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Can a pure domestic BPO survive? Ex-Citibanker Tushar Chopra is proving thatís possible

The recent ruckus in some US states about banning government out-sourcing contracts made Indian BPO players who depend on that market for business somewhat jittery. But Tushar Chopra, managing director of ATS Services, was unruffled. His 300-seater BPO, located in an industrial estate in Delhi, is a niche player with a differ-ence. For one, most of his clients oper-ate in a segment that ATS is consciously targeting — banking and financial services. Moreover, they are all local arms of multinational companies, making Chopra’s client roster blue-chip but exclusively domestic. It includes the likes of American Express, Standard Chartered, Cargill, and Tata AIG.

“The domestic financial services industry is underserved and growing rapidly. We’re riding along with this trend,” says Chopra about his fledgling firm’s offbeat business model. Apart from newcomers like Tata AIG, Chopra sees opportunities in banks that are seeking to build new franchises (for example, in retail) as well as the emerging trend among big players to opt for outsourcing. Consequently, ATS is well on track to achieving its Rs12 crore turnover target for this fiscal.

Is Chopra onto a good thing? Subbu Subramaniam, inves- tment partner at Barings Private Equity, an early investor in the BPO space, thinks so. The uni-verse is big enough to keep firms like A T S busy, he feels. “The market poten-tial is a derivate of all bank accounts, all mutual fund folios, all credit card hold-ers, and all insured people!” says Subra-maniam. It’s a world that Chopra, an I I T alumnus and MBA, is well plugged in to. In fact, ATS’ domain expertise is derived from Chopra’s 25-year experi-ence as a career banker, initially with Bank of America then with Citibank.

It was at Citi that he made his first acquaintance with outsourcing when he set up Northern India Credit Factors, a card collection servicing subsidiary. (That eventually morphed into EServe, Citi’s outsourcing arm). Chopra’s latent entrepreneurial drive came into play when he quit to set up Avco India, a consumer finance company that was later renamed Associates. Just before Associates was acquired by Citi in 2000, Chopra left to strike out on his own.

At the time, BPO was the new buzz-word and McKinsey had published its first report spelling out the huge busi-ness potential, so that seemed the way to go. Although the dot.com boom was showing signs of winding down, Chopra had no problem, given his background, finding investors willing to bankroll his venture. Citibank’s pri-vate equity arm wrote out a $3 million cheque for a 49 per cent stake and A T S was in business.

But as Chopra quickly discovered, personal cachet may get you investors but not necessarily clients. Although he was cordially received by all and sundry on Wall Street and elsewhere, no con-tracts materialised, not even from Citibank. Looking back with the bene-fit of hindsight, he explains: “We had no track record, no size, and no demon-strable experience.” Then came Sep-tember 11 and all hopes of big-ticket offshore contracts vanished. In a bid to survive, Chopra drastically scaled back, realigned operations, and changed focus to the domestic market.

“Domestic margins are much lower than those in international contracts, so my cost structure is necessarily tight. This makes us very competitive,” he explains. The monthly billings rate of Rs18,000 per seat makes Chopra a fanatic about keeping expenses in check. “When you’re in the high-mar-gins game then your expense discipline is not as good as ours is.” A side benefit of having clients in the same time zone is that unlike most BPOs, which run a graveyard shift, ATS is entirely a day-time operation. Consequently, hiring is easier and the staff attrition rate is below the industry average of 40 percent.

But Rajiv Memani, national director (corporate finance) for Ernst & Young, argues that while from a topline per-spective banking and financial services promise growth opportunities, pricing is a key challenge for players like ATS. “Quality service is difficult to sustain at today’s price point,” he says. Realising this, Chopra is pushing hard to move up the chain and boost margins with added-value services like customer retention contracts. Curiously Citibank, the main investor, is not among ATS’s customers.
Although S T D rates have come down, Chopra feels telecom costs, which account for almost half of total expenses, are still a constraint to growth. That explains why ATS remains Delhi-based and cannot realise its national aspirations. “High STD charges make this a very localised industry,” confirms Memani.

With 300 seats ATS has reached criti-cal mass to break even, but it will turn in profits, claims Chopra, once capacity expands by another 100 seats. Although its domestic focus has served it well, Chopra’s aspirations are not limited to it. Having the aggregate skills and a track record in place, ATS can now look for clients in other time zones. Ide-ally Chopra would like to double capac-ity to 600 seats because “the bigger we get, the easier the decision to outsource from us”. Then, who knows, Citibank could sign up too.