Rohit Kapoor, vice-chairman and CEO of Nasdaq-listed business process management (BPM) solutions firm ExlService Holdings, Inc., talks about his company’s acquisition plans and focus on growing the analytics business among other things, in an interaction on the sidelines of the Nasscom India Leadership Forum. Edited excepts:
How has the BPM industry changed in these 10 years and how has EXL evolved in this period?
A lot of change has taken place since 2006. When we went public in 2006, we were $75 million in revenue. Last year our guidance was $624.5 million at the midpoint of calendar year. So, we have grown dramatically.
In the past most of the work that we did was traditional outsourcing work. Now we define ourselves as an operations management and analytics firm. Analytics accounts for about 25% of our revenue, so it is a significant component. We acquired Inductis (an analytics company) in 2006. So in 10 years we have gone from practically zero to a run rate of above $100 million in revenue.
If you take a looked at our business model in 2006 it was a plain vanilla outsourcing model. Today, we use a framework called the Exlerator framework which integrates analytics real time into the processing and also integrates in a large amount of technology applications, lean Six Sigma (data-driven approach to eliminating errors) and benchmarking, all of which allows us deliver more business impact to our customers.
Going ahead, the kind of processes we will be running will be more end-to-end ones, more tightly integrated with analytics and technology. There will be more outcome-based pricing, moving away from transaction-based pricing.
Have the industries in which your clients operate or the way they go about business, also undergone significant change?
Our clients are certainly changing their business models. Their go-to-market strategies and ability to serve customers their customers, ability to access their systems—all of that is changing, and that is changing the way we serve them. At the same time, we are helping them transform as well. We are helping them with new products, services, which allow them to access new customers, in a much faster and cheaper way.
Are Indian BPM firms gearing themselves up adequately for the disruption that is facing the industry?
Most of the players in the industry are changing and are trying to change. Most of them are embracing technology and the disruption associated with technology. Very few of them are actually embracing analytics and the change that analytics brings. We would be one of the few companies that is combining analytics into our operations real time.
How fast is the analytics part of your business growing? Do you foresee that in the mid-term, analytics might become a bigger contributor to the top-line than your traditional business?
Analytics is growing fast. Over the last several quarters, the growth rate has been above 30% plus. And going ahead, we believe that the growth rate will certainly be above 20%.
Our business is split into two parts—operations management which is 75% and analytics 25%. Analytics is growing faster than operations. So, obviously the analytics business will become the bigger play. But we will also grow inorganically, and typically when we have grown inorganically most of the acquisitions have been on the operations management side and around technology platforms.
Therefore the balance between the two of 75/25 might be there for much longer time, though the nature of growth will be different. Analytics will be organic, while operations will be organic plus inorganic.
Are you looking at any acquisitions right now—on both the analytics and operations side?
For us acquisitions are a core way to grow. We are looking at acquisitions and we have a strong pipeline of acquisitions that we are looking at. Some of them are small tuck-in acquisitions—of $10-20 million in revenue—and a few which are much more substantial. Typically we will look at 8-12 deals at any point of time, which will be at different stages. Our goal is to do a couple of acquisitions in India each year, mostly on operations management side. We will also look at analytics but typically companies in analytics are either not available or either they are available at too high a valuation.