Consumano: Software product companies are falling by the wayside

Software product companies are passé. It's software services that hold promise of sustained revenues. So much so that the likes of Oracle, Microsoft, PeopleSoft and a host of other multinationals are turning to services to offset the decline in product revenues. If this sounds like music to Indian services companies, there's more, according to Michael A. Cusumano, the Sloan Management Review Distinguished Professor at the Massachusetts Institute of Technology's Sloan School of Management, and author of eight books on business and information technology.

A third of publicly listed software product companies in the US have shut down since 1998, bringing the total down from 350 listed product companies in 1997-98 to 200. Reflecting the shift to services is the fact that of those that remain, less than 25 per cent draw a major part of their revenues from the products business. Prices of software products in some segments, like supply chain management have fallen by as much as 75 per cent in the last two years, while, it services, which are paid for on a time and materials basis, have remained stable. "It's fortunate that Indian companies did not invest in products...," says Cusumano who joined the board of Mumbai-based software major Patni earlier this year.

There's little doubt that the Indian it services model is winning its share of brownie points.

-Priya Srinivasan

No More Lemons
There's a hot new service in town that can help you cut down on bad hires.

Remember that lemon you hired last month-who wasn't just a waste of time but also left your company poorer by a few lakhs? Not just that, now he's hopped across to your rival, armed with a few of your hottest business strategies. Well, you wouldn't have made that grave error in judgment had you screened him before taking him on board. You wouldn't have had to do it yourself. You could have outsourced it to a firm like Quest Research India, one of the few background-screening companies with pan-Asia operations. "It is basically an integrity and honesty check, a measure for fraud prevention," says Yogesh Bhura, Managing Director, Quest Research.

Face it, bad hires are a big blow to a company's reputation, quality of service, and relation with the client. Considering a significant amount of time and cost is incurred by the management in case of fraud or leakage of information it makes sense to undertake preventive measures like these. Don't however be misled into believing that intensive knowledge-based industries are the lone practitioners of this novel business practice. Manufacturing, financial services, banks and even logistic services are some of the other sectors that prefer to screen their prospective employees. Rough estimates suggest that the organised and unorganised sector together do about 40,000 checks every month currently. Also the new overseas legislations make it mandatory for Indian companies to verify their employees' credentials and ensure complete safety of data. Measures like these would also eliminate passage of sensitive information through high-profile corporate executives skipping jobs besides restricting entry of undeserving candidates who would not have sailed through, but for the false information.

The screening involves verifying educational qualifications, previous employment stints, and the existence of a criminal record. The service providers do a thorough check of the candidates' whereabouts, permanent address, criminal history, work ability, performance at previous organisations, salary verification, integrity check and the like. It is a judicious mix of intelligent telephone calls and physical movement by the service providers, who often need to travel as far as Andaman and Nicobar Islands for such authentication as there is often an insistence on written verification.

No screening can and does take place without the consent of the individual concerned, which may otherwise amount to prying. The depth of screening depends on the level of seniority; for instance, a CEO will have more baggage to be scanned than a process executive. The charges too, which could start at Rs 3,000, can go up to Rs 30,000 depending on the level of investigation required.

Companies that have undergone this process claim that not only has the quality of hire scaled up, there has been a sharp fall in attrition rate and falsification too. "We have achieved a less than 1 per cent level of discrepancy cases out of the total employee strength of 4,000 employees," boasts Aashu Calapa, VP (HR), ICICI OneSource. Hill and Associates India, a security and risk consultancy, vouches for how the rate of bad hires for one of its IT clients went down from 30 per cent to 18 per cent. It does close to 1,000 checks a month as against Quest Research whose numbers average around 10,000 every month.

Many across industries believe that going forward this emerging trend is only bound to become an established practice. Even though many corporates have been doing so in-house, Nirupa Bareja, VP (HR), Biocon reckons that, "as numbers grow, specialised agencies will have to be involved for pre-employment screening." That's a view shared by Nandita Gurjar, Head & VP, HR at Progeon. "We have already been outsourcing very detailed screening demanded by some of our clients, and it is only getting organised."

Employees on their part have responded well to this good recruitment practice. Also more organised players are mushrooming. One of them, Akhilesh Kapoor, Director Operations, TACT India, claim to offer a "comprehensive risk mitigation package including pre-employment screening." That's bad news for the lemons.

-Supriya Shrinate

Networked VC
Nokia's venture capital avatar takes shape-and gets cracking.

NVP's Banerjee: He has hit the road running

As the firm's name suggests, it's the mobile phone and networks supplier's venture capital arm. As his name suggests, Sujit Banerjee is of Indian origin. What it does not suggest is that the Wharton-educated head of Nokia Venture Partners (NVP) is based in California. If Banerjee is currently in India, it's with good reason: He knows all about investing in Indian firms: In his previous stint as Principal with another VC fund, TL Ventures, Banerjee had invested in two Indian firms called Atrenta and Baypackets.

So it didn't take long for NVP to announce its first domestic investment, within days of setting up shop in India: $10 million in Pune company Nevis Networks, an enterprise security firm. That's right up Nokia's street, and sure enough one reason for Nokia's VC avatar is that it wants to incubate and develop companies that can create and market new, innovative technologies "that will help telecom operators target the next two billion mobile subscribers profitably", suggests Banerjee. And while he's at that, a neat return on investment would do nicely too.

-Kushan Mitra

Meet The New Champ
WNS, India's largest third-party ITES firm, plans to grow at 50-60 per cent annually for three years.

WNS' Bhargava: Any predators on the prowl?

After Spectramind, Daksh, Transworks-which have all sold out to large business groups- WNS Global Services might just be the next third-party service provider to watch in the space of business process outsourcing (BPO). WNS has been aggressively rising in the ranks over the years, and in 2003-04 it pole-vaulted to the No. 1 slot, displacing Wipro Spectramind, as per the Nasscom ranking of third party ITEs companies. WNS posted (unaudited) revenues of $97 million for 2003-04, up from $56 million in 2002-03. The company has seen a 50 per cent-plus cumulative average growth since inception as a British Airways subsidiary in 1996.

In 2002, private equity major Warburg Pincus bought a majority stake in the company and transformed it under professional management from a $15-million company with one client (British Airways) in 2002 to a BPO firm servicing 70 clients across industry segments like insurance, healthcare, shared services and knowledge services in addition to travel and transportation. Two overseas acquisitions (the UK-based auto/motor claims management services company Town & Country and the US-based healthcare claims business ClaimsBPO, a part of GreenSnow Inc) have propelled the transformation of WNS, which currently services 14 airlines, eight global insurance and healthcare providers, two leading travel agencies, a global logistics firm and two global telcos among others. The insurance segment contributes about 65 per cent to WNS revenues currently, while travel and transportation accounts for 30 per cent, while all others account for the remaining five per cent. The BPO firm operates out of Mumbai, Pune and Nashik.

WNS continues to look for acquisitions, according to Neeraj Bhargava, Group CEO, WNS. While he prefers to remain silent on exit opportunities for Warburg at this point (logically through a sellout if recent examples in the third party BPO industry are anything to go by), Bhargava emphatically states: "WNS will be an aggressive standalone BPO services company in the next three years. We will continue to grow at a rate of 50-60 per cent annually in this period." You cannot dispute the growth projections, but "standalone" for "three years" can always be open to debate.

-Priya Srinivasan