Conseco Chairman and CEO Gary Wendt made
his name as the star boss of GE Capital Services.
He grew GE Capital into the legendary
company’s largest and most profitable division
during his 13-year tenure as CEO, which ended
in 1998. One of many things Wendt — known as a tough
turnaround artist and fervent protector of the bottom line —
pioneered at GE was the outsourcing of business processes to
India. GE migrated thousands of jobs to India under his
supervision and instigation. And it worked. The adoption of the
offshore business model in India by GE is considered by some to
be one of the driving forces behind the growth of the Indian IT
services industry in the 1990s, because GE’s commitment to
Indian IT validated the model.

So when Wendt took over as CEO of troubled insurance giant
Conseco in June of 2000, as Conseco was floundering on the edge
of bankruptcy, it was perhaps clear that India would have some
part in his turnaround strategy.

In January 2000, EXL Services was an Indian startup, among
many others, hoping to leverage a perceived business opportunity
in business process outsourcing (BPO) in India. Simultaneously,
Conseco had started working on its initiative to send business
functions to India. By August 2001, EXL was suddenly a major
player in the BPO space, having just been acquired by Conseco
for an undisclosed sum. Wendt’s enthusiasm for Indian
outsourcing was showing. His vision: reduce cost and increase
quality right away. And with Conseco’s stock hovering around $4,
down from highs of well over $50 just four years ago, it’s crunch
time for Wendt, as he tries to prove he can really put Conseco
back on a positive path.

So far, he has eliminated jobs, restructured debt and announced
plans to move about 2,000 jobs to India this year. The scheme is
designed to save the company some $30 million annually.
Conseco currently has about 1,200 people working through EXL
in India.

Why Buy?

A visit to EXL’s offices in Delhi reveals a furious pace of
operation. Scores of buses stream in at 6:30 p.m., bringing
700-odd employees in for another day of work. Conseco’s
primary motivators to outsource business processes to India are
standard — namely the lower cost and better service quality that
come from having college graduates performing the same
functions as far less educated workers filling similar positions in
the U.S.

But though the basic pitch is generic — word for word, it is the
marketing language used by dozens of call-center startups and
others trying to tap the BPO opportunity — the service
expectations, according to Executive Vice President of Strategic
Business Development David Gubbay, are not.

“There are a lot of startups,” says Gubbay. “None of them really
do true business processing. Some of them do call-center work or
low-grade e-mail response work, but that’s not true business
processing. You need a much higher level of commitment and
expertise, and no one had it. They all talk about it, but not one of
them actually has that capability.” So Conseco decided to buy
EXL and essentially work on replicating what GE has achieved.

That Conseco is bullish about EXL’s role in its future plans is
evident from the fact that the company flew 400 professionals
from EXL’s New Delhi facility to company headquarters in
Indianapolis, to receive training on various processes related to
insurance.

“Over the last year, about 90 processes have been moved from
Conseco. They range from some low-value data entry work to a
much higher value insurance-related work. So we have gone up
the value chain and will continue to do so over the next few
months,” says Vikram Talwar, EXL’s CEO and former CEO and
Managing Director of Ernst & Young Consulting in India.

More precisely, EXL’s outbound call centers do collections work,
while inbound call centers service customers. Conseco’s policy
services work — address changes, loans, withdrawals, surrenders
etc. — is taken care of in India, as well as account reconciliation,
premium payment applications and, in future, “almost anything,”
according to Gubbay. EXL can even do claims payment
underwriting, since it is licensed in the U.S. as a third-party
administrator. Gubbay also sees accounting functions becoming
part of what EXL offers.

And as Conseco drives new applications, EXL will gather critical
experience and credibility offering BPO to U.S. corporate clients.
Though Conseco bought EXL to expedite its own plans to reduce
cost and increase the quality associated with some critical
functions, the idea is to turn EXL into the leader in third-party
BPO to India, servicing a large customer list. “They have looked
at this as an investment opportunity, not just cost savings,” says
Talwar.

The Right Alliance

“When we started the company, this was too new a concept and
nobody in this business gives you a project in the BPO space
without being able to touch and feel your capabilities,” says
Talwar.

Talwar spent most of his career at Bank of America. “We had
determined that doing processing work in a location that has high
cost doesn’t make any sense at all,” he says. “So even during the
early ’90s, we were looking at doing work in countries such as
India. However, the problem was that telephone services were
not adequate to support it.” Eventually, as Talwar confirms, GE
Capital led the first wave of true BPO to India.

By 2000, there were a lot of BPO startups in India. But Conseco
chose EXL. Why? Clearly, entering the market through an
acquisition was easier than building everything from scratch, but
the choice of partner seems to have come down to Wendt’s prior
relationship with the company.

Talwar, Rohit Kapoor and Inder Singh formed EXL with an
investment from Wendt himself, shortly after his departure from
GE and prior to his appointment at Conseco. “I had known Gary
for many years,” says Talwar. “When we started this company, he
showed interest and was keen on becoming the principal
investor.” That turned out to be a shrewd choice of alliances on
Talwar’s part.

Conseco went with what they knew. “We had the knowledge and
experience through Gary Wendt — and the EXL team had the
capability because they had done it before, and were known to
Gary before [he came to] Conseco,” says Gubbay.

So far, everything has been going according to plan. When it
comes to actual comparisons between the business process work
done in the U.S. and India, there is no question as to the efficacy
of the arrangement with EXL. “The actual work done by EXL,
which is measured in service-level standards, has been
systematically better than what we were doing here,” says
Gubbay.

BPO 101

Talwar paints a familiar picture of the challenges involved in
setting up a BPO company in India. “The challenge was to get
the infrastructure in place, and once that was in place, the
challenge was basically to get the first two or three clients
through the door, because unless you have references, people are
very careful about giving you business process outsourcing work.
They are far more comfortable giving you call-center work,” he
says.

Telecom connectivity was a concern. “While it was much better
than what it used to be, it was still a monopoly with the
government. Obviously, service is not their trademark, so you
had a lot of problems in ensuring uptime, which has improved
dramatically over the last few months,” Talwar explains.

Clearly, customer acquisition was the clincher. 1-800 Flowers,
and accounting firm Deloitte & Touche were early EXL clients,
but with the Conseco acquisition, EXL can afford itself the
luxury of focusing on fine-tuning day-to-day operations.

“It really was a natural limitation of how many qualified people
you could recruit and train,” says Gubbay. “And how quickly you
can migrate the functions. We wanted to take advantage of the
quality-cost equation, get the job over to India quickly, so we
could improve those primary aspects of why we were doing it.
Hiring, training, motivating and managing that many people in
that short a period in time was a pretty challenging task.”

Beyond the HR issues, there are cultural obstacles — notably the
oft-talked-about concept of “accent neutralization.” Gubbay
acknowledges this, but downplays its significance, explaining that
customers are more likely to care about efficient and effective
service than they are about where the person servicing them is
located. He does say that many customers will never know or
realize that they are speaking to an agent in India. “It has become
so common today, that I don’t think people really care,” he adds.

Market Forces

Talwar and also Conseco clearly believe that EXL will achieve
success on a large scale, servicing U.S. corporate clients. But that
doesn’t necessarily mean BPO is a business opportunity waiting
for a multitude of players in India.

“In this business, actual returns take 12 to 15 months. It doesn’t
happen overnight. You can’t cut jobs and open jobs. It is not like
a call center. You initially move jobs slowly when you have a
pilot, figure out what the process is and then you ramp up. So the
real gain for Conseco will come at the end of this year or early
next year,” explains Talwar. He is making a clear distinction
between basic call-center work and the kind of BPO that EXL
hopes to bring to corporate America.

Gubbay comments, “There is more than one way to come into
the same market. People will come at it with a different
emphasis, different capabilities. There is a huge market out there.
It is not that one formula is going to win the market.” But he is
very blunt in his assessment of what exists on the ground in India
today. “Except for the operations that companies like GE or
American Express own, the rest are all startups that have no
infrastructure and no expertise. All they have got is a building and
some capital, but they haven’t done anything.”

Beyond Conseco

The EXL Conseco partnership is clearly an indicator that
advanced BPO to India can and will happen on a large scale.
Today EXL has a capacity of 4,500 workstations, and 5,500
seating capacity, for work in three shifts.

“We are growing rapidly,” says Talwar. “By end of the next year,
we will be close to 3,000 people. We haven’t decided to build our
next facility. We will start by the end of this year.”

The company currently services only four clients. Talwar expects
to add another three to the company’s roster by July. Talwar
hopes that he can soon expand to the degree that Conseco
represents less than 50 percent of business — down from its
current 80 percent.

To find success as a BPO provider, EXL faces a touch sell, deep
into the organizations of U.S. corporate clients who themselves
may prefer to own rather than rent BPO capabilities. Whether or
not EXL is successful in that endeavor, Wendt will have
efficiently brought India into his turnaround strategy for Conseco.
Other corporate executives will no doubt have taken notice,
which bodes well for the Indian BPO market as a whole.

Meanwhile, Wendt and EXL will need to prove that their strategy
of outsourcing business processes to India will have a significant
impact on smoothing Conseco’s rough road to corporate recovery
back in Indianapolis