Digital in Devanahalli

Sriram Raghavan, Co-Founder of Comat

Half an hour from Bangalore’s airport, villagers line up outside a nondescript shop in Devanahalli village to get a copy of government records ranging from birth, death and caste certificates, to land records. Until three years ago, they did not have this option; residents who wanted to buy land or get certificates to enrol in college had to trek to Bangalore city and the government department concerned, and dodge or deal with waiting touts to get their records.

Today, they can just walk up to a rural business centre (RBC) set up by Comat Technologies, pay Rs 15, give them the relevant number (survey number, in the case of land records) and walk away with a document. Two years ago, when real estate prices rocketed as the airport neared completion, Comat’s centre in Devanahalli was jammed by locals who needed these land records to make a quick buck.

If Devanahalli now blurs the line between urban and rural India—with the IT capital just an hour’s drive away—the attraction for Comat’s services lies in the smallest of villages. For example, in Shanboganahalli, some 30 minutes from Ramanagaram town on the Bangalore-Mysore highway, Comat’s centre is located next to a cow shed and its customers often come straight from the fields—feet bare, dressed in dusty kurtas and frayed striped shorts. Land records are the most popular, but at this time of the year, with college admissions under way, caste certificates are chart-toppers.

Comat, which services 60,000-70,000 customers a day across 800 centres in Karnataka alone, has spread to five other states with mixed success.

“The government may be the largest service provider to citizens, but its services are often tagged as bureaucratic and inefficient,” says Sriram Raghavan, Co-Founder of Comat. “We provide services only where the citizen has direct contact with a government department… we want to provide competition and improve the quality of service delivery.”

Comat’s business model hasn’t happened overnight; the company can trace its roots back to 1992 when two friends, Ravi Rangan and Sriram Raghavan, started Comat in the US to develop software. Version 1 of Comat lasted only a couple of years. It was reborn in 1996, with a focus on government technology projects, and offices in the US and India.

In 1995, the Union Government kicked off the revolutionary voter ID scheme and Comat was one of the companies selected for this project. It started small, with just one district, Shimoga in Karnataka, but it expanded across the state, before eventually covering 11 other states.

In 2001, Raghavan decided to sell the US operations to Dallas-based Worldwide Employees Inc. and returned to India to fashion Comat’s next evolution. This time, the duo decided to look beyond just IT and focus on enhancing delivery of citizen services as its business. “We started as a technology solutions provider and leveraged some early projects such as the Bhoomi electronic land records initiative to graduate into services delivery,” says Raghavan. Since then, Raghavan has taken a more central role, with Rangan being more hands off.

The graduation didn’t happen overnight; the company spent years working on the back-end work flow for government departments, which were paper-based and difficult to digitise. It was only in 2006 that the company launched its first services delivery centre and it has been a slow, tough climb to its current size. “Delivering these services has been a monopoly of government departments and the lower levels of bureaucracy didn’t openly welcome us,” admits Raghavan. “Our goal is not to keep the local bureaucracy happy.”

Each of these centres is around 200 sq. ft, costs Rs 1.5-2 lakh to set up and is manned by Comat employees. Since sensitive personal data is handled, the government is wary of letting franchisees into the business. The centres use VSAT satellite connectivity often backed by a broadband Internet line to access government records.

There were (and still are) other teething problems: often, it is hard to find a suitable location, and infrastructure, especially electricity, is a bugbear. The day BT visited Comat’s Devanahalli centre, the power had been turned off at 10:30 a.m. and would return at 6:30 p.m. While the back-up lasted for a few hours, staff were eventually rendered, literally, powerless. “We have tried other solutions such as solar power, but the capex required is Rs 2 lakh per centre, which doesn’t work,” says Raghavan.

While Comat’s business model is reliant on the government giving it a fee, some layers in the bureaucracy are throttling its cash flows. Centre managers typically give all their collections to a local government office, which in turn returns the fee due to them. “We are in effect providing working capital to the state administration,” says Raghavan, “the government almost never gives us our dues on time.”

The long-term potential of Comat’s business model seems to have attracted investors in droves. In three rounds of funding, investors including eBay Founder Pierre Omidyar’s Omidyar Network (its first direct investment in India), Unitus Requity Fund (first investment outside of microfinance), Enam and Avigo have pumped in Rs 80 crore. “The capital intensive nature of its business is a big challenge and Comat’s centres need to generate enough revenues to be self-sustainable,” says Maya Chorengel, Managing Director of Unitus Equity Fund.

Despite these operational hurdles, there is a viable business to be built around social enterprise, Raghavan contends. “Building a social enterprise is a lot more challenging and fulfilling than a conventional business. There is a compelling business case here, but the road is a lot steeper,” he says. Comat, for example, set up 730 RBCs by April 2007, added another 40 by January 2008, before taking its total to 800 operational centres, even though there are around 2,000 in various stages of development. Eventually, Comat hopes to reach 10 lakh customers daily.

To achieve this goal, Comat needs to shave costs, expand its network and deliver more services through them. Even as it expands its presence in Karnataka, the company has already rolled out similar units in five other states and is also expanding the bouquet of services on offer. “We already have 45 centres in Sikkim for example, but there we deal more with NREGA applications and various types of government dole, unlike in Karnataka,” says Raghavan. Elsewhere, the company has also set up centres in Haryana as it seeks to expand.

Besides looking to expand its footprint, Raghavan also believes that Comat can improve its “vertical” presence by offering more services to citizens (life insurance premium payment and mobile phone recharge, for example) and target newer consumers including women and children.

Then, Comat recently announced plans to train around 15,000 rural people to run its RBCs and says it will ramp this up. According to Raghavan, Comat sets certain minimum qualifications (education, ability to attend daily tutorials for people already holding other jobs) and imparts onthe-job training to rural youth. “We were approached by the Karnataka Government for some training programs six months ago,” says Raghavan, “we’ve decided to impart some basic training to about 2,500 people per month for a year and then consider its future.”

Besides employing them in its own centres, these people can also look for employment on government offices or where rudimentary computer skills are needed, he reckons.

With the rural economy expected to be the next growth engine of the Indian economy, Comat may play an important role in catalysing its growth.