Outsourcing: Arul Murugan, Founder and CEO of Enrich IT (Part 2)

Sramana Mitra: You have this business from a financial services client. How does that business roll out from an implementation point of view? Is it that you are providing them with the 30 people that you were talking about, or is it [something else]?

Arul Murugan: Those 30 people are aligned for the managed services project that we got where they will be working both on support, which is SLA based, and ongoing project work. If any major implementation projects come in addition to regular enhancement and compliance projects, then we will do the effort estimation and sign another deliverable-based SOW.

SM: Yes, I see.

AM: We become their Oracle ERP department, actually.

SM: You have crossed $20 million in revenue, and it looks like you have a small number of very large clients. So, is it fair to say that you have about 20 clients bringing in $1 million a year kind of business? Is that the structure of your business?

AM: Not really. We still have the consulting wing, so I would say 60% of our revenue comes from our top ten clients. The other 40% comes from a variety of clients for which  we deploy our consultants on three- to six-month engagements. There, we  do the typical Oracle ERP consulting work on a T&M basis.

SM: And your strategy is to use the 40% as lead generation to develop some of that into really large centers?

AM: Exactly. What we believe is that no client comes out and gives us business as an outsourced provider until we build trust and a relationship; it’s not just relationship alone that matters. We need to build  trust in our capabilities to the client.

SM: Yes, that’s right.

AM: Application services are one part of what we do, where the majority of the revenue comes from. Two years ago, Enrich IT signed a BPO, or you can call it a cloud agreement, with Oracle to provide procurement and supply chain planning in a cloud or subscription model using our technology and domain expertise. The traditional approach is for clients to spend millions of dollars buying the ERP software, spend more millions to implement them over one to three years, and again, they spend millions to host and support them. With the cloud model, we combine the software licensing, implementation, hosting, and support plus our value-added services on procurement and the supply chain area for one flat monthly fee, which can be ramped up and ramped down based on use. We are one of the first companies to become a tier one Oracle BPO provider for procurement and supply chain. If clients go to Oracle and say that they want to have procurement on a  SaaS or a cloud model, Oracle will refer them to Enrich IT.  We did our own add-ons to Oracle advanced procurement suite, wrapped our services on top of that, and offered it as a cloud model. Regarding contract terms, we offer one- to three-year contracts. On pricing, there is a one-time setup fee or implementation fee, and then there is an ongoing SaaS fee paid on a monthly basis based on the number of users.

I think you may be familiar with the word platform BPO where you are providing BPO services using your own technology platform. In this way, you optimize your process to technology you are using and are able to deliver consistently to all the clients and gain economy of scale not just purely from a process or resources perspective but from an overall solution perspective. We don’t want to just provide a traditional BPO service, which is more like a lift-and-shift model. We want to provide solutions on a platform BPO or cloud model. We made a cloud offering on spending management and supply chain planning as an SBU, and we expect that this line of business will provide us with good revenue growth over the next three years. Are you familiar with the private cloud and the public cloud, Sramana?

SM: Oh, yes, very much so.

AM: If you look at Salesforce.com, that is a good example for a public cloud. That means they have a multi-tenant instance and all clients using the same instance.  With the private cloud you provide a single dedicated instance to each client so the client can have better privacy, security, and control and at the same time get the pay-as-you-go model from a cloud solution.

This segment is part 2 in the series : Outsourcing: Arul Murugan, Founder and CEO of Enrich IT
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