Business
India
Can a pure domestic
BPO survive? Ex-Citibanker Tushar Chopra is proving
that’s possible
The recent ruckus in some US states about banning
government out-sourcing contracts made Indian BPO
players who depend on that market for business somewhat
jittery. But Tushar Chopra, managing director of
ATS Services, was unruffled. His 300-seater BPO,
located in an industrial estate in Delhi, is a niche
player with a differ-ence. For one, most of his
clients oper-ate in a segment that ATS is consciously
targeting — banking and financial services.
Moreover, they are all local arms of multinational
companies, making Chopra’s client roster blue-chip
but exclusively domestic. It includes the likes
of American Express, Standard Chartered, Cargill,
and Tata AIG.
“The domestic financial services industry
is underserved and growing rapidly. We’re
riding along with this trend,” says Chopra
about his fledgling firm’s offbeat business
model. Apart from newcomers like Tata AIG, Chopra
sees opportunities in banks that are seeking to
build new franchises (for example, in retail) as
well as the emerging trend among big players to
opt for outsourcing. Consequently, ATS is well on
track to achieving its Rs12 crore turnover target
for this fiscal.
Is Chopra onto a good thing? Subbu Subramaniam,
inves- tment partner at Barings Private Equity,
an early investor in the BPO space, thinks so. The
uni-verse is big enough to keep firms like A T S
busy, he feels. “The market poten-tial is
a derivate of all bank accounts, all mutual fund
folios, all credit card hold-ers, and all insured
people!” says Subra-maniam. It’s a world
that Chopra, an I I T alumnus and MBA, is well plugged
in to. In fact, ATS’ domain expertise is derived
from Chopra’s 25-year experi-ence as a career
banker, initially with Bank of America then with
Citibank.
It was at Citi that he made his first acquaintance
with outsourcing when he set up Northern India Credit
Factors, a card collection servicing subsidiary.
(That eventually morphed into EServe, Citi’s
outsourcing arm). Chopra’s latent entrepreneurial
drive came into play when he quit to set up Avco
India, a consumer finance company that was later
renamed Associates. Just before Associates was acquired
by Citi in 2000, Chopra left to strike out on his
own.
At the time, BPO was the new buzz-word and McKinsey
had published its first report spelling out the
huge busi-ness potential, so that seemed the way
to go. Although the dot.com boom was showing signs
of winding down, Chopra had no problem, given his
background, finding investors willing to bankroll
his venture. Citibank’s pri-vate equity arm
wrote out a $3 million cheque for a 49 per cent
stake and A T S was in business.
But as Chopra quickly discovered, personal cachet
may get you investors but not necessarily clients.
Although he was cordially received by all and sundry
on Wall Street and elsewhere, no con-tracts materialised,
not even from Citibank. Looking back with the bene-fit
of hindsight, he explains: “We had no track
record, no size, and no demon-strable experience.”
Then came Sep-tember 11 and all hopes of big-ticket
offshore contracts vanished. In a bid to survive,
Chopra drastically scaled back, realigned operations,
and changed focus to the domestic market.
“Domestic margins are much lower than those
in international contracts, so my cost structure
is necessarily tight. This makes us very competitive,”
he explains. The monthly billings rate of Rs18,000
per seat makes Chopra a fanatic about keeping expenses
in check. “When you’re in the high-mar-gins
game then your expense discipline is not as good
as ours is.” A side benefit of having clients
in the same time zone is that unlike most BPOs,
which run a graveyard shift, ATS is entirely a day-time
operation. Consequently, hiring is easier and the
staff attrition rate is below the industry average
of 40 percent.
But Rajiv Memani, national director (corporate finance)
for Ernst & Young, argues that while from a
topline per-spective banking and financial services
promise growth opportunities, pricing is a key challenge
for players like ATS. “Quality service is
difficult to sustain at today’s price point,”
he says. Realising this, Chopra is pushing hard
to move up the chain and boost margins with added-value
services like customer retention contracts. Curiously
Citibank, the main investor, is not among ATS’s
customers.
Although S T D rates have come down, Chopra feels
telecom costs, which account for almost half of
total expenses, are still a constraint to growth.
That explains why ATS remains Delhi-based and cannot
realise its national aspirations. “High STD
charges make this a very localised industry,”
confirms Memani.
With 300 seats ATS has reached criti-cal mass to
break even, but it will turn in profits, claims
Chopra, once capacity expands by another 100 seats.
Although its domestic focus has served it well,
Chopra’s aspirations are not limited to it.
Having the aggregate skills and a track record in
place, ATS can now look for clients in other time
zones. Ide-ally Chopra would like to double capac-ity
to 600 seats because “the bigger we get, the
easier the decision to outsource from us”.
Then, who knows, Citibank could sign up too.
