Those wishing to get up close and personal with the heart, the epicentre, the #1 holy spot of the $6 billion (Rs 27,000 crore) Indian Business Process Outsourcing industry will have to take one of the two roads that connect Delhi to its most-happening satellite Gurgaon, in the state of Haryana. Neither route promises smooth progress; one is witnessing roadwork that shows no sign of ending; the other was never meant for the volume of traffic it finds itself supporting. Then, the road from Bangalore to Electronics City, some 18 km away and home to the most visited tech-campus in the country, that of Infosys, isn't smooth either. Bangalore is the capital of India's it services business; Gurgaon, that of its business process outsourcing or it enabled services one. Infosys, though not the largest of its ilk, is arguably India's best known it services brand; its performance and prospects are a litmus of those of the industry itself. The centre of gravity of the BPO business in Gurgaon, one company, promises to be all that in its space.

Pramod Bhasin, a lithe 54-year old with a toothy smile that is as infectious as it is spontaneous, is the keeper of this holy place. The President & Chief Executive Officer of Genpact, he runs a $500 million (Rs 2,250 crore) third-party BPO operation (that simply means that Genpact isn't a captive BPO fulfilling the needs of a parent company). Genpact employs 20,000 people across six countries; it services over 80 customers through 16 operating centres; a third of its customer-base figures in the Fortune 200 and another third, in the Fortune 500; but Bhasin, in keeping with his stature as high-priest of a religion called BPO has a dream. He has visions of global greatness.

That is an appropriate vision for the CEO of a company that is already India's largest in its industry. Its closest rival, the Mumbai-based WNS, is expected to end 2005-06 with revenues around $220 million (Rs 990 crore). "We want to be one of the biggest global BPO companies in the next four or five years," says Bhasin. In numerical terms, he explains, that would translate into a target of $1 billion, Rs 4,500 crore, in revenues by 2008, and $10 billion, Rs 45,000 crore, in revenues by 2016. And so, like other people in Genpact working to realise this dream, Bhasin works 14 hours-a-day and travels 20-days a month. Sleep is a luxury and he catches up with it while traveling (even when he was young, he would nod off during journeys). And he presumably dreams of $1 billion, and $10 billion, and greatness in the making.

By 2009, Dell will have 20,000 employees in India, in call centres, software development centres, and testing centres. Malhotra, a GECIS vet is the man behind this. Romi Malhotra CEO/ Dell India

There's more riding on the efforts of Bhasin and his team than the fortunes of 20,000; Genpact represents the aspirations of a young and ambitious industry, and it has to battle everything from high attrition rates to political opposition to outsourcing (in Western nations) to competition from locations such as Mexico, the Philippines, China, all emerging hubs of the BPO trade. "Those leading the Indian BPO industry need to succeed to establish India's pre-eminence at a global level and to boost the morale of their peers," says Kiran Karnik, President, nasscom, India's National Association of Software and Service Companies.

Genpact, as it grows, will provide the ideal template for a gen-next BPO. Anyone looking at the company closely (and many are) will find answers to questions such as: Does it make sense to be a captive BPO? Is verticalisation the way forward? Should a company adopt a horizontal, platform-oriented approach? "Anything done by Genpact will be crucial for the entire industry," says Raman Roy, Chairman and Managing Director, AccessIntellect, former CEO of Spectramind (and Wipro Spectramind), and the first CEO of Genpact in its earlier avatar.

GECIS' best-known alum, Roy was the company's first CEO. He has since started and sold Spectramind to Wipro. Raman Roy CMD/AccessIntellect

In the early 1990s, when conglomerate General Electric entered the country, it did so with great expectations of the Indian market. By 2000, the company reckoned, its Indian operations would be worth $2 billion, Rs 9,200 crore; $2 billion by 2000 also has a certain cadence to it. By the mid-1990s, it was clear to the company that this target wouldn't be met and that India would take time to evolve into a significant market for its products and services. (This is something that actually started happening in 2004-05; see GE's Indian Summer, Business Today, June 5, 2005). Around the same time, the company realised that GE's insurance business in the us was having trouble coping with growth; insurance is a dialogue- and data-heavy business where customers and prospects interact with the company extensively; GEFA (GE Financial Assurance) couldn't find enough people who could do these things, do them well, and do them cheap, in the us. And so, the company decided to, as a succession of GE managers have put it, "make their back-end the front-end of the Indian operations."

The first project thus outsourced to India was labelled White Mail and it was executed by a team of 20 people sitting in a 400 sq. ft room with 14 telephone lines. "Everyday, we would get bags full of white envelopes (hence the name) with requests for change of address, of telephone numbers and the like from the us," recalls Bhasin, then CEO of GE Capital. "We would feed the information online, streamline the data, and send it back." That's how GECIS, GE Capital International Services, was born in 1997.

With six sigma, a quality philosophy (it entails 3.4 defects in a million outcomes) then the prevailing mantra at GE, GECIS came up as a six sigma beta site (to cut through the jargon, this simply means that processes could be safely outsourced to GECIS with no loss, and a possible gain, in content, quality, and efficiency). In 1998, GECIS had 800 employees and registered revenues of $4 million; the numbers had increased to 5,000 and $85 million in 2000 and 17,500 and $426 million in 2004. By that time, Bhasin and his team were handling sophisticated functions such as insurance, finance and accounting, treasury management, and document and content management for most GE operations in the western world. And by that time, GECIS' success had spawned a rash of me-toos, created an industry, and engendered the next outsourcing revolution.

GECIS had grown at a CAGR (Compounded Annual Growth Rate) of 10,000 per cent over seven years, but Bhasin wanted more. "I thought that if we could do this for GE, the toughest client in the world, we would be able to do it for others too." Around the same time GE realised that India, to it, had finally made the shift from being a resource-centre to being an attractive market. "GE understood that a BPO business wasn't its core competence," says Victor Martinez-Angles, Senior Vice President, and Commercial Leader, Genpact, and then part of business development and mergers & acquisitions team at GE Corporate, adding that the company did express some anxiety over losing control of one of its fastest growing businesses. GE also believes in driving a hard bargain with its vendors-as several of India's it services firms will affirm-and the fact that there isn't much to be gained in bargaining with oneself may have also prompted the company's decision to sell a majority 60 per cent stake in GECIS to two private equity firms, General Atlantic Partners and Oak Hill Capital Partners. "GECIS had a seasoned management team at the helm and a mature product offering," says Abhay Havaldar, Partner, General Atlantic. "We saw a huge opportunity for its business model." In December 2004, GECIS formally became a third-party vendor and in September 2005, the company was christened Genpact and although one of Bhasin's journeys was now over, another had just begun.

The amount of coverage Indian BPOs receive in western media and in India may indicate otherwise, but the Indian BPO industry boasts a less than 2 per cent share of the $400 billion (Rs 1,800,000 crore) global market for such services. If Genpact wanted to play with the big boys, Bhasin knew, it would have to go out and get itself a great senior management team. One person he approached was V.N. 'Tiger' Tyagarajan, a former CEO of GECIS between 1999 and 2002 and a star in GE Capital's global network (his last assignment before signing on at Genpact was as Senior Vice President, Operations & Quality, at GE Commerical Equipment & Finance). "I came to Genpact at what some see as a lower designation because I knew it was a life-time opportunity," says Tiger, designated Executive Vice President, Business Development, Sales & us Operations. "The BPO industry will change the way corporations have been doing business," he adds. "This company will be one of the major drivers of that change."

Q&A/Pramod Bhasin "For Third-party Vendors, Sky Is The Limit"

On captive Vs. third-party vendors: It depends on the type of work one is handling. But (being) captive restricts growth opportunities. For third-party vendors, sky is the limit. On the horizontal business model Vs. verticalisation: Vertical expertise is important but our centres-of-excellence-led model ensures that our deliveries are efficient and fool-proof across verticals. Multiple processes are also preferable because the investment for moving every single process is too high. On voice Vs. non-voice: One has to do both as each has its own merits. The business cannot survive either on high value or low cost businesses. On single vendor Vs. multiple vendors (from a client's point of view): Single vendor works out the best. Clients stand to get the maximum leverage and benefits of consolidation. On onshore Vs. offshore: Both are big businesses, but we have identified our niche in offshore business. That's where the cost advantages mainly lie.

In the first year of its separation from GE, in 2005, Genpact grew by 22 per cent, much lower than the 30-40 per cent most of its competitors (and even Indian it services' Tier-I companies such as Infosys, Wipro and TCS) hope to have achieved in 2005-06. That growth rate, explains Vivek Gour, CFO, should be seen in the context of Genpact's higher base compared to its competitors. And a comparison between it services and it enabled services isn't entirely fair; it enabled services is between 20 and 25 years younger as an industry.

"Those leading the Indian BPO industry need to succeed to establish India's pre-eminence at a global level" Kiran Karnik President/NASSCOM

Before it can drive the change that Tiger speaks of, and to reach the revenue-milestones it has set for itself, though, Genpact will have to address several challenges, some unique to it, others common to the entire industry. "Genpact will have to first reduce its business dependence on GE," says AccessIntellect's Roy. Bhasin is aware of the need to do so. "We aim to reduce GE's (the business Genpact derives from GE) share in total revenues to 50 per cent by 2008," he says. "It is already down to 85 per cent in 2005 from 94 per cent in 2004." The company hopes to achieve this by winning new customers and acquiring companies that could bring in non-GE revenues. In late-March, Genpact and NDTV announced a joint venture that would provide media process outsourcing services such as editing, captioning, indexing, and digitising analogue content. With the global media and entertainment industry worth an estimated $150 billion (Rs 675,000 crore), the joint venture is looking a huge opportunity in the eye. "It is an exciting new field to explore and potentially a business as large as the software business is in India today," says Prannoy Roy, Chairman, NDTV.

The process of building Genpact's non-GE business began a year before its separation from GE (Anju Talwar, the company's Senior Vice President who heads the non-GE operations was asked to consolidate these in early 2004 itself; subsequently, Tyagarajan has been asked to scout for more). Today, Genpact boasts 80 customers other than GE; 40 of these came through the acquisition of New Jersey-based Creditek, 15 from the acquisition of a GE unit in Mexico and 25 were new wins. One such was a deal with the us-based financial services provider Wachovia, which also saw the company pick up a 7 per cent stake in Genpact (from GE whose stake is now down to 33 per cent). And on the acquisitions front, it is targeting two to three companies with an offshore business model and between $100 million and $200 million in revenues (existing valuations in India should make Genpact itself a not-very-affordable acquisition for large global it services firms that are on the hunt in India, although, as is the case with such things, one can never tell). "We have enough cash reserves (to fund these acquisitions)," says CFO Gour. "We don't need to raise money through an initial public offering." Not that raising money from an IPO would be difficult. "A BPO firm is evaluated on the basis of its pre-tax (and interest) margins, the number of contracts on its books, customer-commitment, and the inflation-sharing equation between company and customer," explains a Delhi-based equity analyst. With estimated net profit margins of between 15 per cent and 18 per cent as compared to between 10 per cent and 15 per cent for the industry, Genpact is clearly at the head of the pack.

"With the size of deals becoming bigger, clients are beginning to prefer companies with a larger footprint" Ranjit Narasimhan CEO/HCL Technologies BPO

The other key challenge for Genpact is to address perceptions that its horizontal, platform-led model means, as an executive at a competitor puts it, "that it lacks vertical focus which could be detrimental for it in the long run." His reference is to the key-characteristic of the horizontal model, an emphasis on process-efficiency, process-quality, and delivery. And his implication is that this comes at the cost of content. Bhasin rubbishes this, pointing out that the company does possess "domain expertise," and that "we just top it off with our horizontal abilities." Pavan Vaish, the chief operating officer of IBM Daksh agrees with that approach. "Horizontal expertise complements vertical excellence and both go hand-in-hand."

Another challenge is to manage attrition. Genpact has done alright on that front: it ranked #3 in the 2005 edition of Business Today's Best Companies to Work for in India study (it was the highest-ranked BPO). "We provide our employees the best training and growth opportunities," says Piyush Mehta, Senior Vice president, Human Resources. "There is no reason they should leave us." Then, there are the stock options that the top 200 executives get.

Genpact, some of its competitors claim, is where it is because of GE. "Most contracts that Genpact has won are from GE alumni serving in top positions in these (customer) companies," says a senior executive at a rival. "At the global level, we are not competing with local players," says Bhasin. "There, we are in direct fight with biggies like IBM, Accenture and EDs; winning over them requires a creditable business model and best industry skills."

The company's immediate focus, explains Bhasin, is to move up the value chain, maintain service standards, and increase footprint. Those are logical objectives, says Ranjit Narasimhan, CEO, HCL Technologies BPO. "With the size of deals becoming bigger, clients prefer companies with a larger footprint."

Over the next few years, Genpact has set itself the target of growing by between 25 per cent and 28 per cent organically (acquisitions, then, will be key to achieving the company's revenue targets). Anything faster, reckons Bhasin, would throw the company off balance. "Managing growth is the biggest challenge." Then, it's the kind of challenge any company would love to be faced with.

INDUSTRY-CHALLENGES AND GENPACT'S RESPONSE

Go-go in Gurgaon: Employees at Genpact's Gurgaon centre at work Customers prefer vendors offering integrated IT and IT-enabled services RESPONSE: IT and ITES may have apparent linkages but at a basic level, these are two different disciplines. So, integrated IT and IT-enabled services will never hold true. Indian BPOs face competition from competitors in countries such as the Philippines RESPONSE: They do face competition, which is why we are expanding fast. We are already present in low-cost destinations and will be opening a new centre in the Phillippines soon. But India will never lose its relevance for the industry because of its huge population base and talent. Attrition in the Indian BPO space is at an unmanageable 45 per cent RESPONSE: Offering employees a career and not a job is the solution. Attrition in Genpact is 30-33 per cent and that's thanks to solid training and growth prospects. The BPO-industry has to identify the IT industry's equivalent of moving up the value chain RESPONSE: It already has. Most of the top players in the industry are already doing high-end jobs like handling high-level finance and accounting, insurance and analytics functions.