Meshing IT and BPO

NIIT Technologies feels it will find it easier to integrate its BPO and IT services, than its peers would. Arvind Thakur on why he thinks so.

Hindu Business Line, March 21, 2005: BUILDING an integrated IT and BPO services model is our goal for the long term says, Arvind Thakur, Chief Executive Officer, NIIT Technologies.

Spelling out the broad contours of the model for NIIT Technologies, he says, "the BPO operations are focused on the same verticals in which the IT services operate. We are building process capability in our BPO and technology capability in our IT services so that, over a period of time, we are able to mesh the two".

In his view, only a handful of players are addressing this market space and the early birds will be able to capture a fair share of the market. Read on to find out why this model makes sense.

As frontline companies grow at a scorching pace, how do you think a mid-tier organisation such as yours can compete in the IT marketplace?

The approach for mid-tier organisations is to focus and differentiate. At this point in time, everybody who understands that this is the way to go forward is engaged in sharply defining areas (in which) they are going to build capabilities to be able to successfully compete in the marketplace.

Right now, the issue is not of scale, but of building capability that can be scaled at a later date. If you look at the scale players, they will be in 10-12 industry verticals. Mid-tier will probably be in three or four, but the aim in each one of those is that you should be of the scale and size which is equivalent to or better than the scale players.

I think that is the short and medium term direction and goal of the mid-tier companies.

What is the unique positioning that NIIT is building in the mid-tier space?

In the long term, for NIIT, what we are looking at is an "Integrated IT and BPO model". If we look at NIIT today, we are sharply focused on three verticals: financial services, transportation and retail.

Our goal is in each of the three; we should be among the top three players. In transportation, we are already among the top three. In others, we have some way to go. This goal will be achieved both by organic and inorganic means. We also have a BPO operation that is relatively young for us as an organisation.

The BPO operations are also focused on the same verticals in which the IT services operate. We are building process capability in our BPO and technology capability in IT services, so that over a period of time, we are able to mesh the two.

This will help us not only provide the platform for the customer, but also run the process. This is a different model, which is highly scalable.

Some of your software peers who are attempting this integrated model have had trouble in scaling up. How do you think you can get around this issue?

If you already have established businesses (of IT and BPO), it becomes difficult to integrate. But when you are establishing the business, you can build that into your design. For example, there are a number of processes that we run which are integrated.

To give an example, we are working with a bank. One of the big issues with financial services companies is operations risk, the critical element of which is managing the security environment. What we have done with this customer is to put together a solution in which we have implemented a security monitoring system for the organisation.

The actual monitoring of the network is done at our BPO facility offshore, where people are keeping track of intrusions, keeping a log of and tracing back how the breach happens and reporting incidence. This is hard-core process manual work. And we have a technology solution running the whole process. So, in our sales pitch, we have integrated this as a business solution for our client.

At present, there are only a handful of players who are addressing this model. The companies who take the lead are the ones who are going to capture a fair share of the market.

How are you streamlining your entire organisation to align with this model and your goals?

We have built a vertical structure within the organisation, where we have brought in domain experts and business analysts to run it. We have even acquired a consulting firm and integrated it into our organisation. These are attempts to be able to offer this kind of capability to the front end of the organisation. Even scale players suffer from the disadvantage in that they do not have a front-end as good as the MNC's and they are acquiring here and there. We are also doing the same thing but on a smaller scale. I think we have got our strategy right and now we have to execute against that strategy.

First of all, for us to build a leadership position, we need to choose spaces that are relatively under penetrated. When I talk about spaces, it means industry verticals, geographies and service lines.

In industry verticals, we are looking at three of them, and sub-verticals within that. If you look at geographies, it is difficult to be a leader in the US, so we decided to focus on Europe. But for Europe, we need to have a different model. It is a market in which you need to have a larger onsite presence. We have acquired a company in Germany, which has presence in Austria and Switzerland. In the Benelux region, we already have presence and this gives a strong foothold in Europe. If you look at our numbers, Europe contributes more to our revenues than the US. But we cannot ignore a market like the US. So, we have built a strong differentiation to compete effectively in this mature market. We have built this across two axes. One is the vertical competence that we have built. Take for instance, insurance, where we have end-to-end capability from consulting to BPO — that is, from the Boardroom to the Mailroom.

The other is software engineering R&D. We have two unique technologies that help us in software development and maintenance. One is the knowledge portal which is a capability that comes because we are both in the learning and training business. In our maintenance business, we have won our orders on the strength of this capability.

On the software development side, we have a pending patent. It is a rule-based engine that abstracts the business logic and translates that into a business application. It is called Build My Application.

This is a process for which we have applied for a patent in Japan, because we cannot do it in India. With this we are able to deliver productivity of a magnitude higher than others'.

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