Well, he did not get maudlin, but Scott R. Bayman, the President and CEP of GE India, was definitely affected enough by the poignancy of the moment. That moment was GE's announcement, on November 8, that it would be divesting a 60 per cent stake in GECIS (GE Capital International Services), its thriving business process outsourcing (BPO) business, to two private equity investors, General Atlantic Partners (gap) and Oak Hill Capital Partners. "I think that it's a bit like your child growing up and leaving home," says Bayman, speaking more like an Indian parent than an American CEP; then, he has been here 12 years. And then, GECIS was, and is, the jewel in the crown of GE's Indian empire.

That wasn't meant to be. In the mid-1990s, a few years after GE entered India, it announced that its revenues in the country would touch $2 billion (Rs 7,000 crore at the then exchange rate) by 2000. That wasn't to be: GE Capital, the company's growth engine in the us, never really took off in India; and the country's regulation-heavy power sector didn't help (GE makes power turbines and actually has an investment stuck in Dabhol Power Company). Around the same time, the company realised that its insurance businesses in the US couldn't find enough people to man the phones and answer customer queries, because they were located on the country's East coast where unemployment rates were low. It was Pramod Bhasin, the then CEP, GE Capital, who suggested that this back-end function could actually become a front-end business in India. The idea fit in well with former GE Chairman & CEP Jack Welch's philosophy of globalisation; even today, GE sources components and services from regions where the cost and the quality are the best; manufactures products in countries where it makes sense to; and sells them wherever a market exists (GE was one of the first companies to internally orient itself as a global supply organisation, global manufacturing or products company, and global marketing organisation). In this case, in the absence of any third-party companies that could provide this service, GE went ahead and invested in the business.

Circa 2004, the situation has changed. India has become a BPO hub and from the GE perspective, it probably makes more sense to buy (outsource) than make (do it internally). GECIS has what it takes to become a large global company in its own right, albeit if it starts serving customers other than GE, and goes out and acquires companies or puts down greenfield ventures in other countries where it makes sense for a BPO to be based. "It was not a core business for us," admits Bhasin, now President and CEP, GECIS Global. "So, for GECIS to prosper and continue to grow, we thought it best to partner with someone."

The timing is right from GE's point of view as well. Its revenues in India, which have stayed in the region of $1 billion (Rs 4,500 crore) over the past three years, are set to grow by around 15-16 per cent this year. "With the Electricity Act of 2003, we are seeing a lot more interest (in our products) from potential customers in power," says Bayman. The emergence of several low-cost airlines should increase demand for the company's aircraft engines, and increased investment across sectors could well translate into more opportunities for GE Capital. That bodes well for a company that has hitherto been content to view India as "an intellectual export market", as Bayman chooses to put it. That is unlikely to change immediately, but the growing market for GE's products and services in India-it will still not be as large an opportunity as China-and Bayman's belief that manufacturing will, infrastructure willing, bloom in the country, should see the company move into the second phase of its existence here. Thus far, GE's India business has been in the news for its quality processes (Six Sigma, no less) and its pioneering BPO initiatives. Now, if all goes well, its core businesses-aircraft engines, leasing and power turbines-will make the news.

-By Alokesh Bhattacharyya

SECOND
It's Unique, Really
Do not expect a repeat of the GECIS deal anytime soon.

New dawn: (L to R) S. Bayman, President & CEO, GE India, P. Bhasin, President and CEO, GECIS Global, and A. Havaldar, CEO, GAP (India) plot a new progression

For a private equity fund looking to invest in the business process outsourcing (BPO) sector in India, things can't get any better than GE Capital International Services (GECIS). And for the jewel in the crown of GE's businesses in India, partner-investors cannot get any better than General Atlantic Partners (GAP) and Oak Hill Capital Partners, the two firms that together acquired a 60 per cent stake (30 per cent each) in the company for $500 million (Rs 2,250 crore). "With these kind of partners, the culture, the values of GECIS aren't going to change," says Scott Bayman, President and CEP of GE India. "How GECIS is run isn't going to change."

The low-key style of GAP and Oak Hill was evident during the press-do organised to announce the deal; Oak Hill went unrepresented, and GAP was represented by an ever smiling, but reticent Abhay Havaldar, CEP of its Indian operations. The only point Havaldar would stress on during the two-hour conference was that he "looked forward to working with the GECIS management for greater growth", without spelling out any specific plans or strategies. Replying to an e-mailed questionnaire, Pat Hedley, Director Marketing/Communications, GAP, remarked: "We will work closely with GECIS' outstanding management team as an advisor and a partner."

The deep pockets of its two new shareholders (GE still remains the single largest shareholder with a 40 per cent stake) should help GECIS go global; the company has been eyeing buyouts or greenfield operations in several countries, including Romania, Tunisia and China. And their hands-off management style should be reassuring to GE, which may want to exit its investment altogether when the company decides to go for an initial public offering. For the record, Bayman denies that GE will do this, and Pramod Bhasin, the CEP of GECIS Global and the man whose idea it all was, says the company has no plans of going in for an IPO.

While the deal may start a trend among captive BPO units to go independent and expand their scope of operations by diluting stake in favour of private equity investors, it does not mean more dollars for independent Indian BPO companies. "The BPO space in India has become extremely interesting for a lot of people," says Vikram Talwar, CEP, exlservice. "(The) GECIS (deal) reflects how much interest there is. However, there is a lot of investment available, but a shortage of investment opportunity. There aren't too many independent BPO companies around." That, there aren't.

-Alokesh Bhattacharyya

Pirated Software, Here We Come
Low-cost hardware spurs software piracy.

In what must come as a surprise to nobody, hardware prices have plummeted: the average unit price (AUP) of a pc sold in India has fallen from Rs 51,580 in 1997 to Rs 38,390 in 2003, and is expected to decline by a further 20 per cent this year. hcl Infosystems' entry-level PC, HCL Ezebee, can be had for Rs 15,000 and even multinational hp has an offering priced at Rs 19,000. It isn't just PCs; even portables (read: laptops) have become affordable, with several offerings priced between Rs 30,000 and Rs 50,000 freely available.

All this has resulted in a boom of sorts: volumes increased by 30 per cent in 2003, and are expected to grow by 60 per cent this year. All that cheap hardware floating around has added to the headaches of packaged-software makers. Sameer Kochar, the CEP of Skoch Consultancy, a Delhi-based it specialist, estimates software piracy, in value terms, at 300 to 400 per cent of the 1997 figure. "Piracy is a problem in a price-sensitive market that is also growing," explains Vinnie Mehta, Director, Manufacturers Association for Information Technology (MAIT), an industry lobby.

In 1997, only one out of every five PCs sold in India went to a non-metro; today, the figure stands at one out of two. Affordability lies behind this shift, and it is quite likely that people who have not paid much for hardware hate to shell out substantially for software, especially when it can be had for free.

The high price of software (legal Windows XP costs Rs 6,900 while a pirated version can be had for less than Rs 500) doesn't help its own cause. "Eventually, competitive factors will force software companies to reduce prices," says Ajai Chowdhry, CEP, HCL Infosystems. But "realistic prices should not mean a truncated version of a software specifically for India", adds Kochar, taking a dig at Microsoft that recently announced the launchof a low-cost edition of its Windows XP software in Hindi. Chowdhry's argument finds a buyer in Raj Saraf, the CEP of Zenith Computers, a hardware manufacturer. "Software piracy happens irrespective of the price of hardware," he says. That it does, but low-cost hardware serves as an inadvertent catalyst.

-Supriya Shrinate

I-SPY
Dell It Is

Remember all the brouhaha over Dell pulling some customer support work out of Bangalore and back into the us? The incident was exaggerated even then, since Dell was only re-routing calls from commercial users of two of its computer lines (Optiplex desktops and Latitude notebooks) and not winding up the contact centre business. In fact, since that incident in November last year, Dell has increased headcount at its Bangalore unit. But was it poor manpower quality that prompted the move? No. As Dell's CEP Kevin Rollins recently told a Wall Street Journal columnist, Dell "expanded too fast in India", and it re-routed work only to slow down "until we maintain the level of expertise and capability in India that our customers want". Now, BT learns that Dell plans to set up another contact centre, but this time in Hyderabad. Sources say that it has acquired a 6.5-acre plot at it Park in Hyderabad and is talking to several reputed builders in the country to develop the property. Apparently, Dell wants to build a 50,000-square feet office to accommodate 3,500 employees. Dell, those who know the company say, will start small, with 500 employees, and ramp up subsequently. Doomsayers of the business process outsourcing world, repent.

-Kushan Mitra

FACE TO FACE
"India Is A Strategic Market For Us"

The man is best known for the hip and controversial clothing line he launched some 50 years ago, but the fact is that Luciano Benetton runs a global corporation that has wider interests: in telecommunications, toll roads and food retailing. In India, however, the success of Benetton's clothing business has been limited. Worse, Benetton has had to buy out its local partner DCM of Vivek Bharat Ram due to differences over long-term strategy. Recently in India, Benetton spoke to BT's Amanpreet Singh on the breakup, India plans and the company's controversial ads that are now drawing flak even from its own retailers. Excerpts:

Why did Benetton part ways with DCM in India?

There are no precise reasons. Vivek Bharat Ram's group is entrepreneurial with diverse interests and Benetton is our core business and our only priority. They wanted to exit from the partnership and it was a natural end.

And it was cordial?

Absolutely. At a time when no foreign investment was allowed, DCM helped us in a very fundamental manner. It was good while it lasted.

Benetton has a disproportionately high brand recognition in India compared to its revenues.

That is true and we will try to change that. We also realise that India and China are strategic markets for us.

What are your plans for growth in India?

I am here now to add fresh energy and enthusiasm to Benetton in India. We have 61 stores now, and are planning to add six in the next year and 20 by 2007. We know the consumer expects fashion and we offer them a value-for-money proposition. We plan to concentrate on children's wear, which is extremely appealing and offers high growth. Plus, Benetton plans to have a mix of the "mega-stores" that will showcase the full collection and other smaller franchisee stores.

Don't you think these franchisee stores lead to a dilution of the Benetton brand, as they cause confusion by mixing products?

Yes, some franchisee stores do confuse the consumer, but they have tremendous reach. Of course, we have to streamline product display, as well as window display.

The Indian consumer today is extremely discerning, so why do you introduce fashions in India a season late?

I don't know why you have this perception and I know a lot of people who share it. But there is no such thing. We introduce fashions simultaneously in India and internationally. I think the only mistake that we made was to not use fabrics that were more suited to the Indian climate.

Other global brands like Mango have come to India. How will Benetton compete with them?

Each brand has its own strength in its domestic market, and they have a small presence in India. But I just think it's great for the consumers. They have a lot of choice. After all, do you want to go to the same restaurant every day?

Benetton's advertising strategy has come under fire from its own retailers. Do you plan to stop these bold ads?

No, people remember our ads because they are edgy. We don't want people to be indifferent to our ads.