Friday, November 02, 2007

A New Business Model

Is it possible not to have a brick-and-mortar office, even the tiniest one, and “yet serve some of the most demanding Fortune 100 customers across the world”?

Apparently yes, if you take the case of Anantara Solutions, a second-generation outsourcing company, whose Founder and CEO G.B. Prabhat categorically says: “This is not a place where we like assets”. And hence his team in Mumbai — sorry no numbers, as this is a secret — works out of a virtual office; “we manage the Mumbai office without any address. Our address is an email id and mobile number and our office is a laptop with a USB card,” says Sushil Rathi, a founding team member.

He explains that with laptops his team can operate from anywhere… “home, footpath, wherever. Most of the time we are at the customer site, or with partners, or looking for business opportunities. When we feel the need to meet, we use Café Coffee Day, even for conducting interviews, or meet at hotel lobbies.”

All his team members are enthusiastic about this “asset-less office as we save a lot of time on travelling, which is huge in Mumbai. People commute to office whether they have any work or not, are adding any value or not,” he says. His earlier job had a three-hour commute time; “now I can save that time which is spent either with my wife and two daughters or in attending personal work. With flexible working hours I feel less stressed, less tired and can concentrate better.”

Prabhat says that while the Anantara business model has been written about, “what’s not evident is the adaptation challenge and the exhilaration of shifting to a new type of work environment.” His endeavour is to reduce “the asset intensity of doing business. If you take the balance sheet of medium or large Indian companies, 4.5-7.5 per cent of sales is devoted to financing assets — land in the form of hundreds of acres, office infrastructure, a cubicle and a computer devoted to a person.” Given that 80 per cent of the time a knowledge worker works alone, and only 20 per cent in a community — divided between the client and his team — he felt this was “too much of overheads to operate a model like ours.” Huge drops in bandwidth costs ensure an equally good computing environment at home and geographic position is no longer critical to your work performance.

Minimal assets were planned even at Anantara’s Chennai headquarters, where the 35 workstations would normally support 35 people, but because “we use the hoteling concept... notice all the drawers can be rolled anywhere, nobody owns a cubicle, people take whichever cubicle is free and we encourage them not to come to office unless absolutely necessary.” And yet has ended up with a larger office space than required; “almost two-thirds or 14,000 sq. ft of space is locked away and it’ll be 2-3 years before we’ll be able to use it all,” sighs Prabhat.

This is a win-win for both the company and staff; “for us it is less asset devotion, and for them it’s a saving of 2-3 hours of commuting.” Typically, Anantara employees come to office thrice a week for about three hours; the rest of the time they work at home. “That results in tremendous productivity both professionally and in their personal domain. They have more time for personal chores.”

But surely this model works on trust; how sure is he they are actually working from home, or coffee-shops?

Measuring work

Prabhat says work output can be measured irrespective of where the employees are. “Take a global company like Satyam or TCS or Wipro, employees have a certain output to deliver for the day, and even if a person sitting next-door to me in Satyam (where Prabhat worked earlier), I’d check what he/she has done only on my computer. So as long as we all are part of a network it doesn’t matter.”

On why he set up this model at all, he says as the global supply-chain gets stronger by the day, “no one good company is good at everything. So if you want to assemble something that has many different capabilities, source it from the party best at that capability. We saw that opportunity.”

The second factor was that no longer can you distinguish between consulting and IT delivery skills; “both have to blend into one package to improve your customer’s business performance,” says Prabhat, who has already added Malta to his operations in nine countries. Some East European countries and Vietnam are next in line; both promising low-cost delivery of certain services. “Vietnam and China operate between $8-11 an hour, against Indian companies charging a minimum $18 an hour. If they don’t charge $18, they make a loss. Since we are not asset intensive we can do it. We have evolved a new paradigm of efficiency which is we shouldn’t be doing everything, and get some things done by others. But when we do a certain number of things, we do them differently and not within the same asset-intensive environment.”

Small is good

By definition his is an outsourcing company which outsources its work; and in India this is mostly to small companies. A “well hidden fact”, Prabhat points out, is that small companies in India have far higher efficiencies than larger companies, “being focused on a set of niche competencies.” For example, software testing is one of the hundred things a large company does, but “a software testing company does only that and hence does it best. Also, small companies have not acquired the bad habits of big companies… so many acres of land, manicured lawns. People think that manicured lawns come free; they don’t, and are built into the cost the customer pays. But small companies don’t have manicured lawns, helipads, golf courses, all of that is missing.” Also a small company is more motivated to provide quality; “it’s entrepreneurial versus an employee thing.”

In a way, Prabhat’s asset-less model, which sends work right back to even developed countries, could take away some of the backlash associated with the Indian outsourcing story. “We are actually outsourcing back to America, because in some respects the US still remains the world’s best leader when it comes to innovation, original thinking, marketing collateral. We have an ecosystem partner in the US, but can’t reveal its name or the nature of work because of confidentiality.”

He thinks a time has come to move to a “more secular, democratically distributed model in outsourcing, which has no geographic boundaries and simply seeks out the best, assembles it and gives it to the consumer.”

For his Mumbai team, this is a model to die for. “Not only does it make a world of difference in spending more time with your family without compromising on your professional commitment, it also enhances productivity,” says Tushar Dave, who along with Rathi was the first to join in Mumbai. “It was our decision, we told Prabhat we don’t want an office in Mumbai,” he adds.

Birendra Yadav and Anand Vardharajan came on board next and endorsed this decision. In his former job Birendra did a daily three-hour commute and says happily, “There are a host of reasons to work for Anantara, but for this one benefit alone I would continue to work here; my daughter is one-year-old and I get to spend so many more precious moments with her!” Vardharajan loves chess, but for the last three years had to virtually give it up; “now I play chess again!” And, he spends more time with his wife; he got married last year.

Savio Koman, another team member, can finally take lessons for the guitar he had bought sometime ago.

To the question whether they miss chatting/gossiping at the office water-cooler, Prabhat quips: “They do it at the customer’s water-cooler!”

While he declines to disclose the number of employees at Anantara, which is not only lean in physical assets but also the number of employees because “we don’t insist on doing everything ourselves”, Prabhat says he was very lucky to have eight senior executives from Satyam leave with him to form Anantara. “Therefore in forming the management team there was no difficulty at all. We had a good mix of people who took care of geographic responsibilities, competence and verticals.”

While hiring other employees he looked at “strong operational background because you have to improve the customer’s operations, and need to understand manufacturing, financial services, media and entertainment.” Next came people with technology skills and performance management skills. “To help your customer improve his operations, his team has to partner with you. So the ability to manage change in customer locations was necessary.”

Anantara services customers in the US, Germany, France, Belgium, Netherlands, Dubai, India and China; “I can’t reveal names but we have acquired two Fortune 100 customers. These are customers that have contracts with the best of companies in India and multinationals, so they have a choice and they’ve picked us,” adds Prabhat, whose company started operations in early 2007.

As for the future, he says that till now the “outsourcing segment has been averse to outsourcing themselves. Why? Because they think by doing everything themselves they create massive profit enterprises. That is not going to be true any further.”

But won’t others adopt this model too?

“Very likely. But it will take a while because the existing large players cannot embrace this model without dismantling their models with a huge employee base. Our biggest threat is from new entrants. We are not so worried about big players taking on our model. We’ll dare them to — try doing what I am doing… which means they would endanger their current situation. So there is very little incentive for them to do it.”

On his biggest challenge, he says, “We can stumble in execution; if you analyse the merits of this business model as a strategy, there is little room for failure, because though new to the outsourcing industry it is well proven in other fields.

In manufacturing nobody tries to do the whole job himself.” He is not anxious about delivering quality to his end-customers; “right now our scale is so small that by personal monitoring, we can manage for now, but slowly institutional mechanisms are taking over.”

But his one regret is on the gender front, as the male-female ratio of the workforce is 90:10. “We are trying very hard to improve this; for a company that is so democratic in its bias the last thing we want is gender bias,” he adds.

Source: Hindu Business Line

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