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BT DOTCOM: COVER STORY Why This ASP Flies Pension and pay-roll management ASP, India Life's anti-e-gravity tricks include a sharp segment focus, clear revenue stream, and superior technology deployment. By Venkatesha Babu
Looking out of his corner-room window on the third floor of India Life's office in Bangalore, Ashok Reddy must see a sight that pleases him to no end. Even as hordes of Application Service Providers (ASPs) fall like nine pins, his own two-year-old ASP, which provides pension and pay-roll management services, is growing at 30 per cent every quarter and, Reddy claims, just eight months away from break even. Better still, its list of 190 clients includes some corporate biggies such as Alstom, Cadbury India, Intel (India), IBM Global Services, Pfizer (India), Volvo India, and Whirlpool. It caters to 1.85 lakh employees of its clients, and manages Rs 900 crore in pension funds. So, just what is it about India Life that makes it tick? Quips 31-year-old Reddy, an IIM-B grad and ex-ICICI Securities executive: ''I guess we chose the right niche.'' It's Drab, But It Pays Since 1956, both the pension and insurance markets had been under the government's monopoly. Companies had to interact with the regional provident fund commissioner and the Life Insurance Corporation (LIC) to manage their employees' retiral benefits of provident fund, gratuity, and superannuation. More often than not, doing so entailed maintaining a staff just to deal with these issues. Although private consultants in the form of chartered accountants and HR firms were available, they suffered from a lack of national presence and reliability. When Reddy, along with Manish Sabharwal, a Wharton grad, set up India Life in 1998-funded by View Group, a Boston-based private equity firm, and Centre Partners, an investment and pension management fund based in New York-they were really looking at the impending reforms in the pension sector. Their idea was to leverage India's expertise in IT-enabled services to set up an ASP that would take care of all pension and pay-roll related needs of a corporation. Finding customers did not prove too difficult for India Life. Reddy's proposition was simple: give us your tedious paperwork, and we'll free your personnel to focus on better things. Companies big and small found a compelling logic in it. For example, when K. Vaitheeswaran quit Microland to set up his own company, Fabmart, with only six employees, one of the first things he did was to outsource the pay-roll and pension management to India Life. Explains Vaitheeswaran: ''For a start-up to go through the bureaucratic rigmarole didn't make sense.'' What reinforces India Life's proposition is the fact that while companies are pretty accurate in terms of product costing, they are disastrous at putting a number to their process costs. Managing activities such as payroll administration involves personnel cost, senior management cost, overheads, infrastructure blockage, and opportunity costs, all of which cannot be easily allocated to diverse activities. Besides, the recurring costs of maintaining internal software or payroll package can be quite a bit, especially since upgrades are required to keep pace with the company's growth. Outsourcing, then, frees up managerial time, resources, and capital. Says Sriram Srinivasan, MD, Indus League: ''India Life has removed unnecessary burden on us in terms of complying with provident fund requirements. Now adding employees and getting their pf accounts started is not a problem. There is full transparency and total access to pension and payroll records.'' Once a service agreement with a client has been signed, India Life spends the next six to eight weeks acquiring the relevant data from the client, defining the scope of the service, and focusing on making the data go live. Thereafter, the client and his employees are free to access their payroll and pension accounts online.
There are two levels of access: one for specific employees, and the other for the employer. Using a unique 10-digit Personal Identification Number (PIN) and password, an employee can check her PF balance, loan eligibility conditions, and the status of loan application. She can even check things like leave balance, tax payments, and medical reimbursement details. ''What we are offering is really a single-window service,'' says Reddy, who draws on the teachings of Jiddu Krishnamurthy to ''keep his head'' in the secular world of business. Since the government stipulates both the minimum rate of return (9.5 per cent per annum) and avenues of investment for pension funds (only government securities), India Life does not have much leeway. Yet, Reddy claims that his company has managed to return 1.5 per cent more than the government's benchmark. How? Since India Life manages a huge corpus of more than Rs 900 crore, Reddy, apparently, drives a hard bargain to obtain better returns for his clients. Also, he says, the research division of the company gives the necessary edge in finding the right investment avenues to get higher returns. Reddy is reluctant to disclose financial details, but says that the average billing per employee is Rs 60 a month. Given that India Life caters to, at last count, 1.85 lakh employees, the annual revenues should be more than Rs 13 crore. The actual fee, however, varies depending on the size and nature of the company. For example, India Life charges the IT and biotech industries more, since the employee turnover and topline growth are higher. Cashing In On Technology A large part of India Life's success is due to the technology it employs. Apart from the usual stuff such as firewalls and passwords, the ASP uses technology to make its site more secure and accessible to users. It has an intelligent automatic e-mail response application called Talisma from Aditi Technologies. The mail system is integrated with a chat facility and an interactive voice response system, which front ends the call and the user can gain access to pre-formatted queries in six regional languages (including Hindi, Bengali, and Telugu). On top of all this, there is a toll-free call centre. Understandably, customers are happy. Says S. Bhatt, Head (Administration), Access Technologies: ''The response time is very good. To begin with, we had outsourced only pension administration. We are now looking at outsourcing our payroll services also.'' Sensing more such potential, India Life is widening its own range of services. It is already looking at acturial services for the new breed of insurance companies, and is currently scouting to acquire an actuarial firm. Another area it wants to venture into is claims processing on behalf of hospitals and medicare centres. But the biggest move of them all involves getting into markets such as Australia, New Zealand, and Thailand with its complete range of services. Says Reddy: ''We have extensively studied the relevant laws in these countries, and now it's just a question of timing our entry.'' To fund the expansion, India Life plans to
raise around $3 million from its second round of funding. Guess,
convincing investors should be much easier this time round. |
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