The Genesis of BPO industry

While the world was still coming to terms with India’s success in IT services, one young man working in General Electric (GE) Capital decided that there was something beyond that. Pramod Bhasin sold the idea to his employers in the USA that critical processes could be done out of India and in 1997 GE Capital International Services (GECIS) was created, which went on to be a global success story called Genpact. He was the Former President and CEO, Genpact and currently, he is the Founder and Chairman, Clix Capital. Pramod’s career spans a professional and entrepreneurial journey in Financial Services and Business Process Management across the globe. Prior to Genpact, his career with GE spanned 25 years across the US, UK and Asia. He was earlier the CEO of GE Capital in India and Asia and prior to that he worked with GE Capital in Stamford, CT in the Leveraged Buy- Out group. Ganesh Natarajan, Chairman, 5F World & Former Chairman of NASSCOM chats with Pramod Bhasin about his career with GE, the genesis of Genpact and how the BPO industry started. Corporate Citizen brings you excerpts from the riveting interaction

"We had an urgent need to make some money, to bring in some profits, to make GE Capital in India very successful. And I had the benefit of it in an astonishingly wonderful management team back then"

Dr Ganesh Natarajan (GN): Tell us about yourself.

Pramod Bhasin (PB): I had the good fortune of working with a company like General Electric (GE) which in its heyday was one of the greatest companies in the world. They had fantastic management talent techniques under Jack Welch. I learnt a lot from them. I was a commerce graduate who had done leverage buy-outs in America after doing my Chartered Accountancy in London. My background was uniquely different from what I eventually ended up doing, which is Genpact and the BPO industry. But I had learnt a lot about entrepreneurism from doing leverage buy-outs in America. Those were the days of the bonfire of vanities and all sorts of crazy hostile takeovers etc. which is where we cut our teeth. We were managing pretty tough workout deals and portfolios which GE capital had and you learn entrepreneurship. You learnt how to sell assets what to buy and what to build.

GN: Were you with GE Capital when the idea of Genpact happened?

PB: Yes. That came about when I was sent back to India in 1994 by GE Capital to start GE Capital in India from scratch. After a couple of years into it, we all thought India was great but India was also a country where the future is bright and always will be. Therefore, the missing middle-class we were looking for to finance for home loans and etc. wasn’t there and we kept on looking for them and never found them. We had an urgent need to make some money, to bring in some profits, to make GE Capital in India very successful. And I had the benefit of it in an astonishingly wonderful management team back then.

One of the things that I am proud of is, four of my HR people from GE Capital are HR Heads of Fortune 50 companies in the USA. I hired them, they started with me and then they moved on. We had a fantastic management team but we weren’t making enough money as most companies didn’t in India. We wanted a different use for them and that’s when I thought it was not a brainstorm, it was not a strategic discussion, it was an idea which just popped in my head when I was wandering around in Chennai and I said, why can’t we use talented people to deliver services for the rest of the world. The more I thought about it the more I realised that this must be a compelling idea because no country had English speaking talent in a whole host of qualifications and backgrounds than in India. If you thought about accountants, English speakers, BA graduates, insurance, bankers, and suddenly, the scope opened up in front of me and that’s was the start of the idea of BPO.

GN: TCS and Infosys started off in the 1980s, the IT industry was getting established. Why would you think that suddenly a Business Process Idea would sell?

PB: Quite honestly, I didn’t. Nor did we begin to realise how successful it might be. It was an idea in its basic style which was very compelling to say, I can probably deliver these kinds of services to the rest of the world at a substantial saving of 40-50%. There was no question about the idea selling or not. In fact, the first few people that I spoke to, eminent business people in India, all told me it could not work. They said telecom would not work, our people did not know the subjects, our people did not have discipline, and we would not be able to bring the processes discipline. This is when I decided that it would work, there is a streak in me which is very rebellious. Having worked in the US and the UK for 25 years, I could compare the calibre of the people anywhere in the world. They were as good, except, they cost a fraction. How can you leverage that basic idea is where I was coming from and I thought about it and went to my bosses. It was a preposterous idea, we didn’t have phone lines at home. We would have three phone lines out of which two would be down. I would call up my boss and said that I had a brain wave and I could do the backend of finance and accounting from India—the phone line would go down and i used to say, ‘I will call you back’. I would call him back and he would say, ‘You are not even able to talk to me’. I said it is alright I would solve for it. I didn’t know how. I was a leverage buy-out person. At that time, I was doing consumer finance and commercial finance. We were building a corporate loan book, syndication desk, private equity; how did this idea come from? I don’t know. It was a preposterous idea to be honest. Nobody was going to believe in me, except that I had credibility, I was a senior professional at GE Capital. They sent me to India, they could not ignore me. I went to the USA and asked them to give me an opportunity.

"We would triple check the acquired data. I did not tell my US counterparts about the triple checking. They just thought that we were brilliant. Till I get this right I would not take any chance of making a mistake"

GN: What did you start with? Was it mainly the call centre kind of work or was it transaction processing?

PB: We started with a few things. We knew a bunch of things and we rested our business on that. One thing we knew that we could not afford to make any errors because the world would blame India. One of the CEOs that I had worked with had said, if you make a payment in accounts payable in America then it is a problem of the system. If you make a payment in accounts payable in India then it is the problem of India. Remember that they will all say you cannot do this in India as opposed to, it was a minor hiccup. So, we knew two things, the first, we knew that it had to be foolproof; the second, we knew that we had to do with a great speed and with great cost-efficiency.

We went to my friend within GE Capital who was running the largest retailer credit card business. We went to him and said why don’t you give us your white mail? White mail is the mail that comes in as correspondence with address changes; in those days, you didn’t have the internet, nor mobile phones. You used to get requests from your customers and they would bundle the requests and courier them to us. We would enter in the data base and we would send them back. We would triple check the acquired data. I did not tell my US counterparts about the triple checking. They just thought that we were brilliant. Till I get this right I would not take any chance of making a mistake. We also liked our success. It also took the phone lines out of play because I didn’t have to rely on very defective phone lines which is what India had in those times and telecom policies were just opening up. That is when we realised that we can do more—we could do the call centres which is where Raman Roy came in, he helped with STPI. But that was not the biggest element. The biggest element was finance and academy, and there was science we had to build up which I loved doing. We had to build transition tool kits as they were referred them as. Because every process is formal and informal. You had to understand it, build the science of it. You had to find a way to try to manage the entire operation. So you did that—you used six-sigma and such. You had to train people in such subjects that you have never heard of before, for instance, mortgage processing, auto insurance, credit cards because most people did not have credit cards.

Our first office is still on the highway, in Gurugram, it’s historic. It is a shed, a warehouse. None of the fancy building existed back then. We could not get food or transportation at our office, nothing. If we had to bring in people we could not do that easily and if we had to drop them at the airport that was also a tough job. Every step, every morning was a new event; every day was a new problem.

In the meantime, GE was waiting to see what we had done. They had not put in a lot of money or hopes behind this. But I knew that if I killed really well in the early stages with flawless execution, and outstanding hiring, they would be impressed. So, the element that helped us was we had hired fabulous people, showcased them to our counterparts in the USA and they looked at them and looked at salaries we pay. A charted accountant in India that you hire in those days was about 3-4 lakhs—it is unimaginable, to be able to hire a CPA equivalent and that blew people away at that point in time and we started expanding that canvas. Even in the best of times, I remember hiring Tyagarajan, bringing him in when Raman moved on. I said to Tyagarajan, I want you to run this business because one day we would be 2000-people strong. But the audacity of that is something which I think about a lot—go to a country 5000 miles away and convince over faulty telephone lines that I am going to do your back-end accounting and finance out of India. These are critical processes. I asked a lot of people as to why we don’t try that with some other country and see how fast they throw us out.

GN: Let me ask you to put on a modest hat and how much of it was due to Pramod Bhasin.

PB: In regards to the convincing and the passion aspect, within GE and GE Capital, I was carrying that, and I knew them well. I was an officer of GE by then, I was running GE Capital Asia as well. I had the power to talk to people and convince them and talk to people with credibility and I think that helped because you need a ready buyer at the other end because most people would not let you do this. And they were able to look at us and say we believe your calibre, and that mattered a huge deal. Having said that, we put together a fabulous team. This was a hallmark of GE and they were able to help to solve all pieces that went in. But then again, the dream was entirely mine. Very importantly, as we kept moving forward, I realised that we could keep expanding the scope of what we did, to a point till we started telling everybody that don’t ask what we can do, ask us what we can’t. Within a company, I could do supply chain, insurance, treasury management etc. So in time, very quickly, the BPO industry got known for call centres. We weren’t doing that much of call centres, of course, it takes a lot of people but we were doing treasury management for all of GE Europe treasury.

In 1999, we started the analytics business. In 2000, we started acturary work for the USA, we were doing medical claims underwriting and so on. We were beginning to touch. At one time, we were experimenting with doing French work out of India with the people who spoke French. And we took this to China. One of the things that I am very proud of is, we globalised this moment. We went to Dalian (city in China) first and said, why don’t we do it for Japan too? Dalian had not seen a bunch of Indians before. To that extent we were pioneers in India, we were casting new ground. We went to new cities like Jaipur, we took the chance; looking in the hindsight, it seems very easy now. But in those days things were tough.

"We needed a framework to build what I would call it the science of managing business processes and we helped to build that. We helped to build what was the ideal, most optimistic efficient mortgage processes from a bank, for instance"

GN: Considering the famous GE Six Sigma and process maturity, were processes were also part of your success in Genpact?

PB: Yes. We had to find a way to manage the entire operation. At the time GE had announced six sigma into the organisation across the board. I clung on that as my raison d’etre. The amazing thing of business processes is that it has never been written. For instance, if you want to make a paper clip there is a refined and defined way in which you make it-engineering-wise. However, processes wise, everybody pays the bill differently, everybody pays the mortgage differently, every bank processes mortgages differently. None of that had been written, we needed a framework to build what I would call it the science of managing business processes and we helped to build that. We helped to build what was the ideal, most optimistic efficient mortgage processes from a bank, for instance. We used that fairly pioneering work in terms of process management. But it was resting on the foundations of not just six sigma but also lean. The other thing that we did was we took a huge plunge in many of the areas. It sounds terribly easy. We trained around 16,000 people in six sigma. We invested heavily in the science of managing business processes.

GN: When did the whole industry started sprouting around, there was Daksh and Spectramind and WNS, etc. did you have a 2-3 year lead time before all that begin to happen?

PB: We were captive and GE didn’t want us to stop and do this commercially. I had every major company including Accenture who came to us and asked for our services. And we said no. Can you imagine if we had said yes to Accenture and we would done this for them? GE, at one point in time, had 20% of the business of TCS, Satyam, all the big names in the industry. I was pushing GE very hard and trying to convince them to build an industry out of this; it can put so much of valuation on the table but they didn’t want it. Now TCS is valued more than GE. Having said that, GE did not wanted this to be done commercially, there were issues around it that were around the whole John Kerry thing had popped up about outsourcing. Jack Welch hated headcounts, one thing he did not like about me is that I was adding headcounts, thousand a month. It was an anathema for GE because they relied so much on efficiency. They did not want to be known for outsourcing. At that time, we stayed captive even though Standard Chartered, Bank of America, everybody wanted our services and had we been able to do it for them, Genpact would have been thrice its size.

GN: Which was the first true third-party outsourcing company that came in?

PB: At that time Daksh came into the picture. What happened was we were getting queries from people who wanted to come into the office and see what we were doing. From the McKenzie’s to Standard Charters, everybody-they started to write to Welch how great we are doing. Jack Welch shut down all the visits, he said, I don’t want people to be pressuring me about this and they didn’t realise that they had a tiger by the tail. But I did realise. They just thought it is just a back-off and I said no this is a new industry being born. And the differences were subtle but enormous as you can imagine. There was a large myth about GE had this idea. I was selling at GE night and day to get them agreed to the idea.

GN: As you said, you really had got the tiger by the tail, Tyagarajan?

PB: We had hordes of people wanting something from us. We went to GE eventually and said spin us off. Because in the meantime, as you said, McKinsey started their operation, McKinsey Knowledge Centre, Bank of America, Standard Chartered, IBM, and Accenture. All of them started to realise and that’s how the business started.

GN: Did you get permission to start doing outside GE work?

PB: Only when we weren’t able to spin off they weren’t allowing me to do any. In 2004, I went to GE and said our growth is dropping down enormously. We will never be able to grow enormously, you will lose all the people—this business has value spin it off. And fortunately, they agreed and said alright, we will keep 40% and 60% goes to private equity. In January 2005, we became an independent company called Genpact. The first customer was Carlos Ghosn of Nissan who I remember very fondly because it was the fastest win that we had. I sat opposite to him in Oberoi Mumbai and he asked me what do you do? I said we do backend processes. He asked what the result is. I will deliver 40 per cent saving. He asked me whether I do this for GE. I said yes. And he gave me the contract. I think the robustness that we got from serving a client like GE who is internal but ultimately extraordinarily demanding, extraordinarily disciplined was invaluable. GE is the one who helped a lot of companies like TCS who also do project management and learn how to do those things.

"Having worked in the US and the UK for 25 years, I could compare the calibre of the people anywhere in the world. They were as good, except, they cost a fraction"

GN: Moving on to the current timeline, say 15 years ahead from 2005, how has the organisation grown in terms of width, depth and volume?

PB: I have pluses and minuses on that—one expanded wonderfully with a lot of great value-added services such as analytics, research, financial analysis; things that are happening which are cutting-edge, which are really showing the way higher-end services can be delivered out of India. Having said that, I don’t think that our industry has evolved the way it could have. We should be making products. What kind of products? Just like ADP has a payroll, we should have a financial accounting product, we should have products where people come in and use our box and are delivered an output and a service. We just haven’t evolved to that point which I feel sad about.

GN: Is it because of easier picking in services and there is too much of a hassle to make products?

PB: It is some essence of easier picking but I honestly believe that there is a lack of risk-taking. People are not taking risks, whereas, if you look at the margins of the companies that make terrific margins, they make these kinds of products. Now for us to bundle them and try and sell them would have been a magnificent idea and it is something that I tried when I was there. If I would have stayed for some more time I would have done it for sure. But I don’t think we invested time, money and energy into thinking about how do I build a mortgage product, how do I build an insurance product, why shouldn’t every bank in the world processes its mortgages through a product that we build or a platform that we build?

One thing that we tried hard at Genpact was to try to be better than our customers at what we would do, become the experts in that area and I wondered to what extent we have achieved that because we should be experts, we should be the best in class at whatever we are doing because that’s our business. And yet I wonder if we have moved far away from being owners to being designers.

GN: I keep hearing from a lot of CEOs today that we have moved beyond outsourcing to optimisation and we are able to add value back to the customer by just telling them how to do better. Is that really happening or it is an anecdote?

PB: It is happening and it is huge. We started with six sigma, one of the reasons to embed six sigma in our operations was because we want to offer our clients product. We want most of our contracts based on that. We would tell these are the people who will deliver six sigma and lean efficiencies to you every single day. But that is still using a defined process, it isn’t transforming it, it isn’t changing it completely and saying throw that out, plug into our platform and I will do it for you for a lot of money but at a tenth of the cost for myself and much lower cost for you. We also lost the advantage and I blame myself and the IT industry, the moment you start pricing per person, your productivity goes out of the window or you don’t get paid enough etc. Look at the margin Cisco and Microsoft make that is what you make on products. I think Cisco makes a 40 per cent operating margin. The moment you are pricing per person, you will manage per person.