Meet the man who gave India a new kind of outsourcing

Every year, TiE (a non-profit global network of entrepreneurs and professionals) Chennai honours entrepreneurs with awards, and last month, at TiEcon, Chennai, the awards for 2010 were announced. This time the 2010 TiE Start up of the year award was given to Vinod Harith, the founder-director of CMO Axis Outsourcing Services.

CMO Axis is described as the first Market Process Outsourcing (MPO) company in India.

In this interview, Vinod Harith talks about what MPO is and how he got the idea to start outsourcing in marketing in India.

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Does MPO also work like BPO, KPO, LPO, etc?

It is a new one in the alphabet, if you can call it that! After running the marketing divisions of various companies for more than 20 years, I felt there was a big gap.

Most of the agencies - ad agencies, PR agencies, etc - do task based outsourcing. Their objectives are not aligned with the objectives of the CEO or marketing heads. So, most of the time, the 'marketing heads' become more like glorified project managers when they work with four or five of these agencies. None of these agencies is accountable to the business house.

If you look at other functions like finance and accounting, the CFO of a big enterprise never calls an agency but calls an accounts BPO and they bring in people, process technology and they run the complete outsourcing.

That's when we thought, why can't marketing be done the same way?

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You were the first to start Market Process Outsourcing in India. Were you following what was being done in some other parts of the world?

We are the first globally, as well. Nobody has done Market Process Outsourcing before. We are the global pioneers in this space. While marketing outsourcing is not new, functional part of outsourcing is.

Advertising agencies and PR agencies are doing marketing outsourcing; the difference is that we are doing it at the functional level.

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When you first started, did you want to target the large companies or small and medium companies? Where did you see the gap?

Having worked in both small and large companies, I have seen gaps at both levels. For the large enterprises, we supplement and substitute their existing marketing team. We fix competency or bandwidth gaps.

In the case of SMEs, they either have no access to talent and even if they get talent, they are unable to retain it.

Also, marketing is a function that is always going to be short staffed. India has around 25 million SMEs and we will never have 25 million marketing managers. If you look at the global scenario, it is five times more than that number!

There are 100 to 125 million SMEs and there is never going to be 125 million marketing managers. So, how do these people access marketing? They have to go for the share service model. And an organisation like ours delivers marketing services to a bunch of companies.

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You started your company in 2008 when recession engulfed the whole world. Why did you start at such a time?

Many people discouraged me from leaving my job as the head of marketing communications at Wipro, and starting this enterprise. They asked me, 'are you crazy to resign your job at this juncture'?

But I thought recession was the best time to start an enterprise for two reasons. One, it helps you build a more sustainable organisation. If you survive a recession, you can survive anything.

Two, recession is the time when people would outsource more. Marketing is the first thing people will cut in recession and marketing managers will be under pressure to work under a limited budget.

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How was it like in the initial days?

My brother and I started this venture, as both of us come from marketing background. We just pooled in our PF money and started with Rs 500,000 to Rs 600,000.

When you first started, were you only looking at the Indian market?

When we started, we were very clear that we didn't want to go global, as other markets are very mature in outsourcing. That's why we wanted to start with the Indian market.

Our target was both the 25 million SMEs and also big enterprises. In the case of SMEs, we planned to do away with the need to have a marketing division as we would be their marketing team but we looked at substituting and supplementing the existing bandwidth. Most of the SMEs we work with today, have no marketing team.

Even today, the domestic market of SMEs continues to be mind boggling. But the problem with the SME market is that it's not really mature. The maturity of our domestic market is not as high as global markets.

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Did you see the effects of global slowdown in India as well?

Indian companies were very cautious though we were fairly insulated in recession. Though they were not affected directly, they slowed down and preserved cash.

How was the first year?

We had four clients (one SME and four large enterprise) and made just a bit more than a crore in the first year.

Year two was not that good as that was when recession started affecting Indian companies. We grew about 40-50 per cent.

But after that, we have been growing at 100 per cent. This year, we will have a review of about Rs 5 crore (Rs 50 million). We plan to hit a revenue of Rs 100 crore (Rs 1 billion) in the next 3 years.

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Have you started looking at the global market now?

After having spent four years in the domestic market, we feel we are ready to go to the international market. We have started getting a lot of interest from global customers, especially from the US, UK, Netherlands and Singapore. Also, we just signed our first Singapore client, and two from the US.

In MPO, is US the biggest market?

Yes. But we feel, MPO is not restricted to the US alone. Any English speaking market could be profitably serviced from India.

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US President, Obama's major concern is outsourcing and he is trying to bring back all the work to the US. Yours is a new field and how do you think the new US policy will affect the outsourcing industry?

Voices against outsourcing have been there all the time. They say, don't outsource when you have a pool of domestic talent. The advantage that we have is, there is very little talent available anywhere in the world. There are not enough marketing managers to serve the businesses out there.

There is a dearth of marketing talent building up because of the sudden burst in the number of entrepreneurs. In the last 10 years, entrepreneurship has grown in a huge way across the world.

The other thing is, most of these SMEs compete on an equal footing with the large companies. For example, both Flipkart and Amazon are talking to the same customer. So, the small guy also needs the same marketing muscle as the big guy. Thus, how efficiently you market defines your success.

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How big is the global market for MPO?

It is very difficult to estimate the market size but if you look at one aspect, which is design outsourcing, it is an $8 billion market in the US alone.

So, by a very conservative estimate, we are talking about a few hundred billion dollars of market. Out of this, the agencies that are there now are servicing only 50 per cent of the market. The other half is not getting serviced.

That is why we have signed up a partner in the US, and we are talking to a few people in the Middle East. This year, we will definitely go global. We are also looking at small businesses globally.

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You started off during the recession, and you saw it all. In which direction is the global economy moving right now?

My sense is that there was very little upward or downward movement; it was and is moving sideways. There is a huge flux in the market both in India and globally.

There is no huge push driving investment into marketing. The big dollars are not going into marketing to make us smile!

There is no negative sentiment. But there is no positive sentiment either. I feel it will take another 12-18 months for the sentiment to start improving.

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You have won quite a few awards like the TiE Start up of the year, the Nasscom award, etc.. How important are awards to start up companies?

It is very important. It gives us the recognition that we are doing something right. Therefore, TiE and Nasscom acknowledging what we are doing is a very important endorsement for a start up like ours.