Outsourcing: PV Kannan, CEO Of 24/7 (Part 6)

Sramana Mitra: This has been very insightful thus far. What other trends are you seeing in the outsourcing call centers?

PV Kannan: Just to put it straight, we are not really in the pure outsourcing business. We don’t compete with the classic outsourcing companies on work. If someone says, I need 500 people in location X at this price, 24/7 will not bid on that work. I want to make that clear. We are not a classic outsourcing shopper from that perspective, but we are an outsourcing shop just as much as any technology-enabled services companies such as ADP, First Data or any of those ilk. We go in and say, Look you have a problem, you are thinking about the problem in such a way, and you are dividing it up among people and just getting other  people to subcontract someone or run it in-house. Then you buy a bunch of technologies and you try to put all of them together, but at the end of the day, you don’t solve the problem because the problem is that consumers want quick answers in whatever modality they want to engage in. Some of that is left out of the picture. If you want to solve the problem this way, we want you to think about it in this manner.

For us, our clients are won by our going and talking to them directly, not by their sending out an RFP and boom, 24/7 bids on this work.

SM: How many customers do you work with?

PVK: Just a handful; about 25 of the top brands in the world.

SM: That was what I thought, listening to you speak. The customers need to be quite smart and sophisticated to understand what you are talking about, right?

PVK: Exactly. That is one, and they have to have a very large organization. for all of this to be interesting to 24/7. It’ll work in a smaller setup, but for us, it is more interesting to work with the larger B2C clients where there are at least 10 million to 20 million consumer relationships on an ongoing basis. That is when all the data does its trick. That is when all the stuff works like magic. Otherwise, if we have 10,000 consumers, you can pretty much memorize them in your head like a local restaurant owner does.

SM: Sure. Especially with your predictive modeling and other techniques, interesting dynamics happen when you have the law of numbers playing in the equation.

This whole notion of technology-enabled services where you have bought in a certain perspective and specific knowledge to a particular domain, in this case, customer support, what is the best way to grow this business? Is the best way to grow the business to work with the same customers, the same 25 serious, big customers that you already have relationships with, and then perhaps open a new line of business that includes technical support?

PVK: Yes, that’s a good question. There is probably what we grapple with internally as well. It is a long sales cycle, so the answer is really finding  companies that are trying to solve a problem and  where the costs are going up disproportionately. Those are the targets for us. There is no magic answer. If your question is, Can you sign up 100 customers in a year . . .  is that the question?

SM: No, it’s more that, then I look at your business from a consulting background, where and how do you grow this business?  What revenue level are you at right now?

PVK: We don’t disclose that.

SM: Are you a private company still?

PVK: That is correct.

SM: OK, but you are in the several millions in terms of revenue, right? Tens of millions in revenue. Do you have VCs involved?

PVK: Just one, Sequoia Capital.

SM: Which means that you are under pressure to grow. You have to grow at some point, or you have to give your investor an exit.

PVK: Yes, they have been around with us for eight years, and it is Mike Moritz on the board. There’s no overt pressure, but it is implied and if you take money, you will return it. If it’s Sequoia, you have to return it with larger returns.

SM: And you have to return it for venture capital. You have to return it within a certain time because the funds operate within a certain cycle.

PVK: If you have taken money, there is no obligation to return it. You have to understand that. It is not like it is mandated that seven years hence, I will do this.

SM: There is no mandate as such, but that is how the industry operates. I have taken money several times. If you have taken venture money, is supposed to return venture money.  If you don’t return venture money, the investors don’t like you very much. That is pretty much the lay of the land.

Anyway, the point I am trying to explore, it is just the framework that you describe of doing this enabled services and predictive modeling. You seem to have hit upon a formula which is working, which is successful, so to me it seems that you could make a lateral shift into the technical support business and offer that same framework to your existing customers. The chances of that becoming your next big growth of opportunity are higher than trying to sell the customer support solution to  another 50 customers where the level of understanding of the problem may not be as sophisticated.

PVK: I think it is a fair point. We are evaluating all those opportunities. I can’t comment on it specifically. You are touching on a competitive strategy element that I am not that comfortable discussing, but you are hitting on all the logical points of to think about it.

This segment is part 6 in the series : Outsourcing: PV Kannan, CEO Of 24/7
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