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Vipin V. Nair

Starting up is easy but surviving and getting the better of competition is another story, like this one.

Sanjeev Aggarwal

THE New Delhi-based Daksh eServices Ltd is an instance of a successful IT-enabled service (ITES) company in India. From being a four-member start-up, it has grown to a 2,200 people organisation in less than three years, attracted loads of investment from venture capitalists and acquired Fortune 500 clients.

Recently, the company received $21-million funding from General Atlantic Partners. Daksh targets to double its revenues in the current fiscal to $30-35 million and has set up a third facility in Mumbai. The clients of the company include Amazon.com, Yahoo! and Sprint PCS.

In a chat with eWorld, the Daksh Chief Executive Officer,Sanjeev Aggarwal, who recently won the Ernst and Young Entrepreneur of the year 2002 award for start-ups, recounts what it takes to build a successful IT-enabled services company. Excerpts from the interview:

The Genesis

When you start out, you need to have a good perspective of your potential customers. When we ventured to set up Daksh in late 1999, the niche that we saw was in the electronic customer interaction. Those were the days of the Internet boom, eyeballs and all that. Millions of e-mails were hitting e-businesses everyday and we realised that there was a niche for an e-mail or chat-based contact centre.

Even as we conceived Daksh, we tossed the idea with companies like Amazon.com and Bigstep. They told us that it made sense to move such work to India and there weren't many people doing such work. That gave us confidence that we were on the right path.

One person who played a major role in shaping the success of Daksh is our angel investor, Ashish Gupta, the co-founder of Junglee.com. An important aspect of a successful company, which is often not publicised, is the fact that it has a successful mentor. Ashish played that role for us. It was through him that we got introduced to Bigstep and Amazon.

First customer

Once you get introduced to a prospective customer, then the conversion of that prospect to a client depends on your ability. Our first customer was Bigstep, whom we got in April 2000. The starting point in acquiring more customers is doing a successful job of the one you have. The US is a highly reference-driven market. If you have done a great job for Amazon, on the strength of that you can approach another client.

Also, your market reach in the US counts. You should have the right salesforce engine that has a good idea of the prospective clients. Currently we have three people in the US and one in London.

Over the years, the market for ITES has become cut-throat. Today, a potential customer looks at five options: one is whether he can do it himself through a captive centre; two is to look at an American company like Convergys that he is familiar with; three is to consider the ITES arms of large Indian software firms he may already be dealing with; then there are large Indian businesses who are entering the ITES space; and lastly there are people like us whose core competency is ITES. So all these players are vying for the customer who lands in Delhi or Mumbai.

Attracting capital

You need a good quality investor with pockets deep enough to support you. When Ashish put his money of a quarter million dollars into Daksh, CDC, our first round VC, had a lot of confidence to fund us.

It takes multiple things to attract capital. When you look at the first round of funding, what matters is how promising the team and the idea is. In the second stage, when you are looking for millions of dollars, the investors would look at your achievements so far; whether you have met your targets, acquired the right set of customers etc.

If you achieve your benchmarks, it is very easy to attract capital in this industry, because it is one of the fastest growing sectors in the world. So there are people who are looking to invest in teams and venture capitalists are forthcoming to invest in companies who have delivered.

But yes, there is lesser capital available for the first stage of funding these days. The risk appetite has probably gone down over the years and people feel that at this point of time creating another Daksh is a lot tougher than it was in the past. So people are more interested in investing in companies that they can help scale.

However, I feel that fresh start-ups who are very focussed on niches such as insurance claim processing, healthcare sector or HR processing where they can build a unique value proposition can still attract capital.

Hiring the right people

In order to be successful, you do need a high quality management team, which is highly global in its perspective but also has a strong Indian heritage. If you bring Americans to work here, they won't be able to understand the elements of doing business in India.

The ability to raise the hiring bar goes up as you grow. In the first phase, we were fortunate that we had this team of co-founders and some early stage employees. People actually bet on people. So if you think that you are committed, you are likely to succeed, then there are lots of managers in this country to take chances.

Now this industry is five-six years old. Companies like GE and American Express have created a fairly large pool of labour. India has now built a good foundation of management talent in this industry thanks to our predecessors like GE.

Billing rates

Billing rates get categorised by the tier that you belong to. There are tier-one companies, who are established players, get about $12-20 per person per hour across the spectrum of BPO services. Typical contracts are of three-five years and we arrive at a rate upfront. It is a very difficult business to manage, as our costs would be going up every year. The only way to maintain profitability is to increase productivity. You need to make your people work more efficiently.

vipin@thehindu.co.in

Picture by Ramesh Sharma

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