NextWealth: Creating a Next Wave in India’s IT and BPO Industry
Friday, June 17, 2011
During the early days of the Indian information technology outsourcing industry, Sridhar Mitta’s biggest challenge was convincing American companies that India was a viable destination to send their work. Mitta was with Wipro, at the time a fledging IT division of a vegetable oil company. He was, in fact, the very first employee of the company’s IT business and later went on to become its chief technology officer and president of the global research and development business. During Mitta’s visits to potential customers in the U.S. in the early and mid-1980s, he would invariably be asked two questions: one, where is India? And two, how are Indians so fluent in English?
There were other concerns, including worries about infrastructure, connectivity, cultural differences and quality measures. “But the basic premise of outsourcing to India — a wage differential of 1:10 and abundant talent — was so strong that the rest fell into place,” Mitta recalls. The global delivery model pioneered by Indian IT companies completely shifted the paradigm. Instead of Indian engineers having to go to client locations, the work moved to where the engineers were located — in India.
Mitta, now 62, is looking to spearhead another wave in the industry with NextWealth Entrepreneurs, a social entrepreneurship organization which he co-founded in September 2009 with three other industry veterans — Mythily Ramesh, Anand Talwai and S.R. Gopalan (all former colleagues from Wipro). Mitta, who is managing director, describes NextWealth as an IT services company with a “distributed delivery model.” He explains that this model envisages a large number of small delivery centers located in non-metros, i.e., in tier 2, 3 and 4 cities and in rural India. Mitta believes that the distributed delivery model can address the biggest challenge currently facing the Indian IT and business processes outsourcing (BPO) industry: a limited supply of workers, which is leading to high attrition and wage escalation and, in turn, threatening India’s position as an outsourcing destination. Countries like Mexico, the Philippines, and Ireland are fast emerging as alternative locations, especially for low-end BPO work.
“The Indian IT industry is like a mainframe model. Companies set up huge campuses that can hold thousands of employees. These [campuses] are few in numbers and located only in the metros and big cities,” Mitta says. “The companies then recruit people from across the country and bring [workers] to these centers. This has worked well so far. But taking this mainframe model to smaller cities [in order to tap resources] is not feasible. What we need is the Internet model, a large number of small centers with around 250 to 500 people each.”
“We believe that the distributed delivery model will be the new paradigm,” adds NextWealth CEO Ramesh.