Busy at the back of the office

In early 2000, no entrepreneur was willing to bet on the domestic market for business process outsourcing (BPO). Reason: It was a relatively lowmargin business (margins were a third of those in global outsourcing); also, there were not many large Indian corporations willing to outsource their business activities. That didn’t faze a 43-year-old Sandip Sen, who founded Customer First Services in Bangalore in 2001. This economics graduate from Kolkata’s Presidency College, whose last job was at Hutchison Max, sensed a big opportunity in domestic telecom and financial services outsourcing. It wasn’t long before the likes of BPL, Standard Chartered, the UB Group and Apollo Hospitals became his clients. In five years, Sen had some 2,500 employees in offices in half-a-dozen cities.

Cut to Lance Rosenzweig, a 47-year-old entrepreneur based in Los Angeles, who, in 1998, cofounded PeopleSupport Inc. along with a friend, David Nash. Rosenzweig, who had worked with GE and Morgan Stanley, did well to survive the dotcom bust in 2000 by migrating a bulk of call centre operations to low-cost destinations such as the Philippines and Costa Rica. Eight years down the line, even as the global economy was rattled by the subprime crisis in the US, Rosenzweig winged himself to Mumbai to explore opportunities in one of the fastest-growing economies of the world. “I met over a dozen Indian BPO companies before tying the knot with an Indian partner—one who shares the same core values and commitment to quality,” says Rosenzweig.

The common strand binding Bangalore’s Sen and LA’s Rosenzweig is the Ruias’ $18-billion Essar Group, best-known as an integrated steel giant (right from mining iron ore to selling ready-to-market products). The Mumbai-headquartered group is also known for its joint venture in telecom with Vodafone, a refinery, and shipping and construction ventures. But few would associate the Ruias with a thriving outsourcing model that’s been built brick by brick over the past six years. Sen and Rosenzweig are just two of the entrepreneurs who are a part of the lineup that’s at the forefront of Essar’s major—but almost hushed—foray into IT-enabled services (ITES). By merging their respective companies into an umbrella entity called Aegis, these entrepreneurs have got a second wind with more than a little help from the financial and strategic muscle that only a conglomerate can provide. “We are creating a platform for entrepreneurs so that they can survive and thrive,” says Aparup Sengupta, Managing Director & Global CEO, Aegis Ltd.

The 44-year-old Sengupta himself has been a serial entrepreneur, having founded ITES firms like 24/7 Customer, IonIdea and Think Harbor in the US. “We need people with passion, who can also bring innovative ideas to grow the business,” says Anshuman Ruia, Director, Essar Group. Ruia, the younger son of group Chairman Shashi Ruia, adds that the ITES portfolio is a well-thought-out strategy of the group to diversify the portfolio away from commodities (steel) and annuity businesses (power) to services (telecom and BPO).

The ITES onslaught can be traced back to 2003, when the Ruias made their first acquisition, of Aegis Communication Group in the US for $28 million. Another 12 followed in the years to come. Aegis was struggling with some $22 million in losses. The takeover trail hasn’t ended: Last fortnight, the Ruias picked up CCN Group of South Africa for $30 million. Today, Aegis BPO is valued at a billion dollars, with some 35,000 employees and 32 global locations. It is also profitable, say company officials. “Our ambition is to grow as big as we can in the services space… we are a value investor,” says Ruia.

Essar’s edge in this business is courtsey of its decision to focus on the India opportunity early on. The domestic BPO market is today worth $1.6 billion and is expected to grow to $6 billion by 2012. The biggest pieces of that pie are financial services, telecom, healthcare and railways.

What’s more, the Aegis team’s strength has been to acquire overseas companies—many of them in distress—at attractive valuations and turn them around quickly. “We integrate a company in less than 100 days,” says Sengupta. “Our target is to buy 3-4 on an average every year,” he adds.

Yet, the Ruias’ ITES ambitions aren’t restricted to BPO alone. Just two months ago, Aegis floated a subsidiary, called Aegis Tech, to provide customised solutions to mid-sized companies in voice & data networking, unified communication, managed services, information security and remote infrastructure management. The man spearheading this venture is another entrepreneur, S.K. Jha, who had founded a company called 3D Networks, which he sold to Wipro Infotech in 2006. After working at Wipro for some time, he moved on to join Aegis Tech as President. “Our aim is to build a company with revenues of a billion dollars in the next 36 months,” says Jha. The Ruias will pump in $100 million over 12 months to capture growth opportunities. “We are on the look out for acquisitions in remote infrastructure, system integration and allied space,” reveals Jha.

Other outsourcing businesses under the Aegis umbrella include Aegis Engineering, a knowledge process outsourcing (KPO) firm that focusses on engineering designs for manufacturing, refining and electrical plants; Aegis Direct, a marketing vehicle with direct sales agents, which pays special attention to last-mile delivery for industries like financial services; and Aegis Aspire, which is seeking to create employability in the BPO industry in India and abroad.

The core of Essar’s ITES portfolio for some time to come will be BPO, which had revenues of half a billion dollars last year, and which the company claims is the fastest-growing BPO in the world (at a rate of 50 per cent as against the Indian BPO industry’s growth rate of less than 30 per cent). NASSCOM has ranked it at #8 amongst India’s top BPO exporters for 2008-09, ahead of Infosys BPO and HCL BPO.

The Ruias will follow a growth strategy similar to that in BPO in its other businesses—of growing rapidly via acquisitions to build scale. The promoters are active investors in their ITES companies, not content at just writing out cheques. “Scale and size are something one learns from the group,” says Sengupta who meets the family at least 1-2 hours every day. “It’s very inspiring,” adds Sengupta, who is also a part of the global management committee (GMC) that charts out the business plan for the entire group. With a BPO operation that’s worth a billion dollars and plenty more irons in the ITES fire, the Ruias would clearly be in a mood to give this services prong of their diverse portfolio pride of place.