Prakash Gurbaxani, the CEO of TransWorks, impresses you with his ability to cut through the clutter and get straight to the issue on hand. In an exclusive interview with India Syndicate's Indhu Radhakrishnan and Balaji Narasimhan, he holds forth on the major trends in the BPO industry, and why outsourcing is here to stay.

Excerpts:

1. What are the major trends in the BPO industry?
Companies, across the board, are looking at the most strategic location to provide services. In fact, outsourcing of manufacturing, which started in the early 80s, is solidly established, and now, the same thing is happening in services. It happened in the IT industry because of a lack of manpower.

Earlier, companies thought that big opportunity in BPO meant easy opportunity. They felt that, if you were merely in the industry, you would get business. Now, they have started realizing that it is more than about infrastructure and the number of seats you posses. The important thing is how do you convince a Fortune 500 company that you can help them cut costs?

However, the industry is maturing fast. Projections are more realistic, and companies have started accepting risks, which they didn't do in the euphoria of the start-up phase. Now, the foundations of the BPO industry are more solid.

2. What is your take on captive BPOs and third party outsourcing initiatives?
Third party BPOs suffer from a lack of domain expertise, while captive BPO units don't suffer from this problem. However, third party BPOs can succeed if they get the domain expertise from the client.

3. Will the industry witness new start-ups in the coming years?
One of the significant trends is that in the last 12 months, there have been no new third party service providers entering the BPO market. Existing companies are growing, captive BPOs are growing but there are no new players coming into the market. In some small niche areas like HR or Research, smaller companies could possibly survive and succeed, but in the mainstream, you are either big or you are dead.

The industry has matured now; companies have realized that BPO is a scale business and not an SME business anymore. In the services business, there are long gestation periods involving significant investments. Expectations now are more realistic and there is better awareness of risks involved in the business. So though the quantum of investments is going up, the number of new players coming in has reduced

4. Will India's poor infrastructure hamper our growth?
Poor infrastructure will limit our ability to grow, but it cannot kill the industry. No single factor can kill the industry. With good infrastructure, if we are able to create, say, a $20 billion industry, with poor infrastructure, this might come down to around $12 billion. One thing is certain; the BPO industry is here to stay.

5. What differentiates TransWorks from other players in the industry?
The first thing is to deliver high quality services. We have managed to achieve a good referential base of clients, and today, twelve of the Fortune 500 companies are our clients. You should also realize that neither technology nor infrastructure drive outsourcing growth. Only the ability to deliver matters, and for this, you need the right people.

6. Talking of people, what do you think of the attrition issue?
This is common whenever you have a demand/supply gap. However, this is an industry that has grown fast and consolidated fast. As an example, in Bangalore, when we started operations in January 2002, we had just 26 people on board. Today, we have 2,600, and this is just in Bangalore!

7. Can you discuss some of your plans in Europe?
We have a sales office in the UK, but we don't possess any off shoring capabilities there.

8. BPO is all about costs cutting. Will the focus shift to quality in the future?
The primary reason for outsourcing cannot be just cost cutting. In a globally competitive environment, companies go for quality at the right price. The most important thing for companies who are outsourcing to India is good quality of services. Only if we can deliver this are they interested in the cost savings. No US company will come to India if we deliver poor quality even for free!

9. Your company guarantees to meet performance metrics within 60 days of going live. Please enunciate.
Let us say that a particular transaction costs $20 per hour in the US, and $10 per hour in India. Technically, then, the savings are to the tune of 50%. However, if the US centre can perform 10 transactions in one hour, while the India centre manages only 5 transactions per hour, then the cost per transaction is $2 in both cases, and so outsourcing gives no benefits at all!

Our promise is that, within 60 days, we will ensure that the quantum of output in India will be similar to that of what is achieved in the US, and this ensures that costs really come down.

10. A huge hue and cry was raised in the US during the elections against outsourcing. Can something like this dampen the growth of outsourcing in India?
A free economy is always about high quality and competitive costs, and all companies want to achieve this. No company in the US will ever say that it wants to keep all its operations within the country's boundaries. CEOs are judged based on the value they deliver for the company and its stakeholders and since outsourcing helps improve profitability significantly, there will always be demand for India's BPO.

11. Can you discuss your data analytics partnership with IMC?
We have tied up with IMC because there is a lot of synergy with what TransWorks is doing. Getting and retaining customers is difficult, and we must consider the customer life value. Not all customers can be retained all the time, and it may also not be profitable to do so either. The question that companies are asking is whom should we target with what?

Data analytics helps us to fine tune customer acquisition and retention using data intelligence. Once you know whom to target, the 'hit rate' is significantly enhanced. This means that you are not wasting your dollars tapping the wrong customers.