The services industry has already been redefined by the rapid emergence of intelligent automation and digital technology. This has created a massive headache for traditional service providers looking to protect existing clients who still pay them for humans to provide effort, when they should really be paying their provider to help them achieve business outcomes, based on results.
While many of the traditional providers are struggling to deal with this “revenue cannibalization”, several of the middle-tier providers are bubbling up to take advantage of this opportunity. Net-net, they do not have a lot of “legacy business” to protect and have more flexibility to pick up clients which no longer want to get entrapped in a legacy FTE model. One such disruptor is Hexaware, which is reinventing itself as an automation-driven service provider with the appetite to take on and transform legacy engagements from its competitors, in addition to chasing brand new green-field opportunities of its own.
We caught up with the firm’s energetic CEO R Srikrishna (aka “Keech”) to shed some more light on what makes a firm like Hexaware tick, and a little bit about Keech himself, and how he has catapulted the firm into the spotlight over the past couple of years.
Phil Fersht, CEO and Chief Analyst, HfS Research: Good morning Keech – it was great hearing from you in New York last week at the HfS FORA Summit. But before we get into the business side, Can you share a little bit about your own personal history and how you ended up running things at Hexaware?
Keech, CEO, Hexaware: Sure. So, prior to Hexaware, I was at HCL for just about 20 years. In HCL, I joined as a management trainee, and progressively came to more interesting roles. A little over a decade ago, about 12 years prior to my leaving, I started what would then become a large global infrastructure outsourcing business.
But it started off quite modestly in 2000 or so, first in India and then in America in late 2002. I came to that business and led it for them, for a little over a decade. The last three years at HCL, I also led their health care and life sciences business. Between the two businesses, I led what was (at that time) 45% of HCL’s revenue.
How I came to be in Hexaware really has two parts to it. One part was that I wanted to quit HCL, the other was that I wanted to join Hexaware. There were some overlaps, but there were some independent reasons as well.
In terms of leaving HCL, there was what I felt were some industry issues and then there were some personal issues. Personally, I want to create a legacy. I wanted to create a legacy in an organization where if somebody were to look back at it, in say 10-20 years from now, it would be thought of as a company that Keech created. As successful as HCL is, I would never have that opportunity there. It rightfully belongs to Shiv Nadar, who is the Founder, Owner and Chairman. So that was kind of motivation number one – to work for an organization where I can create a legacy.
The second one really is the fact that I wanted to be CEO in early my 40s. I believe that the industry needs to become younger. Being young is not the important issue, I think the ability to keep up with changing technology is the real issue. The truth is I think that comes with being younger too. So, I really felt like this was the best shot at becoming a CEO in early 40s, not in my late 40s, which is when the window for me to be a CEO at HCL would have opened.
The third issue is structural to the industry where I felt like even back when I quit, which was in early 2014, the industry had reached a point where there were going to be structural head winds for the larger players that would last a decade or longer. This would make it very hard for them to continue to grow the way they had done in the previous say 20 years. They had grown and created structures as a people-based delivery organization for too long. For organizations of that size, it was going to be incredibly hard to make a pivot to a more technology based delivery organization.
So those were all the reasons of why I was looking to move away from HCL. I was not actively looking but it was at the back of my mind.
Why Hexaware really for me? I thought it gave me an opportunity to create that legacy. To start, it had the right ownership structure. It was public, which was very important as it allows you to attract the right kind of talent and allows you to be visible in the market. And if you look at the Indian IT industry, actually many Indian industries but especially IT, a lot of companies even if they’re public, still have a very concentrated family ownership. I wanted to work in an organization which was public and didn’t have a founder family type ownership structure. If you want to be a CEO, I think a you are only able to be real CEO somewhere that you have professional ownership. So Hexaware kind of met that sweet spot of ownership, where a chunk was owned by a PE firm, the rest was public, and the PE firm philosophy (and negotiated philosophy) was clearly that they would stay away from running the company.
The last thing about Hexaware was that, as you put it somewhere else, it was small enough to be dangerous and large enough to be present or the other way around. It had the size, ability, client relationships, and financial stability, all of which can be used as a solid platform to build a serious organization.
Phil: So, as we think about where things are shifting, Keech, tell us a bit more about Hexaware. You were traditionally known for your HR tech capabilities and some BPO work, but you seem to have changed tack a lot in the last couple of years. You’ve talked a lot about automation, for example, and I’ve actually heard several clients talk very positively about the capabilities of your company and enjoy working with you. So what is the grand plan?
Keech: Our grand plan, Phil, ultimately is something I will describe in 2 ways. First is that we want to be the first IT Service company in the world where half our workforce is digital. I think you understand what I mean by digital workforce but to clarify, it does not mean that we have half our workforce trained in digital technologies. What we really mean is that we want that half our workforce is machines. In other words, half the work we do that was done by humans in a different scenario, would be done by machines.
That’s one kind of way of thinking about the grand vision, but that’s not the end goal. Ultimately, automation or clarification are still a means to a larger end game, which is transforming customer experiences. So at this point and going forward, everything Hexaware does is defined by three themes: ‘Automate everything, cloudify everything, and transform customer experiences’. And doing so all the while recognizing that automating and cloudifying are steps to the journey of what is ultimately the Holy Grail – transforming customer experiences.
Phil: I think you’re about $600 Million in size, Keech… and we’ve talked about being “dangerous enough to go after some big deals, but also small enough to be nimble and disruptive”. What do you think that means in reality? Can you share some examples of how you’re being disruptive with some clients, but also how you’ve been delivering the bread and butter work that’s got you to this size as well?
Keech: Phil, I’ll give you three real facts from an internal perspective and some customer examples. The internal I think is very important.
In no particular order, the first is that our leadership team and I pride ourselves on knowing customers. I personally would know, at least for our top 30 odd customers, what their 3-year plans looks like and what their 2018 priorities are. And that’s very important knowledge that we incorporate as a collective team in our plan. So when we decide what our investments are, which technologies and which areas are we going to invest in, it is not done in isolation. It is done in fairly seeped and in-depth knowledge of our individual customer priorities. I think our size allows us to do that.
The second internal thing is the fact that a lot of silos – which traditional organizations have – we’ve broken them. The biggest silo that’s being broken as an example, is the silo between BPO and technology. Any organization that treats BPO as a BPO business, and by that I mean how many traditional organizations treat BPO as a ‘step child’, thinks BPO is the cost-centre fork who does low-end work and the tech team thinking is that they are superior to them. We’ve broken that completely. Our BPO and tech businesses are fully aligned and the person that leads automation thinking for BPO is our CTO and this CTO is the same CTO for the IT organization.
There are many other silos that are also broken. If you think of ‘cloudifying everything’ or think of ‘transforming customer experiences’, the number of traditional IT horizontals that need to come together to deliver those outcomes is very large. In terms of customer experiences for us, each of our six horizontals contribute to that outcome. How do you bring it together? It’s now a lot easier for us to bring it together and manage some potential conflicts, credit issues, politics. All that is in our rear-view mirror and I think it’s a lot harder for legacy organizations to do.
So how does this transcend then to clients? For the largest clients, we tend to be viewed from the lens (primarily) as a disruptor. So, we have a very large global bank for example, where we’ve just a done a recent contract where our role is essentially that of a digital resolver. So essentially what that means is we’re only the digital labour. In their IT department, we work with them in identifying what kinds of service requests and incidents we think can be resolved digitally. That comes to our platform. If we fix it, we get paid for it. If we don’t, it goes to their human resolver. That human resolver is one of those traditional companies. In essence, we sit as the first layer of the office which is the PR and there is a PR disruption play.
The more mid-sized organizations (and that mid-size could vary from let’s say a billion up to 8-10 billion dollars in revenue); we’re everything for them, but even here we’re using automation as a basis for full outsourcing. Automation is not the only thing we do, or cloudification is not the only thing we do; we use those to deliver better outsourcing.
There is a third example where I will describe one such deal where the question of what do you work is the question. There is nothing obvious in how technology or automation can impact it. However, the clients said, “hey, this is a painful but critical piece of work that is highly labour intensive. We don’t know if any automation can impact it. However, we want you to take a look at doing that work because we think in the long term, if there is somebody who can bring innovation to how it’s going to work, it is most likely to be Hexaware.”
Phil: You mentioned earlier about your outlook for creating an industry for the next generation of talent coming up behind us. I’ve noticed personally, meeting with several of your executives, that you’re bringing in a younger breed of leader to your firm, with a lot of energy and passion and a mind set for the digital world, etc. Is this deliberate?
Keech: There are three things that are in common for all our Leadership. Youth is not a target state, but it does wind up happening that way. But the target state is actually three things together. That is our collective leadership is the following three things together:
First is that we’re all kind at some point of times in life where, in our past areas of expertise, we were one degree separate. We all know each other, work well with each other. So when we got together in Hexaware, we didn’t have a process of figuring out strengths, weaknesses, politics and stuff like that meant that we jell very well as a team.
The second common thing is that everybody has built or run much larger businesses in much larger organizations. They’ve managed a scale up to 20 times what they currently do.
The third thing they have in common is that they all share a common passion and a common vision that the pure labour-based model that the traditional companies are so seeped in is not sustainable and that the next decade presents a big window of opportunity for companies like us to disrupt the space and become significant.
Phil: So, when we talk about technologies like automation, machine learning, etc., these aren’t the end game, they’re like a means to getting us from one place to another. What are these “places” in your view, Keech, and what is the real “end-game” for clients these days?
Keech: I think the real end game is relatively simple. It is transforming customer experiences. Ultimately, I think on the day when you had the HfS summit, there was a survey about, “What are millennials? What are the brands that they like most?” Number five on that list was Amazon.
They were not even on the top four. Number one was Apple. I think number two was YouTube. Number five was Amazon and I think there was Uber there somewhere.
The point is, why are these brands most loved by millennials? Because they deliver fabulous experience to anybody using them. That experience is by design, obviously it is not by accident. To deliver such an experience, there is a lot of automation that needs to go behind it. Let’s think of a credit decision for example. If you want a home loan, the amount of time it takes for the lender to make the decision is days and it’s painful. There is a lot of information that goes into it. That information collection is somewhat automated, somewhat digitised. But after that it still goes through who knows how many days for the underwriters to make the decision.
Imagine if a company could say, “here is a form to fill in and when you press submit, the next instant we’re going to tell you whether you get a loan or not.” Then after another instant, the money is in your bank potentially or with some settling agents bank.
Now for that level of customer experience to change, the amount of automation and straight through processing that needs to happen is immense. Frankly, I don’t think you’re going to go from the current scenario of let’s say 10 days, to instant decision and delivery. There may be some digital company that can do that, but the vast majority of existing organizations are going to go through this step by step. They’re going to find ways to reduce the time from 10 days to 8 days, then to 5 days and then to 10 hours, and that’s going to be the journey. Technology is going to play an important part in making the journey happen, but the outcome is always improving customer experience.
Phil: To finish up, Keech, can you briefly give us what you think we’re going to be talking about in three years? You’ve been in this industry a long time, you’ve seen a lot of change already, and looking at the pace we’re moving at now, what do you think we’re going to be talking about in three years?
Keech: Let me give you a couple of different perspectives, Phil. I’ll talk about how a service provider’s organization will look and feel. I’ll also tell you from a technology perspective around the themes we are talking about what I think could be most important in three years and that will be that we will have begun to mainstream and conquer.
In a lot of simpler use cases, very complex problems will remain ahead of us. But we will also then begin to see this immense train of blockchain. I think blockchain has a means to solve complex problems, not by trying to insert a machine into what a human was doing, but by doing something completely differently.
Let’s take establishing a level of credit as an example. Today there is a human that looks at 20 conditions in a letter of credit and makes a decision whether or not to negotiate the claimant’s payment. You can replace that human’s decision making, by AML, and that’s one way to solve the problem. But what blockchain can do is to completely replace the need for human decision making at all. And I think blockchain will become pervasive in the three to five to seven-year timeline. So certainly in three years I think that will be one of the most critical things will be talking about, but from the IT Services provider perspective, we need to follow up on that.
Phil: So, I do have one final, final question Keech! How did you get the name “Keech”? Does it mean anything special or is it just a nickname?
Keech: It’s a nickname that came from a very popular Tamil movie, which was there 35 years ago. When I was a school kid and there was a school kid in that movie called Krishna, whose nickname was Keech. So it stuck.
Phil: (Laughs) Very simple! This has been a great discussion, Keech, and appreciate your time and am excited to share your views with the HfS community.
Keech: I absolutely look forward to that Phil!