The recent appointment of Keshav Murugesh as the CEO of India’s second largest BPO firm, WNS, heralds the second phase of growth for the company. Murugesh is not new in the BPO sector or IT industry; he was with Nasdaq-listed Syntel for close to eight years, first as CFO and then as CEO, and by the time he left, the company had become a $420 million firm from a $175 million one. But Murugesh has a tough challenge in front of him: The expectations are high within the company after Neeraj Bhargava stepped down; key promoter Warburg Pincus (it has a 50 per cent stake) wants to exit and the industry is also undergoing changes. Murugesh spoke to Shivani Shinde about the way forward and his concerns. Excerpts:
Where do you see WNS in five years?
From an aspirational point of view, we would like to be leaders in this space; be seen as a company that lives by its value, is the employer’s choice and provides innovative solutions to customers. But the journey will go through a number of steps. We do plan to have a strategic planning exercise in the near future — it will have all our top-level leaders and vertical heads participating in an interaction and coming up with a new, refreshed mission-focused statement.
…and what will be the focus of this strategic meet?
We will focus on figuring out the values that will drive WNS to the next growth level. Where the market is headed; what businesses that we have make sense; which are scalable and what new businesses we need to add to our portfolio. By mid-2010, we would have laid out the journey we want to undertake and those who will be on the bus.
How much of these plans will be affected if Warburg chooses to exit?
As management, I am not concerned about what investors think. Besides, they have made their intent clear in the past. Having said this, the mandate given to us (the management team) is to do such an outstanding job with the company that it becomes unaffordable for anyone to buy.
Given a choice between a private equity joining the company and a BPO player acquiring WNS, which is preferable?
No comments. I cannot comment on what shareholders do with their stock.
You spoke about value addition for clients. Can you elaborate on this?
My focus is on how we get the maximum share of this huge addressable market and our challenge is how we move our numbers to the next level. One of the ways to capture this is to identify the industries that are looking at a globalised portfolio of services. But here a lot of the services being offered will become commoditised. So, you have to go up the value chain and this is where the new models and services line come in.
While it’s true that we do see recovery, for many clients, business is still under pressure. Retail is one such example. New businesses will also emerge due to the political developments that we are seeing. For instance, even if 30-40 per cent of what US President Obama plans in health care passes through, the delivery of health care will never be the same again.
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Which new business units would you like to enter?
It is too early to say. Besides, I want the team to come up with suggestions and views before we make any final decision. But if you look at our business, banking, financial services and insurance (BFSI) is an important vertical. I already see gaps within that, which we can address. So capital market is one such area. And some firms in the financial sector, like capital market, asset management, wealth management, hedge funds and others, are under tremendous stress.
I think, health care is something that has the potential to grow. We do already have something in this space, and I don’t see why we should not be able to grow in this.
What about geographical expansion?
This is another area where we would like to expand. We are in Latin America, Costa Rica, Sri Lanka and the Philippines. As far as other geographies, like Europe, etc, are concerned, we will expand if we see a requirement, but that also means getting the language capability.
IT firms are increasingly getting into the BPO space ...
I don’t think IT firms getting into the BPO segment is, in any way, a threat to pure-play BPOs. The addressable market is so huge that the need for consolidation at this time certainly does not arise. There are so many potential markets to be addressed. We ourselves are talking about expansion.
More importantly, in my interaction with clients, I do not see any interest in them opting for these integrated IT services firms. Also, all of us have enough IT capabilities to address any complexities that our clients face.
Secondly, when there was stress in the market and when the demand was low, many firms got into other segments. This was driven by the need to meet targets. Of course, some of them are doing well, but pure-play IT firms will again focus on what they are really good at once the market starts looking up. For us, the BPO business is the core.
We are also clear that we will provide only services, unlike some of the IT players that are getting into product platforms. Clients have some discomfort with IT players that are getting into BPO as they might be competitors in future.
If we look at the WNS business model, there are some concerns. Your travel business is seasonal, auto claims is cyclical and health care has also seen pressure in the recent slowdown. How do you plan to address this?
I look at it differently. Since we have been in these areas for such a long time, we know how to handle these pressures. So, whatever dip happened last year was because of the global demand issue. But also remember, if I have less business in one quarter, the same business gives me additional flush of revenue in another quarter. As for health care, it was impacted due to outsourcing, off-shoring and the political will.
This is precisely one of the reasons for the strategic review meeting. This will help us address some of the concerns.
The acquisition of Aviva was to give you entry into larger deals. Is that happening?
I think the Aviva acquisition has been one of the most important one so far. More than cross-selling, which is one of the strategies to take the business to other clients, I think the Aviva account is still under-penetrated. There is huge potential to expand that one single account. I have told the team that they have to focus only on increasing this account presently.
With clear recovery in the US economy, what are clients saying? And is the pricing pressure now a thing of the past?
For us as a company, the pipeline is looking strong. Clients are much more comfortable in terms of outsourcing and off-shoring. The original panic that was evident among clients has passed and they realise that they need to walk on this route. But the BPO pipeline takes much longer to convert and the decision-making cycle is slower. Some of these things take as long as nine to 12 months. So, if IT firms are talking about hiring and growth, that is happening as the decisions that were on hold have started to move now.
The IT and BPO need not grow at the same pace. But, when BPO takes off, relationships become much stronger, giving much more sticky business. But things are much better than what they were last year. I track the number of visits that clients make to our office, and I must say that this has gone up compared to last year.
As for pricing, we have been able to renew contracts with the top-10 clients — they account for 60-65 per cent of our revenue. And the pricing has been stable or, in some cases, better.