts in our company who serves clients with industry specialization and deep knowledge of statistical modeling techniques. We always tried to identify the existing trends and position ourselves accordingly in order to partner with our clients, support them and grow along with them in lines with these trends.
We have been very careful about the type of business that we do with our customers, so that it will be a very sustainable business and a business where we really add value to them and do not get commoditized. We have chosen to deal with prime customers who are strong and growing, so that our business can also grow along with them. We have chosen to diversify geographically on a global so that we will not be dependent on one country. We have also chosen to focus only on select industry verticals and domain, so that we can have greater amount of differentiation and compete with much more bigger players. Again, when the economy slows down there will be a big pullback for the IT business but BPO is much more necessity driven and much less discretionary spends, so it is much more stable. Any time there is actually a tough environment, it is much of an opportunity for us as we are able to reduce the operational cost of our customers and streamline their processes.

Innovation is key for us. We have innovated our business model, we moved over 25 percent of our business from FTE based pricing model to a transaction based pricing, we have introduced platform based BPO, we have introduced and embedded new technologies in some of our processes through proprietary workflow and application tools that we have created, we have embedded decision analytics in the out sourcing operations of our customers. Innovation is an inherent part of our organization; it is a part of our value system and culture. This has reflected in the growth that we have been through.

Grooming a Leader

My responsibility as a leader is to give my company a clear-cut path for growth and be helpful and supportive to my management so they can deliver the best. The most important thing that a leader should do is to surround himself with highly talented individuals and then to have complete faith in them. This is exactly what I do and plan to do in the future. We, the management team of EXL, have been together for a very long period of time and we get along really well with each other and this stability has been a major factor of the success of the organization. My leadership motto is to mandate and provide an environment in which my fellow workers can thrive.

(As told to Vimali Swamy)