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what's a midsize outsourcer to do?

Jerry Rao CEO MphasiS, tells Zubin Jelveh the difference between Indian and American workers.

india Updated: Apr 11, 2006 11:55 IST

With consolidation expected in the outsourcing industry in the next two years, what's a midsize outsourcer to do? For Jerry Rao, the chief executive of MphasiS, an Indian outsourcer, the answer is: embrace it.

Last week, Electronic Data Systems, the information technology consulting giant, made a $380 million offer for a 52 per cent stake in MphasiS. The company's board was receptive to the offer. The potential for a deal was put in place last year when Barings Private Equity Partners decided to sell its 35 per cent stake in MphasiS.

The company, with headquarters in Bangalore and New York, has a work force of 12,000 and $170.44 million in 2005 revenue. MphasiS specialises in information technology services and business process outsourcing.

The outsourcer made news last year when three former employees at one of its call centres were arrested for stealing passwords from Citibank. Rao said the incident gave him restless nights, but that it was an important learning experience and subsequently Citigroup increased its business with MphasiS.

In an interview to Zubin Jelveh, Rao, who will remain in his post at MphasiS, also discussed President Bush's recent trip to India, the difference between Indian and American workers and the steps Indian outsourcers need to take to ensure data safety. Here are excerpts from the interview:

How important was this deal for MphasiS?

The advantage is that we move from a financial investor to a strategic investor, which is always good for stability. We move to an investor who can introduce us to other customers, who can help us extend our product offerings. And I think we can also give our employees good career paths.

What is the advantage for an American or European company to set up shop in India?

I don't think the US can afford to ignore India, which is why all the players are considering serious India strategies. I don't think US companies want to repeat the mistakes of the US auto industry of being arrogant and inward-looking.

Were you pleased with President Bush's defence of outsourcing during his recent trip to India?

He was good because he said look, ultimately this is about productivity and efficiency and about making sure that American companies and American consumers benefit from lower costs just as much as India benefits from creating jobs. But he also went on to say that job loss is never an easy thing and the way to deal with that is through training, so I think he addressed the issue fairly comprehensively.

Having worked in both countries, what are the differences between American and Indian workers?

American workers tend to be more creative, tend to be more questioning and tend to be far more contractually bound. If they say they will complete a task in seven days, they will. Indian workers tend to be hard working, tend to be disciplined, but they are not contractually bound. They are always overestimating their abilities to finish a task, and a certain amount of the creativity and the questioning that you get from Americans is not there, but it's changing. I think the mutual exchange is helping both.

You recently opened a call centre in Tijuana, Mexico? Is India outsourcing outsourcing?

It is for doing Spanish-language business process outsourcing for American companies. If you want to do a call centre for an American company, sometimes they want to give the 95 per cent English and the 5 per cent Spanish to one vendor, and that's the advantage of having that.

How can Indian outsourcers guarantee the safety of data?

India should treat this as an opportunity rather than a problem and we should be able to rise up and do transparent audits and say we're as safe or maybe slightly a tad safer than other places in the world. We have to get the message across that 99 per cent of the time the data never leaves the US. We have to re-educate customers; don't give your passwords to people. In our call centre in India it's paperless, you cannot take in cameras or cellphones and we do not allow them to print stuff or download stuff. We should not duck that issue because it's a genuine customer concern.