If you thought the business services industry was hurtling along at break-neck speed, read our first-ever blog post over 5 years' ago entitled "Beyond Labor Arbitrage: The New F&A BPO Frontier". However, while it does sometimes feel like it's taking an age for this industry to progress, we have to remember that the widespread adoption of global process sourcing, incorporating remote delivery from offshore and nearshore locations, is barely a decade old.
The good news is that the conversation has clearly advanced, and services buyers today are much, much more in tune with their needs and desired outcomes from business services, than they were in the aftermath of the 2008 crash. Anyone attending last week's HfS 50 Blueprint Sessions in Boston was blown away by the intense level of dialog from 35 leading enterprise buyers, brought together by the common desire to improve their talent and define their careers, move beyond a cost-centric delivery model, and work more effectively with their sourcing partner to foster innovations for themselves.
So...where is the future of business services heading?
Well... now is a great time to reconnect with one of the great pioneers of the global business services model. This chap has been personally involved in many of the largest engagements this industry has seen over the past decade and beyond. Noone has been closer to the buyers over the years to observe the changing conversations, the growing awareness of their needs and apply these to the ever-competitive provider marketplace. Yes, it's time to touchbase with NV “Tiger” Tyagarajan, now 18 months into his tenure as CEO of Genpact.
Tiger is now settled back into New York – a short train ride from his son’s university in Georgetown, Washington D.C., and also within easy reach of the Wall Street analysts, eager to fathom how his upstart firm continues to outpace the leading providers in the business services industry, with consistent annual growth at the 20% level and shortly going to surpass the $2 billion revenue mark...
Phil Fersht (CEO, HfS Research): Good morning Tiger. It’s been well over a year in the hot seat. What’s it been like? And did you always want to be a CEO?
NV “Tiger” Tyagarajan (CEO, Genpact): Phil, it doesn’t seem like more than a year has already passed! It seems like just yesterday that I took over. But other times it feels like I have been here forever. After all, this is my 15th year in the company; 19 years with GE. I have now gone through seven quarters announcing results. The world has continued to evolve and change throughout this time. These have been interesting times.
Phil: You’ve had a really colorful career. Where did you start out in life and how did you end up leading this $2 billion company?
Tiger: I started 27 years back in sales at Unilever selling soaps, detergents and cosmetics in India after I got my MBA. It was all about execution, daily action and real-time monitoring sales and salespeople. I learned a lot from that results-and-action-oriented company.
Then I worked for Citibank for three years on the consumer lending side. I had six jobs in three years. The consumer banking industry in India was going through turbulence and change. Delinquencies and losses happened in a short span.
I was one of the first employees of GE Capital to set up the consumer financing business. As part of the regular leadership rotation, I joined GE Capital and Financial Services, which had 300 people. It was a fascinating run. By 2002 we had 14,000 people in 3.5 years.
I wanted to commercialize the business but GE said no because they wanted us to focus on serving GE’s businesses. So I came to the US to work for GE Commercial Lending as a global leader.
Then, three years later, when GE spun off the division, I came back. I have always loved this business and the people. I believed this would change how companies would run in the future. I came back as the head of sales and marketing; I had to set up the function. Then, three and half years later, I became the COO; it was a grooming ground.
Sometimes my career was a natural progression and sometimes it just happened. I wanted to take over the job when Pramod Bhasin retired, but things like that are never given in a public company.
Phil: What kind of skills did you have to develop as a CEO that you didn’t expect when you took on the role?
Tiger: I was involved in every strategic decision and direction that we took. I had the advantage of being in marketing and sales. So I had the market feedback and direction; I knew what clients and customers were saying. I knew operations inside out because I had run that segment of the business earlier. And I knew all the people even though I was in the US.
Pramod (read earlier post) and I ran the business as a partnership even though he was the boss. In many areas I ran it on my own and he didn’t interfere. To some extent I had the luxury of the last seven years where I wasn’t the CEO but it was just a shade different. I have been doing the job in any case. That made it easy for me to step into the job. So what’s different?
What’s different is clearly I can’t delegate the decision-making to someone else. That hits you when you are at crunch time and have to make a decision. Should you go right or left? You are looking at an acquisition and everyone has put everything on the table and you turn to the team and they say what they think. But you have to decide.
Given the fact we are now so global with global operations, clients and investors, it makes it tough to manage your time. How can you be in all places at all times? How do you use technology to connect? Particularly in our business where holding one culture and being felt and seen the same by our clients is so important. This is important since culture is a big differentiator to us.
How do I deal with the Street? It takes time to do a deal. It takes time to get revenue. But the Street unfortunately functions quarter by quarter. So, how do you manage the long and short term?
Phil: When we look back to the 2008 crash, what does it look like from a provider perspective? Do you feel clients’ needs have changed radically in the last four years?
Tiger: Yes. I see three changes. First, there has been a natural evolution as more and more clients see examples of where outsourcing works. Therefore they have a higher degree of comfort that it can be done. Now the conversation is less about “Can you do this?” especially in traditional areas and more about “How are you going to do this? What do I have to do?”
The other thing [second] that has changed: a lot of clients understand this is not just about labor arbitrage or efficiency. It’s also about effectiveness; how do you drive better outcomes? Clients are more educated. We have been educational in this journey.
The third thing is the recession. It has changed the lens people use. Earlier, it was “Let’s do the whole thing in a three-year journey.” Now it is: “Yes, I want to undertake that journey. I am going to evaluate you on whether you can handle that whole journey. But I am going to break it up into three parts because I want an immediate payback.” That’s the tough part.
Today, large corporations are dividing up the work to get a faster payback. They want a bigger bang for the buck.
A lot more companies that have never outsourced before are jumping in, especially in Europe where people have been pushed to the wall. Companies that wouldn’t have thought about outsourcing in the normal course of affairs are thinking about it now and want to do it.
There is a range of changes in client expectations and how suppliers are providing solutions. Clients are now cleverer. Many more people know how it works. This is still a small group. Sometimes they undertake this key journey with outsourcing advisors. That can be good or bad. It’s bad when it takes a long time.
Our focus is: How do we get maximum value and outcomes for our client using end-to-end and smart enterprise processes? It has made a huge difference about how we think about what we do. It’s made an even bigger difference in how clients think about their journey. It’s taken on a different transformational agenda.
Phil: We have been through so many secular changes. When we look out to 2020, what do you think the world will look like? What will our industry look like?
Tiger: The fundamental belief we have—which is why the industry is so exciting—is this a long term, secular direction where most global corporations are going. They are asking: What are the core competencies and intellectual capital I need to hold on to? What are the things I don’t need to do?
This is no different than the transformation that manufacturing did 20 years back. Now most manufacturers don’t make all things that go in an automobile or an iPhone. Today Apple does the intellectual capital of the what, the how and the design. They also do sales and marketing. But not much else.
I think services are going in the same direction. But it will be a long journey. Today we do complex work for some clients, but some clients are not there. We think the world will get to a situation where services are bought and sold between corporations where each has a core competency around a set of services that it sells. Those corporations are focused on their own intellectual capital.
A focus on outcomes and business income will soon gather momentum. It will be how expectations are set. It will take time to really be the way that services are sold and delivered.
This is a very segmented industry today. But there will be some bigger winners. But it won’t happen in a hurry. There is such a wide range of services, industries and geographies. Consolidation isn’t going to happen in a hurry. It’s just too nascent. But it will happen at some point. The strong will become stronger.
This will change the way companies compete. There are companies we deal with in emerging markets. They have an invention that they want to start selling. They want to focus on that product and keep improving it. They want to buy everything else from someone else. They buy best of class from day one. They go to the cloud because they don’t have any legacy IT. They have incredible speed because they are not hampered by finance, HR, IT or procurement. They become a highly virtual organization.
This gives these new incumbents in certain industries structural advantages older companies don’t have. New incumbents in emerging markets and new incumbents in established markets with new technologies will aggressively take out the older companies in a far faster cycle.
Data. The ability to capture it, keep it and use it will get better and better. Then the question is: How do you get insights from it? How do you help corporations make better decisions? Some companies are going to get much smarter at making decisions using these insights.
Some companies will use all these as levers to become far more successful than others. This will benefit them hugely. For us, it’s important to position ourselves in some of these services and be part of the solution and be part of the innovation in the space. We need to be the reason to drive this change. This will also change the way companies run.
Stay tuned for Part II, where we delve deeper into the pace of change in today's sourcing industry...
NV “Tiger” Tyagarajan (pictured) is Chief Executive Officer for Genpact. You can view his full bio by clicking here