Interview

"The next five years are going to be crucial for India."

Brian T Keane, President & CEO of Keane Inc. reveals his plans for Keane India to Srinivasa Rao Dasari in Hyderabad. He also talks about India’s potential as a BPO hub

* Is the BPO backlash a part of presidential politics or will it gain momentum?

Outsourcing or the backlash against it is nothing new. In the mid-1980s there was a furore when the manufacturing sector began to outsource. Now, it is there in the technology sector where white collar jobs are moving out of the US. Outsourcing definitely benefits the private sector. Once job growth starts, the backlash will subside.

* A recent US study says that outsourcing will create twice the number of jobs lost. Vinod Khosla, the co-founder of Sun Microsystems, recently visited Hyderabad and said that outsourcing would result in savings of $150 billion per annum and the creation of 15 million new jobs at $75,000 per job. Do you concur?

Outsourcing will benefit US companies by improving the bottom line. Profitability will result in greater capital investment creating new jobs. Enthused by the current trend, VC funding has picked up from the second half of 2003 onwards.

* Why are Keane’s plans for BPO in India?

We have BPO operations at Gurgaon and are considering two alternatives, Hyderabad and Noida, for expanding our operations in India. We are also evaluating secondary cities. Hyderabad has emerged as a favourable destination for the IT sector. The people are industrious, the state’s economy is growing and the housing sector is booming. Taking these positive factors into consideration, we have decided to allocate a major part of our investment in India to our Hyderabad centre.

* What industry verticals are you targeting under the BPO umbrella?

We are providing BPO to banking and financial services, money management, insurance, and healthcare. We also provide management consulting to optimise business processes for our clients.

* Business process reengineering (BRE) is a buzzword. It talks about radical changes in enterprises for companies that move from software development to BPO. What’s your perception of BRE?

It is important to improve skill sets. Reengineering helps companies change and develop their strengths. We focus more on process automation and streamlining. Through BPO, we provide extensive training on different industry verticals and we possess domain knowledge in these areas.

* Is quality assurance (QA) a big deal?

Keane is a CMM-5 company that does quality work. We prioritise key areas such as product range, cycle time, quality, customer satisfaction and cost measurement in our operations.

* What was the investment made so far and what is the RoI on your Indian operations?

Over the past three years, we have invested about $100 million and the returns have been encouraging. The internal rate of return (IRR) stands at 25 per cent. We have earmarked $25 million for expanding our Indian operations. Keane Inc is cash-rich company and we will fund acquisitions from internal resources. We are looking at acquisitions in applications and BPO in markets such as India, the US, and the UK. In India, our headcount in the applications space will go up from 1,300 to 3,000. In BPO, we are ramping up to 2,000 people from the existing 300. Keane India accounts for about 20 per cent of our global headcount.

* Could you elaborate on the competitive advantage of India vis-à-vis China and East Europe?

The cost structure in India and China are comparable. The cost of infrastructure and skilled manpower in India is cheaper than that of East Europe. The next five years are going to be crucial for India. It has to sustain and consolidate the current boom otherwise there will be a situation where other countries will overtake India [in cost arbitrage]. Many Asian and East European countries are gearing up to tap the global outsourcing market. Currency fluctuations will play an important role here.

* The mix of work is starting to favour offshore delivery rather than onsite consulting. As billing rates for software development offshore are only 30-35 per cent of onsite billing rates does this put margins under pressure?

Margins will vary from onsite consulting to offshore delivery. Usually, volumes are larger in offshore delivery taking care of any difference in margins. Offshore will continue [to grow] in the future.

* Is application outsourcing going to pick up?

Yes. Application outsourcing reduces cost for clients and it helps them concentrate on their core business. We do application outsourcing in India and this is in the range of 20-25 per cent of our total volume. Many clients prefer application outsourcing customised to their specific needs right from development to implementation, maintenance and upgradation. Application outsourcing improves a client’s profitability driving capex that in turn drives innovation. In any company, innovative plans and services can keep the organisation in the forefront.