Kale rides the BPO wave

After tasting success in its airline software business, Kale is now seeing good business in BPO. Its new offerings for the industry include revenue accounting, sales audit and ticket proration. Chitra Padmanabhan reports

Kale's first focus will be to increase revenues to Rs 2.5 crore per month by the end of 2004, says vipul jain

Once upon a time not so very long ago companies outsourced only specific functions such as customer service to business process outsourcing (BPO) players, and preferred to carry out their core functions in-house. All that is changing today.

Corporates, which typically saw outsourcing as a cost advantage, are now willing to experiment by outsourcing key functions such as HR and accounting, and are on the hunt for BPO players who offer niche services. This trend is driving BPO service providers to build the domain expertise that’s necessary to stay in the business.

Sensing this trend, many software companies have started their own BPO initiative since a company having proven domain expertise has a clear advantage over a pure-play BPO player. For instance, if a company has been a software provider for the banking vertical, it has a better chance of bagging outsourcing contracts from banks. Such a company is also likely to exude greater confidence, and stands a better chance of convincing the outsourcing company about its capabilities.

One company poised to do so is Kale Consultants, which has created a niche for itself by providing software for the airline industry since 1993.

Its BPO business has been branded as Managed Process Services (MPS), which at present offers end-to-end revenue accounting and sales audit services to the airline industry. Kale’s MPS centre uses its own software products, Revera, Apex, Faregain and Prism. "The most important feature of our MPS offering is that we use our own products and processes to provide these services. Another advantage we have is the opportunity to constantly upgrade our technologies by virtue of our interaction with the airline industry, which in turn strengthens our domain knowledge," says Vipul Jain, the company’s managing director.

Since Kale makes use of its patented products, it has evolved the strategy of dividing its services into three business models: outsourcing, providing software services, and only part-outsourcing of business processes. "The option lies with the customer. We can offer the same services on an outsourcing model, or if they wish to carry out the processes in-house we can provide the software, or if the customer prefers part-outsourcing then we can offer the same. Thus, all our services are complementary in nature," says Jain.

Variable cost model

Kale offers to handle the complexities of passenger and cargo revenue accounting on a completely outsourced basis. The second area that Kale focusses on is sales audits, which assess the revenue due to the airline. This is very useful because the airline industry, which deals with ticketing agents, experiences losses in revenue due to various malpractices. For example, there are certain conditions attached to every airline ticket; if an agent violates these conditions and sells the ticket at a lower fare then this revenue leakage can be detected through a sales audit. Here the value proposition to the customer is that the fee charged is a percentage of the revenue leakage detected. "If an airline had to set up this department within its premises it would have to compulsorily incur fixed costs which would eat into its profitability. We work on a variable cost model where airlines are spared the expense of infrastructure and are only required to pay fees in relation to the revenue procured," explains Jain. Kale at present offers revenue accounting services to Qatar Airways, the Portugal-based Air Luxor and Canada-based Canadian North. On the sales audit side it caters to Malaysian Airlines and Qatar Airways.

Future services

At present Kale’s MPS is at a stage where it has consolidated its entire revenue accounting and sales audit services. It now plans to introduce additional services for the airline vertical such as interline billing, ticket proration and cargo sales audit. Interline billing services will enable airlines to track receipts from and payments to be made to other airlines in case of tie-ups. "Our future services are in the trial phase, and will be moving to the production phase by the end of this year," reveals Jain.

The company has also drawn up long term plans to give a sense of continuity to its MPS business. In the first phase, Kale plans to scale up its centre, which currently accommodates around 200 people per shift. "After we fully move into the production phase for our new services, our first focus will be to improve our run-rate to touch Rs 2.5 crore per month by the end of 2004," says Jain. Last year the company’s overall revenue was approximately Rs 15 crore, and if Kale’s plans materialise as planned, it is soaring towards the Rs 100-crore mark by 2006.