Q: Tell us how Evalueserve started: how did you know and how to start business together?
Alok Aggarwal: I basically came to the United States in 1980. I received a Ph.D. in computer science from Hopkins University in 1984. I joined IBM ’s research department in 1984 and worked there for 16 years. I established the IBM Research Lab in Delhi and became a director in 1997. At that time, the Internet was booming, so one of the strategies was that we should open a laboratory in India, because we lost researchers to Indian Internet startups. United States. Therefore, I was ordered to open a laboratory in India and moved to Delhi with my family in 1998. I started the laboratory in April 1998 and developed it into about 35 PhDs and 35 masters.
Marc Vollenweider: I am 100% Swiss. I graduated from the Swiss Federal Institute of Technology in Zurich and am an electrical engineer. Then I joined McKinsey as a newbie and as a business analyst. I spent a year at McKinsey (McKinsey)-it was 1990-1991 to go to INSEAD in Paris to study MBA. Then I rejoined McKinsey, stayed in Switzerland, and was elected a partner in 1998. Then in 1999, I moved to India with McKinsey and became one of the consulting business partners, responsible for the healthcare business and many other matters. Then, I was also responsible for the so-called McKinsey Knowledge Center, which was an initiative led and promoted by McKinsey’s then global head Rajat Gupta.
The goal there is essentially to establish a research center to support consultants around the world with high-quality rapid research. So, suppose you have a question-how many companies meet these conditions and these conditions-you will send an email to India, and some busy bees are dealing with the problem, and send the answer in the form of a ZIP file, and then you return in the morning To the office, you are ready to answer. We started with an initial 12-person team and increased it to 120 MBAs between 1999 and 2000. This is a pure captive, and only meets McKinsey’s needs internally. Then I knew that this might be an interesting third-party business model, so that’s why I started thinking about starting my own company in March / April 2000.
AA: Interestingly, we met because the children going to the American Embassy School in Delhi had a birthday party. I think it was early May 2000. When we started talking, we realized that he was thinking about one aspect of research and analysis, and I was thinking about another aspect; then, why do n’t we create a company that provides various research and analysis services and other high-end services related to knowledge expertise Company? Therefore, we met several times during that time (July / August 2000) and quit McKinsey and IBM in November 2000, and established Evalueserve (for “evaluation services”) in December 2000.
Q: When you set up your own company, did you involve McKinsey funds?
MV: No, neat. Alok and I have invested our own money, McKinsey has no institutional funds. We are privately owned, we own the vast majority, and then we have a Swiss private equity investor, you can call him a super angel … so in the first few years of 2001, 2002 and 2003, we needed some funds to grow, Because we started to turn a loss into profit in 2002, this is actually quite good, but if you grow at a rate of 100%, then the largest capital consumption item is actually not an office or computer: it is accounts receivable. Because you are essentially prepaying for income; because the personnel costs on your balance sheet are there, but you are not getting income. Therefore, you need to balance these before you can grow at a rate of 100%, and even if you make a profit, you need some money. Therefore, we raised some funds with very small chips. In the next five years, we conducted five mini rounds-even mini rounds, you know, 100,000 dollars here, 100,000 dollars there. Since 2005, we have not spent any money.
AA: After seven and a half years, we have about 2,500 people worldwide. Of these 2,500 employees, about 60 are customer engagement managers. Therefore, we conduct business development, sales, and hold customers with our right hand and our experts in our back-end research centers with our left hand. Because we are very involved in customer delivery and customer management, these 60 jobs are not performed at the headquarters; we have about 28 in the United States, 2 in Toronto, Canada, and about 25 in Europe, of which 11 or 12 In the UK, from a sales perspective, the UK is our second largest territory. Then we have one in Shanghai, one in Hong Kong, one in Singapore, one in Australia, and one in India. This is about our team of about 60 people.
Our back office is actually a physical office, located in China, Romania, India and Chile-therefore, we call it “BRIC” rather than “BRIC” … India is the first A family that opened in December 2000; we currently have approximately 2,130 people in India. China ranks second with 160. We provide Japanese, Chinese and Korean services as well as related knowledge services in three languages. In Chile, we are located in Valparaiso, about 45 minutes away from Santiago; from there we provide Spanish and Portuguese services, we cover the Latin American market and the Hispanic market in the United States, the market is developing very quickly-currently about It accounts for 10% of US GDP and is expected to double during this period for the next 20 years. This not only helps us cover these languages and various countries, cultures and customs, but also helps us. It also helps us to provide an average of 24/6, because we are able to transfer work to Chile in a smooth manner instead of people working in India or China at night.
Romania is particularly interesting for us because our location Cluj is a university town and many people speak German very well-so we will be able to cover Germany, Austria and Switzerland well. We can also cover Eastern Europe, especially Russia, Ukraine, Azerbaijan, Romania itself, Poland, Hungary; with the oil outflow from Russia and some other eastern countries, the region is growing very rapidly, so it is expected to achieve good development. Therefore, we basically provide knowledge services, most of which are research and analysis, and some of them are middle-level office jobs, but all of these are knowledge services for banks, pharmaceutical companies, healthcare, technology, media, telecommunications, etc.
Q: What do you think are the biggest challenges encountered in the enterprise life cycle? How to overcome these challenges?
MV: I think it’s very simple. These 2500 guys need to be busy. Marketing and sales are always the biggest challenges. Initially-we called it the “double divide”-when we first went to meet people, we said, “Hey, this is Evalueserve”, they said, “Oh, so do you want me to outsource my strategic research? “This is the first divide, because no one has done it before: this is a completely new concept; no one knows that it can be done. Therefore, this is a huge obstacle.
AA: Obviously, there was no such offshore outsourcing until 2000 and 2001. The only company doing this is the McKinsey Knowledge Center, which had about 120 people when Marc left. American Express is doing some credit card analysis, which may require another 100 people. General Electric was analyzed by another 200-250 individuals. Therefore, when we started operations, the total number of people by the end of 2000 was only 500-1,000. If you look at the entire knowledge service or knowledge process outsourcing industry, India alone has grown to about 75,000, so it has experienced quite strong growth in a relatively short period of time. Of course, this also brings its own challenges, because humans are not like robots. The skills required in the knowledge service industry and the knowledge process outsourcing industry are quite detailed and deep knowledge that people need to understand-you can learn partly through experience and projects.
MV: Then the second element is that they say, “Are you from India?” Then we have to say, “Yes, it is really very effective in India.” This is indeed a double chasm. To overcome this and introduce a new concept, this is indeed a challenge. Then, the next challenge is to build a scalable sales force. You know, now we have about 50 sales people, these people are obviously very expensive people. Therefore, we must find a model that is actually scalable and economically feasible. I think this is the second very big challenge.
Q: How do you recruit these specific skills?
MV: So far, we know what works. Therefore, these people may be people with a former Reuters background or a former research background who must sell research results-I call them salesmen in the field of “research services.” Therefore, these are very good people. Then there may be more remote people or people working in their respective industries, such as those in the marketing department, and have an angle to sales-want to enter the sales field. Therefore, you can say that the common elements are: there is a sales perspective, an understanding of how professional services work, and then an industry perspective. If these three elements work together, then usually we have successful sales people like this: usually Between the ages of 30 and 40, approximately within this ability range.
Q: What is the difference between Evaluserve and its competitors?
AA: Four or five things. One of them is our geographic coverage at this point in time. We are more like a global organization, so, as I mentioned before, we can provide services almost seamlessly 24/6 without having people work in night shifts or cemetery shifts. The second fact is that since we have 2,500 employees, we are able to introduce areas that others may not cover, so we have a fairly strong vertical market in areas such as oil, gas, and utilities, and I want to say that most of us compete There are no opponents.
The third point is-just as I explained how Marc and I got together, I call it accidental. This is not to say that we have a good brand vision, which happens more accidentally than anything else-we are more than us Leading by about 2½ years. competition. We are the first company to develop the entire KPO service business, define it and treat it as a third party in a very clear way. Fortunately, I believe that we still have an advantage of 2 to 3 years over most companies Competitors. I mean, in the drafting of intellectual property patents, we often see some comments from competitors. We say, “Yes, we published the same comment in 2005-2006.” Therefore, we know what evolution level and evolution state these people are in.
MV: Then I think this is a service combination, which is very unique in our case. We are completely based on research and analysis, so we do not do any business process outsourcing or IT outsourcing, only this one-our 2500 employees are only engaged in customized research and analysis. For example, this is the difference between us and Infosys BPO or Genpact, which also tries to carry out some activities in the KPO field. But we are pure games. We will only do this-obviously with the necessary attention. There are some niche market participants, and we are more extensive than these niche market participants.
I think our service portfolio is investment research, which is the field of investment banking, hedge funds, etc .; business research is more like what the market does, what the participants do, what the company does, these kinds of questions; market research, which is More phone interviews; then data analysis, which is more statistical software packages for counting large data sets; and finally, technical analysis around patent analysis. This is a unique product that has a very high synergy in our case, but few others.
Q: What is “KPO”? Are there any restrictions on the content of outsourcing?
AA: This is a very interesting thing. When we think of this word, I think we have a very specific meaning. We rarely use the term KPO in conversations with customers, because for me, it has become a word like “love”: everyone “loves” everyone else, but what does the word “love” mean ?
What happened is that when we started, there were many call centers and BPO companies engaged in low-end finance and accounting, low-end human resource outsourcing, credit card processing, etc. In 2001, 2002-and even 2003-some news media and journalists asked us what we did. We will say that we are providing research analysis and knowledge analysis services outside of India. They will always say: “Oh, you are another BPO-is this a fair statement?” We will say “Yes, but you know Knowledge service is fundamentally different from BPO. “
Mark and Ash [Gupta; Evalueserve’s CCO and India country head] When discussing this issue in 2003, they basically said “we are actually a KPO” because knowledge is part of the work we do, and the stronger our ability to provide knowledge, the more fees we can charge-and In the BPO, the charge is quite good. The reason for the definition is that the process is clearly defined: the operator or help desk who is answering the phone, they ca n’t actually charge more. But here, if you are on the value chain-if the person has ten years of experience in the telecommunications field and can provide more in-depth knowledge-even outside of India, we can charge a fee of $ 75-80 per hour . In the United States, the corresponding rate is more like $ 400 per hour.
Therefore, in August 2003 or September 2003, a reporter from the Economic Times asked Ashish ’s common questions. Ashish said, “Actually, you know that we are KPO, not BPO.” I ’ll post it later tell me. This reporter did not fully understand it, but wrote an article, he said “Evalueserve talks about becoming a KPO”, and I am actually an inner researcher and started research, we finally determined that KPO is What and its size The market size is about-about 17 billion US dollars worldwide-outsourced to low-wage countries such as India, the Philippines and China. I gave a speech at Bell Communications in New Jersey in December 2003 and wrote a paper in April 2004. Fortunately, within a year, the Indian news media used the term KPO, which Spread quickly like fire.
Therefore, the difference between KPO and BPO is basically the following: In BPO, the process has been clearly defined, such as how you will answer specific calls, the level of upgrades that will be performed, and so on. On the other hand, there is no such process in KPO. So, for example, if you go to a patent attorney and you ask the patent attorney “We want to take part of your job and do it in India”, he will say, “Are you kidding? The person who helped me sit next door, We discuss writing at least 3 to 4 times a day; this is an art, not a science, without any process. “
Therefore, in a typical KPO project, the first thing is to actually persuade the person and take part of the artwork, and process it in order to transfer it to India, China, Chile and other places. But because it can never be completely eliminated-because there is indeed a part of the art that is owned by a “rock star” patent agent or a “rock star” securities research analyst-15% -20% still remain in their minds , It must come back, and to complete the project, it must still be done by someone with real knowledge and in that country or in a specific country to complete the 15% -20% domain. Therefore, x is relative to what we call x minus, where x% is done in the US or the UK, and 100 minus x is done in the Philippines or India or anywhere else. This is the difference between BPO and KPO.
Therefore, first of all, there is no process that can be discarded to recover it. Second, knowledge is an important aspect of knowledge. The higher you go in the knowledge chain, the more you can pay for the project; third, some final modifications (suggestions, opinions, etc.) may account for 5 %. I would say that in some cases 40% must be provided by front-end personnel.
Q: Where did most of your research go? Will the direction change over time? For example, is there still more research based on technology patents?
MV: It grows proportionally. When you look at the details, we will complete about 40% of the work in investment research, such as equity analysis, investment banking or funds; in the field of business research, about 25% of the work is similar to “What is this market doing, This is a customized newsletter, this is a company profile. ” Then, we will conduct about 12% of market research, and conduct intellectual property research of the same scale, the rest is data analysis and knowledge technology. In terms of customer segmentation, we once again accounted for about 40% of the financial industry; I would say that 20% is professional services-consulting companies, research companies, law firms-the rest is corporate services.
Q: Is the situation changing now?
MV: No, no, it’s actually the same. It is growing more or less. This is actually very surprising, it has not really changed. We believe that due to all the subprime mortgage crisis and other reasons, investment research will be affected to some extent, but this is not the case. In fact, this has increased the pressure on these companies to outsource.
Q: So, what will be the next big division of KPO?
AA: I think the pharmaceutical industry can easily do this. The problem that the pharmaceutical industry is experiencing is, for example, the cost of producing drugs and obtaining FDA approval is increasing at an alarming rate. For example, only 26 drugs were approved last year, and the cost for research, development and approval was $ 39 billion. At the same time, the population of most developed countries is aging, so the demand for drugs is increasing, but there is no money to spend on them. Over time, it does not matter whether the United States enters a socialized medical system: it has basically been socialized through Medicare and Medicaid insurance plans.
Therefore, these pharmaceutical companies will have to do two things. First, on the one hand, they will have to find other markets to sell to India, China, and other emerging markets; however, the people there do not have this purchasing power, so they must price their drugs lower; second, they will have to Ways to find ways to reduce drug costs. Invent them first, then get approval-this is a very, very mature field, and KPO will benefit them.
Q: Do you think the driving force behind outsourcing is changing, what is the biggest threat?
MV: Okay. Sometimes people say that costs are increasing: salary and your salary increase. But as far as we are concerned, I have a fairly simple answer to this. I said that in our case, we have a very simple strategy: we will be located in the five regions with the lowest cost and the highest skills in the world. This means that by definition, I can prove mathematically that I will always have a cost advantage. Because, rightly, you will always be in the lowest cost and highest skill position. I think that’s fine.
But the biggest challenge will be to add value to customers. This is not a threat, but a challenge, because customers want more value-added, thinking, and especially our insights. They want productivity, they want global coverage, they need 24×5 … so when you look at how service levels have evolved over the past few years, it’s really amazing. Today, I can do something here that I couldn’t even imagine two years ago. Therefore, the speed of things is actually increasing. This is not only linear, but it is still increasing.
I think the second point is the battle for talent. People ’s requirements for outsourcing participants mean that they must have the ability to train higher levels and develop talent, which means you must have a very solid training process-for example, we have a program called “Caring for People”, including different Career development model, work / life balance and many other aspects. It is crucial to do this. The third thing is leadership. Especially in emerging economies, you find that there are few experienced leaders, so you must essentially guide people into leadership positions that would otherwise be impossible. Some of us are about 30 years old and lead about 120 people. Now, I was only 15 years old. Therefore, I think creating this kind of leadership from within is an important factor.
Other than that, I do n’t think there are major challenges because, as we usually tend to say, participants in this field should actually cooperate in developing the market-because the largest part of the market has not yet been resolved, which is internal to the company Work still in progress-not even completed! I mean the people who work best with us are actually using us to promote growth; they do n’t use us to cut costs. Very interesting, do you know? They put forward new ideas and use us to complete their growth. These people really make good use of us. Perhaps the battle for talent may be the biggest threat, because if the company does not do well, they will lose. That’s it
Q: Finally, India has dominated the offshore outsourcing market, and it has been for some time. Do you think there is no indisputable dominant position in the short to medium term, if not, why?
AA: India is developing so fast in outsourcing, but it is also important in the domestic industrial field, which is developing very quickly. The outsourcing export industry has the same needs as the domestic industry and employs the same or similar types of people, so wages continue to rise and losses are also great. I think that the risk that is even greater than the increase in wages is layoffs: what we call “job-hopping.”
I think one of the biggest challenges-unfortunately, because these people are still very young, they are not really aware of this at this point-the cultural change that India will face seems to be happening to young people, young people are about to graduate People, just change their job as long as they wear a hat-and I will go further without even wearing a hat. They said: “Well, it’s boring, let’s go, still” or “I will get a 15% salary increase from the next company, let me get an annual salary from Evalueserve, let me float my resume, get it from another company 15% salary. Company. “
What they did n’t realize was that whenever they moved from one job to another, they did n’t actually do any work for Evalueserve in the last three months. In the first three months, they were learning about the culture and working style of another company. Therefore, they have wasted six months of life, where they have not really learned much, and because it is all about knowledge and learning, they are screwed up. They completed this work four to five times until they spent about seven years in the game, and about two years have been wasted in the whole process. They have basically completely excluded themselves from the market.
Because if we look at their resumes in the future, even if we send their resumes to the client and say that we want to use this person, it is likely that the client will refuse to say, “You cannot use this person for my job, he seems to have been changing jobs , I do n’t know what kind of knowledge he has, what kind of person he is, and overall, this is not only true for KPO. In the Indian export industry, export service industries such as IT outsourcing, BPO and KPO exports may be The biggest challenge facing the Indian service export industry.