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10 Questions

with Ratnesh Mathur

By Paul Voosen
Staff Writer, The Prague Post
June 6th, 2007 issue

KURT VINION/THE PRAGUE POST
Mathur says the goal of every outsourcing operation his company takes is to automate to a point where work can be eliminated.
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The past decade has seen the spectacular international rise of Infosys, the homegrown Indian firm specializing in IT outsourcing. While most of the company’s operations draw on India’s low-cost, English-speaking work force, the company has begun expanding outside the Subcontinent. In 2004, one subsidiary, Infosys BPO, opened the firm’s first full-fledged European outsourcing center in Brno, south Moravia, which will expand to about 400 workers by year’s end. Ratnesh Mathur, head of Infosys BPO in Europe, talks to The Prague Post about India’s demographic destiny, Europe’s delayed acceptance of outsourcing and the fallacy of moving east.
The Mathur file

Job title: Vice president, Infosys BPO
Age: 39
Previous job: Vice president and head of corporate core systems, Citigroup
Family: Married, no children

➊ When you looked to open Infosys’ first European development center, why did you pick this country, and Brno in particular?
By 2003, we saw that the largest cities in Central and Eastern Europe were already showing a drain on the graduate-level talent pool, and their cost levels were already significantly higher than second-tier towns. So it was clear we needed a tier-two town, but someplace that wasn’t very small. Besides Brno, we looked at four or five cities in south Poland and Bratislava, which is actually smaller than Brno.
We have about 200 employees in Brno and 20 different nationalities. About 75 percent of our team is Czech or Slovak, although we do need some young foreigners from Western Europe, since we are processing in 16 languages. We also have some small jobs in Hebrew, a little bit in Arabic, but that’s the esoteric stuff.
➋ What outsource work do you do, and how does it compare with Infosys’ traditional IT focus?
The work we do is business-process outsourcing [BPO]. The industry is new but the nature of the work is old: finance and accounts, accounts receivable, accounts payable, travel and expense processing.
Our BPO subsidiary is effectively a 4-year-old company with about 11,000 employees. We have a center in Brno, a center in Hangzhou, China, and we’re building in Monterrey, Mexico. Plus, we have four centers in India.
The BPO segment is dependent on language. It requires a cultural context. Take customer service: You’re talking with our customers’ customers, and that means you need a presence in Europe. If you take that work into India, the context gets lost.
➌ Who are the Brno branch’s customers?
We have five different clients right now, all Fortune 500 names. Out of the five, three are U.S. multinationals and we do work for their European operations. These are large companies with a presence in 80 to 90 countries. The other two are European multinationals. Right now, it’s the German, French, Spanish and English markets that our leads are flowing in from.
➍ Has Europe been as quick to accept outsourcing as the United States?
The situation has changed in the past three years. Today, I’d say there is a lot more understanding of outsourcing, and it’s accepted a lot more in Europe, beyond IT.
The trend started in the U.S. and now has come to the rest of the world. If you look at the auto industry, they were among the first to invest in Central and Eastern Europe, especially the Germans. The services have followed with a bit of a lag, but now the market is open. The European banking industry is an example of a sector ripe for outsourcing.
➎ How did your parent company, Infosys, go about its rapid international expansion over the past decade?
The company started in 1981 with six founders who had $250 to create a software company. In 1999, it had revenue of $100 million. At that time, we prepared for scale, investing in processes, technology, and training infrastructure. We had about 3,000 employees then, and now we’re in excess of 72,000 employees. Last year, we had more than $3 billion in revenue.
➏ When you prepared for scale, was projecting the future growth of broadband and its “flattening” qualities a big part of your plans?
Technology was a piece of it, yes. But in India you have to own the infrastructure end-to-end. Our offices run for several kilometers and are cities unto themselves. We built their electricity, water supply, security. It’s unique in India. It’s like one of the U.S. universities, going to campus and that whole ambience.
Similarly, we have our training institute in Mysore, India, with our own faculty where 4,000 employees can be trained concurrently. That’s the kind of investment we made. When we started in Brno, we sent quite a few of our employees — maybe about 20 percent to 30 percent — to India for training.
➐ Salaries are rising steadily here and should eventually reach West European standards. Will your business model remain viable with higher wages?
Cost is definitely one of the drivers in outsourcing. But it’s a lot more than that. We fully transform a customer’s back office. So when we take over an activity, yes, it begins with some cost arbitrage — that’s inherent in our model and goes without saying when you look at our development center locations. But that’s just the start.
The second stage is process standardization. All our centers are ISO certified and our BPO division is the only company in Europe to have the new ESCM certification from Carnegie Mellon. Once we’ve done that, at the third stage our IT-parent edge comes in. We can suggest a reengineering solution. We understand the customer and can recommend a technology solution, and we have that expertise in-house.
Eventually, our aim is to automate to a point that we can actually eliminate work. That’s the goal of every operation we take from our customers.
➑ Are countries doing enough to account for the creative destruction that happens when accountants have their jobs shipped across borders?
The outsourcing world is being used the way e-commerce was several years back, and Europe is lagging behind the U.S. But we haven’t really experienced any backlash.
The world is opening out so much today. If you look at the total population of India, nearly every sixth person in the world is Indian. And look at trends inside it, like 54 percent of India is less than 25 years of age. So of course that’s going to get talked about in the press.
Labor laws are what they are. Outsourcing is not about designing a solution to circumvent the labor law. That’d be the wrong approach to it. The companies outsourcing to us are looking to become more efficient. It’s truly a partnership. The typical contract is not three or five months. These are five-year, seven-year contracts. When companies outsource, they take a long time to think about it, and the decision is made at the COO/CEO level.
➒ In the future, will Infosys BPO remain in this country or relocate elsewhere in Europe?
In Brno, we can grow to about 600 or 700 people. We have a long-term view of our work there. We will never go to a customer and say, “Keep moving east.” It just doesn’t work. East ends and you come back full circle.
We’re continuously doing location analysis. As we approach capacity in Brno, we’ll announce a second location. It could be in the Czech Republic, a city like Ostrava, or outside it. We expect to be at about 1,000 seats in Europe two years from now.
➓ Besides Infosys, have you seen much in the way of trade between India and the Czech Republic?
It’s interesting, the links between a country of 10 million and a country of 1 billion. There’s Mittal Steel, which owns the largest plant in Ostrava. Škoda is a very popular car in India. And Bata — we always thought it was an Indian firm. There’s a town called Bata close to Calcutta. Since the 1950s, it’s been the most popular shoe in India.
Want your top manager to answer our 10 Questions? Send a message to Paul Voosen at pvoosen@praguepost.com


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