Daksh was a startup floated by a group of enterprising individuals who sought opportunities in providing niche customer support to global dotcoms and e-businesses through emails and chats.
That was seven years ago in January 2000 when Daksh was founded with only seven employees. In the years that followed, it business model became more comprehensive as it expanded not only its services but also its base of clients and markets. The company was low on capital, which was bridged up by three rounds of successful funding from venture capitalists. By early 2004, Daksh was not only a symbol of one of the better-managed VC funded companies but also one of the largest employers among all business process outsourcing, or BPO, companies with over 6,000 employees.
Like all VC funded firms, Daksh too was preparing for an IPO to allow its venture capitalist to cash out. It was during this time that the world’s largest IT and business solution company came calling. The result was the country’s biggest BPO acquisition reported to be valued at over Rs 700 crore. The acquired company became IBM-Daksh, which is acknowledged as one of the most successful service acquisitions for IBM Global.
It is said that marriages are made in heaven. In the case of Daksh it can be said that the company was conceived at a marriage party. That was in 1999 when a chance meeting of two young men , Former CEO, , and , CEO, IBM Daksh, at a wedding party in Jaipur resulted in something very momentous. The two men realised that they both shared the same aspirations and entrepreneurial zeal. They also felt that they could work together.
The inspiration for the new business model came from a business report that stated that 67% of offline transactions are being abandoned due to inadequate customer support. The duo realised that they could create an organization that would provide email-based customer support to these global websites and e-commerce companies. Since the operations would be based out of India with low cost wage structures, there would be cost savings to the tune of about 40-50% for any client outsourcing work to India.
As soon as the idea took shape, two more partners joined them. The team soon looked for a suitable name for the start up. The dotcom craze had devoured almost all English sounding names and the choice soon fell on the native name Daksh, which is a unique identity on the web space cluttered with English names.
Daksh is a Sanskrit command in military training and it means attention, alertness, and utter vigilance to act immediately with supreme urgency. As per ancient Indian scriptures, Daksh is also one of the names of Lord Vishnu who upholds the universe.
Drawing from the new branding exercise, the management felt that the new company would strive to uphold the universe of customers. But those were the heydays of the dotcom. Funding was never a challenge for people with ideas. Daksh got its first big client, a fortune 500 e-retailer, in amazon.com.
Sanjeev Aggarwal, Former CEO, IBM Daksh, said, “Amazon had never even outsourced within US. Even within the US, they were doing all customer service inside. For them to outsource was one big step and for them to offshore was an even bigger step. In June, we won the contract and in December 2000 we were able to surpass all performance metrics that we had signed up, and after that we were on a roll.”
“India’s telecom infrastructure was not as resilient. Since we were doing e-mail based customer interactions, we had some tolerance in the channel of communications. If it was voice, which is more a real-time interaction, then we feel that at that point in time we would have had some serious challenges.”
Daksh put in place some simple practices for its core team by taking into account its limited resources and reach to target companies, which get revenues from online sales, to service the customers with the help of email and internet-based chats. Voice-based servicing would come in later. To conserve resources, promoters like Vaish would fly economy class, stay at a friend’s place during US trips and dine at the cheapest eateries.
To provide proper training cum learning opportunities to employees in operations, so that they became enthusiastic members of the community, to create a culture wherein employees as well as customers give feedbacks which results in foolproof processes, to target only those e-commerce companies which could pay decent double-digit dollar money for billing per person per hour.
Daksh was perfecting a plain vanilla operation. This would soon prove to be a foundation platform on which a much larger and complex organization would be mounted. Within a year of operations and with over 650 employees, Daksh became profitable on revenues. It was now time for serious investors to take a look in.
Citigroup picked up a substantial stake in Daksh in its second round of funding in April 2001. The funding was needed to drive the firms next round of expansion. Daksh was now ready to complement its emails and chat-based processes with voice-based customer support and high-end solutions.
The equity funding from Citigroup came at a time when dotcoms were going bust. But fortunately for Daksh its clients were big and strong enough to endure the dotcom meltdown. In the time of the crisis, the services provided by Daksh became all the more critical and valuable for its Fortune 500 clients. By early 2004, Daksh had acquired capabilities big enough to be quoted by IBM, the world’s most acquisitive company in the technology business. Daksh was bought over by Big Blue in April 2004.
In India, the dotcom movement was being replaced by a new BPO revolution. A large number of global majors were setting up captive operations. Domestic IT services major Wipro set the ball rolling with the acquisition of Spectramind in 2002 for Rs 470 crore. By now, Daksh had emerged as one of the country’s leading e-customer relationship management organizations and its revenues too had jumped from USD 2 million to USD 18 million in 2001-02, and up to USD 29 million in 2002-03. It was looking to double it to about USD 60 million by 2003-04.
Being the largest standalone third-party service provider Daksh received the full backing of investors. In the third phase of funding, it received significant equity infusion from General Atlantic Partners and Citigroup. The investment partners brought not only funding, but also potential clients for the company.
, Head, , said, “Along with capital, private equity also adds value in the form of management, governance, and linkages with their global portfolio companies. A lot of them have specific sector expertise and have resident entrepreneurs who are actually sector specialists. So, they look to add values to a company not just by providing capital but by actually supporting its management by adding to its business through providing global linkages and helping in the overall governance of the company.”
By now, Daksh had a global footprint. It was catering to its clients European operations with services in German and French. Its Manila unit offered an entire suite of technical support and back office transaction processing. It was 6,000-employee company and handled a range of services like insurance, back office, claims adjudication, technical support and call center services.
The company was approached by over half a dozen potential acquirers but the management was determined in its belief that the company was not built to be sold as it was built to go public.
Sanjeev Aggarwal, Former CEO, IBM Daksh, said, “When Big Blue comes calling, you do not ignore. What we saw at that time was that customer projects were becoming bigger and more complex and many customers were looking for transformational solutions. This means, I not only have to do processing but also need to bring in a package of consulting services to decide how to improve the process, apply technology to remove some processing, and then operate those processes. More and more, it seemed to us that the world is looking for more integrated solutions and we had only one piece of that which was operating the processes. We thought by partnering with IBM we would be able to bring about a transformation.”
IBM-Daksh has grown phenomenally since the acquisition. The company has grown to 17 centers and seven locations in India from three-center operations in Mumbai, Gurgaon, and the Philippines. The growth is being driven as much for IBM’s global footprint and powerful sales machinery as by the location advantage of India.
India’s BPO and IT enabled services exports are projected to be about USD 11 billion in 2007-08, up from USD 8.4 billion in 2006-07. This itself was a major leap from exports of USD 6.3 billion in 2005-06.
The domestic market is just USD 1.2 billion. But IBM’s bagging of Bharti’s outsourcing deal is just an indication of the Indian market’s locked potential. But thanks to the emergence of the BPO industry, general graduates can look forward to jobs at very early stages of their career.
Last year, the industry employed about 4.15 lakh people. This number grew to 5.53 lakh this year. The major impact of the acquisition is seen in the exchange of processes and ideas between the parent company and IBM-Daksh.
For instance, IBM has taken in Daksh’s heritage practice of Voice of Customer to different parts of its global universe. Here the company undertakes the polling of its clients every six months to see how they perceive services and based on their feedback, IBM Daksh brings about transformational changes.
Similarly, some employee recognition and engagement practices have been replicated in other IBM centers. But what IBM brings to the BPO customers post acquisition is in integrated solutions, drawing from its global strengths of consulting technology and research. One thing striking about IBM Daksh is that even after acquisition, the original promoters continued to be at the helm as professional CEOs.
“The big part about IBM culture is that they would empower you a lot. Once they are convinced that you can execute, they let you operate almost like an independent company. I never felt that from being an entrepreneur working for oneself, now I was working for somebody else. It showed in the results, we grew from 6,000 people to 20,000 people in two years,” Aggarwal said.
This continuity is also seen in people management at IBM Daksh. The organization’s duty towards its employees is like a middle-class family, which gives its children value systems and education. This simple philosophy allows the employees to avail not only a training to uplift their work-related skills but also acquire learning to enhance their overall personality and plan for career growth.
, VP Strategic HR, IBM Daksh, said, “One of the biggest dimensions or measures for learning is, does the employee feel that he has grown in the organization, that is number one. Second, can you meet your leadership requirements internally by having trained your people. In most of these areas we have a very positive experience. We have something called a global campus, which is an e-learning opportunity available to people with some excellent programmes. There are very unique competencies that we have in the area of imparting learning.”
IBM Daksh has grown big, but it knows that to sustain growth momentum, it will have to continue to expand its global as well as domestic footprints. Already strategies like setting up centers in new places like Kolkata, Pune, and Vizag have cut attrition rate significantly and cracked open new recruitment avenues for the company. A larger recruitment universe also means that the company is able to find the right talent fit for a variety of areas such as servicing like financing and accounts business, insurance and technology verticals, and high-end services as well as knowledge process outsourcing including work like providing high-end support to chief financial officers.
The acquisition of Daksh bolstered not only IBM’s global delivery capabilities but also brought the global major to the heart of the world’s fastest growing BPO market.
After three years of integration, IBM Daksh had emerged as a peoples powerhouse growing more than threefold to over 20,000 employees in a competitive landscape, where the name of the game was offering integrated solutions to clients at the best price. The acquisition of Daksh has empowered IBM to meet the challenge of value competitors like Infosys and Wipro. IBM is making huge investments to increase its presence in the Indian market in the sphere of consulting, technology, and research. In all this, its business transformation arm is proving to be a most effective delivery vehicle. Daksh could not have asked for a better suitor.
Excerpts from CNBC-TV18’s exclusive interview with Pawan Vaish:
Q: What inspired IBM to choose Daksh?
A: IBM was looking for capability in the business processes space because over the years IBM has morphed itself from being a hardware company to being an IT services company. Today, there is emphasis on software and business processes. Actually, it has been a very interesting story. I would certainly say that within IBM, the Daksh acquisition is touted as one of the most successful services acquisitions. It has brought enormous capability to IBM, which along with IBM’s technology, consulting, and research capability we put forth a value proposition to clients which was very compelling.
Q: Would you say cultural integration is not complete between Daksh and IBM?
A: Culture is a very important element of any integration. One of the reasons why this acquisition succeeded is because right from the start the value system and culture of the two organizations really matched. Daksh had a very strong executive support within the IBM company and IBM did not force fit itself on Daksh. IBM broke all the rules of integration in the Daksh administration. They said whatever made sense we will integrate but whatever we think is the best of the breed in Daksh we will leave it alone. In some cases, we will take those best practices and absorb them within IBM. We integrated the financial systems, compliance and control, and some elements of HR processes which in IBM were very mature. There were certain operational and HR processes that Daksh brought to the table that IBM felt were best of the breed and they took them to their other centers.
This mixing has been fantastic and there will be an ongoing transfusion of talent and best practices. We have had talent move from Daksh to China, Philippines, Japan, Australia, and the US. This is phenomenal.
Q: What are the emerging opportunities for IBM-Daksh now?
A: We have a global view. This is not only about India. We believe that a global footprint is essential to be a successful company. We have a global footprint. So, wherever we get the right skills, environment, and risk profile that is where our business will go. Globally, continuing to expand is something which is important to us.
Our F&A business continues to grow very aggressively and that is another area of growth. We are doing a lot of business in high-end BPO which is commonly called KPO. In our F&A world, we are doing high-end support to CFOs. We do a lot of high-end work in the insurance and technology verticals. I think moving up the complexity chain is something that is another exciting area.
The third area is all about putting together solutions where we bring in technology, research, and business process all together, and then put a solution to our customers so they can be ahead of their competition. That is something which is unique about IBM because just in research it spends USD 6 billion every year. So, we are able to tap those elements.
IBM-Daksh is a sterling success of a VC funded company. They grew from just seven employees to be counted among the country’s leading ones. It is success of such companies that keeps VCs to stay invested in startups.
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