1.case study aegis-mridul- case stdy competition - participation

Aegis

Case Study | Outsourcing | Telecom | Innovation Management Please consider the environment before printing

A eg is : Emer gi ng C ompetitiv e and I nnov ativ e Str ateg ies i n T el ec om & Outs ourc ing I ndus tr y

MANAGEMENT-CASE:

CASE - TIT LE : INNOVATION MANAGEMENTCASE

AEGIS: EMERGING COMPETITIVE AND INNOVATIVE STRATEGIES IN TELECOM & OUTSOURCING INDUSTRY

Aegis



Aegis:

Em e r g i n g C o m pe t i t i v e an d I nno v a t i v e S t r a t e g i e s i n T e l e c o m & Ou t s ou r c in g I ndu s t r y

- A study of Cutting Edge Technologies & Communication Tools in AEGIS TELECOM & BPO

Aegis



AREAS of RESEARCH: TELECOM & BPO

CASE OBJECTIVE:

ACKNOWLEDGEMENTS:

I wish to express my profound thanks to Prof. Kunal Gaurav for giving me this wonderful opportunity.


C o m p a n y : A egis

DHRUVA CASE COMPETITION 2012This case contains 15 pages. Submission date: Dec 03, 2012.

A M A N A G E M E N T C A S E W R I T T E N F O R

C L A S S - R O O M T E A C H I N G & D I S C U S S I O N


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Aeg s

• CASE WRITTEN IN ASSOCIATION WITH AEGIS, an ESSAR GROUP COMPANY

Aegis

AUTHOR PROFILE

Mridul Arora

Mridul Arora is an MBA in Finance from ICFAI Business School, Kolkata, ICFAI University and a BBA (Hons.) from Jadavpur University. He has been an active participant and winner in Corporate Quiz Competitions conducted by Colleges and Corporates. He has authored research papers on “Business Intelligence, Competitive Intelligence, Analytics, Knowledge Management and IFRS” (2012) in IIM Calcutta and IBS Hyderabad. Mridul has worked in reputed organizations like Allahabad Bank and IBM Global Services. He is also a keen participant in MDPs, EEPs, Workshops and International Conferences and is passionate to learn and unlearn new trends in industry by applying innovative concepts, contemporary research tools and modern analytical techniques. Presently, the author is a corporate professional working at Deloitte, Hyderabad as a Tax Consultant.



Last Edited – Dec-03-2012

Aegis: Emerging Competitive and Innovative Strategies

B y M r i du l Arora

Welcome to this innovative Aegis case study dealing with Innovation Management. People, process, and technology are the foundations for growth. Although the transition to a new service process involves change management, a cooperative process can minimize complications to a business and lay the foundation for a solid future.

INNOVATION, CREATIVITY & IMAGINATION first entered the corporate world and boardroom in the 1940s and 1950s by ALEX OSBORN, Co-founder of Advertisting agency-BBD & O. In 1960s, Edward De Bono, a British neurologist, introduced the concept of “LATERAL THINKING”. Mr. Steve Jobs articulated the concept as follows: “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it.” With innovation comes growth, and with growth comes opportunities … opportunities for success … opportunities to develop future leaders. Listening to clients, market, and to each other will spur our next innovation. Ask questions of your colleagues. Ask clients about their challenges. And pay close attention in meetings. I have learned through the years to execute upon a “rule of three.” If I hear the same challenge or request from three different sources, that tells me there may be room for innovation and growth in that area in a continual pursuit to be the best. Not all ideas pan out; some ideas are more challenging than others to implement. Some require leadership, others require change management. The point here is to make innovation part of your daily life and be passionate about the ideas that you think can make a difference.



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Introduction : The Right Process

“Many businesses fail to meet their growth goals because it is difficult for senior managers to break free of their mental paradigms and existing strategic boundaries.”

-Bob La Perle, GM & VP, Kodak.com

The Late Dhirubhai Ambani dreamt of a digital disruption in India — an India where the common man would have access to affordable means of information and communication. Dhirubhai, who single-handedly built India‘s largest private sector company virtually from scratch, had stated as early as 1999: ―Make the tools of information and communication available to people at an affordable cost. They will overcome the handicaps of illiteracy and lack of mobility. Most of the contemporary enterprises are engaged in a “rat race”. The challenge is to think out of the box and devise strategies which will enable an organization to operate efficiently and remain a step ahead of business rivals. At the same time, a company must market its products in an efficient fashion. Resourceful marketing enables a company to reach out to the masses who are the ultimate consumers of the product.

The reason why certain enterprises perform better than the rest is that these enterprises adopt consummate strategic and marketing policies and vertical marketing systems (See Exhibit-7) which provide them with a large consumer base. This is where international business strategy and marketing modules come in handy. Some enterprises are taking a slow, steady approach by adopting mobile wireless 3G and 4G technology to do what they’ve always done more effectively. Others are using mobile to jumpstart transformative changes in their business or operating models, doing fundamentally different things.

In this case, we have set out the findings from the CEO interviews of Aegis, a Multinational Corporation in a range of offerings in BPO and KPO Services. It illustrates the strategic priorities and talent issues faced by the company. We address the challenges, complexities and responses which Aegis encounters. This requires understanding the broad business, talent objectives and assisting in the integration of an international experience in global competency development to have the right people, in the right jobs, in the right locations.



From a leadership development perspective, people learn primarily through experience. But seldom do organizations have the systems, tools and culture needed to create the kind of stretch assignments and other developmental experiences that facilitate real growth. Networking, Formal Learning, and Technology-assisted developments are critical to make smart moves that meet current business and future developmental needs.

The problem with the telecom industry is in their infrastructure and network coverage. It has been recognized that the telecom industry’s health depends on lowering service provider operational expenses as well their capital expenditures. Telecom vendors have made significant efforts to address this need and telecom company vendors have also taken this issue seriously with data traffic rising rapidly, revenues from data traffic were growing at one-seventh this rate, and costs associated with data traffic were growing faster than revenues. In many organizations, mobile initiatives are popping up in almost every business unit, department and region. Some are pushing existing solutions and process benchmarks from the web and desktop to the innovative devices like Smartphones, Blackberry, Android, iPhones and Cloud Computing Platforms. Others are reimagining their business without location constraints.




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THE EMERGING TELECOM AND GLOBAL OUTSOURCING INDUSTRY DYNAMICS:

A COMPETITIVE LANDSCAPE

The booming telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and the launch of new services. Communication service providers are shifting from traditional voice and data services to being players in telecommunications, media, entertainment and the IT sphere. Greater penetration of new services, availability of relatively inexpensive and feature- rich handsets, consumer education and values have forced the industry to measure Average Profit Per User and Customer Lifetime Value as rigorously as they do Average Revenue Per User. This is achieved by outsourcing services like sales, order management, postpaid billing, provisioning and customer management, resulting in reduction in operating expenses, maximization of revenues, increased agility in go-to-market plans, and improved customer retention and loyalty.(See Exhibit-2)

Outsourcing continues to “go mainstream”, becoming another standard business practice that should be evaluated as business needs mandate. The outsourcing market continues to confuse outsourcing with offshoring. Many respondents still see the two processes as inseparable — even though many times outsourced work never leaves the originating country. Information Technology, Finance and Human Resources continue to lead other business processes in outsourcing, though all business processes are expecting to see increases in the use of outsourcing and offshoring in the near future. Insourcing, though rare, does occur. We are beginning to see more clients contemplating insourcing functions due to vendor non-performance or changes in business strategy.

Currently, Telecom and Outsourcing Industry is facing the following challenges:

1. Globalization Effect: With opening up of trade and commerce across different countries in the world, opportunities are becoming plentiful.

2. India’s advantage: Liberalization of our Indian government coupled with talented manpower is successful in making India as the best destination for other countries to shop for outsourcing business.

3. Threat from other countries: Current advantages of India will not be guaranteed for years to come. We have many countries in the competition, not to forget giant China.

.

4. Impact of U.S. economy: As majority of outsourcing business is coming from US, certainly US economic health is of critical importance. US economy condition will have direct bearing on the


financials of IT services companies.

5. Sustaining of Quality: in products and services offered by Indian BPO (See Exhibit-4) companies is of paramount importance in the light of stiff competition offered by other countries. Quality is the moola mantra for any ITES/BPO/KPO company, without which it cannot exist.

Typical challenges in the industry are

1. Financial Austerities: Companies have resorted to different mechanisms of cost cutting such as pruning of human resources, bench cost, travel cost etc..

2. Looking for optimal utilization of human resources : All resources should be billable. This means freshers should be billable from day one.

3. Reducing bench cost: Keeping of reserve talent pool is done away with.

THE DISRUPTIVE AEGIS MODEL FAILS AFTER PILOT TESTING:


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GROWING SWEET & SOUR

In our experience, skill, knowledge and responsiveness, blended with individual style and character, create the chemistry vital to Strategic relationships – our delivery model. The high average call handling times (AHT) has significantly impacted customer satisfaction score across the globe. This has led Aegis to lose11% more contracts in 2011-12 than 2010-11. Aegis had to write off a huge decline in the value of foreign investments due to the slump in the global telecom and outsourcing market post 2008. In 2008, Aegis had roped in with the leading US-based media company AOL but had to bring about a number of other strategies to wake up to the challenges of the “new” economy post recession. Aegis announced that its commitment towards globalization was intact. It decided to focus more on Indian Business. Innovation at Aegis is quite remarkable.

The Co-creation business model construct of Aegis is externally oriented and illuminate the relationships that the firm has with the various actors in its value network. With deep domain expertise to synchronize their onshore in-house processes with outsourced offshore centers to provide scalability and flexibility. This synergy would enable them to restructure and consolidate the UK and US based captive operations. The client chose Aegis as its partner to provide inbound customer service for contract airtime and pre-paid mobile customers .Aegis has a long-term client relationship ranging over five years.

Since inception this engagement model (see Exhibit-6) has transformed from a “productive hours” model to a “delivered hours” model, showcasing the client’s confidence in Aegis’ ability to effectively manage its end user experience. Aegis has been able to meet the client’s quality and experience metrics such as “Voice of Customer” (VOC), Voice of Employee (VOE),


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Customer-satisfaction (C-SAT), and issue resolution1.

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Teaching Footnotes

1. VOC, VOE and C-SAT are the parameters used to

judge the efficiency of outsourcing agents.


The comprehensive and holistic alliances and memberships of Aegis addressed the three pillars of sustainability: People, Process and Technology (See Exhibit-1).In Aegis, the work can be moved anywhere allowing for a degree of freedom depending on where it is cheaper to do so or at a place that has unutilized capacity or skills.

A capability gap is the difference between the ability of existing systems to meet operational requirements and of what's expected of it. Capability gaps may occur due to: Faulty recruitment procedures, Inability to connect to sustain & scale up

the existing capability by providing the right number of people. The two main ways in which a capability gap can be spotted are:

1.Competency Mapping2.SWOT Analysis

Aegis capitalizes on the of TEAM (Together Everyone Achieves More).It makes use of agile methodologies like Lean Six Sigma, Flexible and Zero-Base Budgeting, CSAT, AHT, Hall of Fame Awards and Annual Award Distribution Ceremonies to reward its top performers. After running successfully for close to 30 years, Aegis got into trouble by 2008 recession. Post recession, the business scenario in the US had changed considerably. Aegis had to contend with the onslaught of other giants like GE, Genpact, Wipro and Infosys. Over the past decade, the Indian economy experienced rapid growth with the ingress of MNCs and became the hub of outsourcing services. Between 2008 and 2011, a turnaround was orchestrated at Aegis by its Global MD and CEO, Aparup Sengupta. In Philippines, Aegis had a monopolistic situation but now a lot of competitors were coming up. Aegis took a position-of quality, not price. Post 2008, Telecom and Outsourcing contributed 5.5% to the GDP and generated 2 million employment opportunities. After 2008 global financial crisis, Aegis had an impact on its profitability as various sectors of the economy like automobile, banking, real estate and software industries were affected.

Aegis realized that in 21st century, a company needs to change its outlook, particularly in

http://www.aegisglobal.com/section_level1.aspx?cont_id=4c4BdnkPpOQ%3D

http://www.aegisglobal.com/section_level1.aspx?cont_id=4c4BdnkPpOQ%3D


context to application of Information Technology in business processes


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AEGIS still relied on some old fashioned Information Systems. This thought of major technological change became even more deeply ingrained in the CEOs’ mind when he met a software vendor at a social event. The vendor promised him some customized solutions that would help integrate the company’s data. AEGIS had two primary units: an outbound telemarketing unit and an inbound catalogue sales unit. These units operated independently of each other. AEGIS has plans to integrate these units, which required a significant amount of integration of the relevant data and information. Along with this, the company is also planning some significant growth strategies, where it planned to increase its call center to 200 from the current number of 10. New open-switching system was to be implemented in the new setup. This will enable automatic redialing and call forwarding. Plans were also in place to implement new human resources and ledger software. The vendor assured the CEO that building of data warehouse would be the company’s solution for effectively managing its expansion plans and the new software. . Employing a sophisticated switching system and proprietary software, the Product will enable customers to receive telephone calls on any designated telephone line, through a toll-free number and private extension. The Product provides three important benefits that address the target end user's needs: privacy, flexibility, and convenience

The Product is a full-featured call management service that supports multiple extensions, several call handling options, and voice mail. When a customer establishes an account, he or she is granted a personal extension number that can be assigned to a specific telephone number such as a home, office, or cellular number. By giving others the extension number, in conjunction with the directReach™ toll-free number, the customer is able to receive phone calls and engage in totally private, anonymous telephone conversations.

Aegis

The service is fully customizable, allowing the customer to configure the service to meet his or her unique needs. The user controls all Product features through a complete management system on the Web or through an easy to use Interactive Voice Response (IVR) telephone interface. Through this control system, the customer can easily:

Register and activate the product using a credit card Specify the receiving number, and modify that number at any time Program different receiving numbers for different times Terminate an extension and obtain new extensions Customize voice mail and check for new messages Review account usage and change monthly calling plans

As a prevalent norm that a data warehouse and Customer Relationship Management (CRM) software achieve profitability, the Board of Directors in a meeting agenda (see Exhibit-11) gave the permission to the CEO to run a pilot project in the Corporate Headquarters at Mumbai. Convinced by the Board, the CEO decided to go forward with the idea. He allocated a budget of Rs. 250000, and plan was to implement a 500GB data warehouse in all the centers and offices of Aegis to keep a master track record of all the clients and calling customers. Since most of the internal staff was not comfortable with other Information Systems (IS) projects, some new personnel, such as a manager of the data warehousing projects and as an Management Information Systems (MIS) director, were hired outside the company. The time span given was approximately four months. An initial project team was assembled, consisting of the MIS director, the project manager, and couple of users, among others. The project manager attempted to push back the deadline, to make the project more realistic, but the CEO was insistent of staying with the original plan. Ultimately, the CEO agreed to the implementation of a pilot project after five months, before the role out of the actual data warehouse. Although the CEO envisioned the Nonetheless, the project team remained optimistic and started the second phase for the project, namely the scheduled lengthy interviews with potential users throughout the organization and asked them to talk in depth about their job requirements, day to day activities, technology needs, and so on. Hence the user requirement phase was relatively long (about three months). The project team members also focused on defining the business dimensions, attributes, relationships, and so on, for the design of the data warehouse.

Aegis

Since these were multiple departments, there were many conflicting needs and definitions, all of which needed to be integrated. At the end of this stage, the project team realized that individual units’ business requirements were too inconsistent. All of the business managers had their own customized spreadsheets, which they used to create their respective reports. These individual spreadsheets were based on the managements’ own sets of assumptions and had no synergy with each other. The project team had to invest enormous time just sorting through these inconsistencies. This further delayed the project, which was not expected earlier. To add more trouble, the team also realized that there were no appropriate data to enter into the data warehouse. Some of the data were legacy data, and extraction of these data will be a costly affair for the team.

The possible alternative solutions are:

Look for avenues even in the Small and Medium Enterprise (SME) areas.

Increase Investments purposely to keep shareholders attracted and gain their confidence in the company by bringing waves of technological innovation

No Increment for the current financial year for the employees

Employees to be called back from sites in U.S.A. to upgrade the systems on the ten existing call centers to open technology systems.

To layoff 10 percent of the workforce and cut executive salaries

Aegis projected revenues of $12 million in its first year of operation, growing to $48 million by year five. Cost of goods sold was calculated on a per-minute basis and included all services associated with buying, selling, and billing the customer for calls, as well as credit card fees. Gross margins were projected to be around 61%, while operating margins—after advertising, promotion, O &M and G&A costs—were projected to be around 43%. Net income was projected to be $5 million in the first year, growing to $21 million by year five.

Aegis

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The existing IS department refused to cooperate with the team, since they were threatened by the data warehousing project and viewed it as reducing their importance to the organization. The data warehousing team attempted to salvage the situation by gathering some data from existing reports and manually entering them into pilot data warehouse. However, they still knew that without significant changes to the existing systems, the actual data warehouse could not be implemented, yet plans for the pilot went ahead as scheduled. When the pilot data ware house was finally installed, the situation became even worse. The users refused to use it, claiming that it did not add anything to their existing capabilities and was difficult to use. Instead, of the originally planned five months, the pilot development and installation had taken over eight months. In addition, it incurred an estimated cost of Rs. 750, 000, significantly higher than the CEO’s budget (see Exhibit-9 & 10). At the time the pilot failed, there were some structural changes in the organization as well, including new directors of MIS and technology. The data warehousing project manager built a new plan that estimated that the data warehousing project could be delivered within two years. However, by this time most of the company executives, including the CEO, had grown tired of it, and the project was officially closed within a short period of time.

The person receiving the phone call incurred the charge for the call, based on a rate plan that varied by usage level:

Plan Expected Usage Monthly Fee Charge per Additional Minute Free Monthly Minutes

Registration only Trial $6.95 $.79 0 minutes

Basic subscription Middle $14.95 $.69 20 minutes

Premium subscription High $29.95 $.59 45 minutes

The per-minute prices were higher than the cost of standard long distance services, but approximately the same as other enhanced phone services, such as local collect calls, which ranged in cost between $.35 and $.70 per minute depending on the length of the call, plus a per-call connection charge.

Aegis

Summary and Conclusions

In Aegis’ case, they articulated the opportunity to evolve to a very different telecom industry structure, one that involved a growing diversity of handset manufacturers and application developers driving distributed innovation in smartphone technology. In forming its view of the telecom industry, Aegis recognized the importance of orchestrating a robust and diverse ecosystem.

The final element of a shaping strategy, the shaper’s acts and assets, help overcome the natural skepticism that potential participants might have in times of high uncertainty. These acts and assets are designed to strengthen credibility by demonstrating the shaper’s commitment and capability to achieving the shaping view and supporting the shaping platform. In a shaping strategy, these three elements reinforce each other, helping the shaper mobilize a large number of participants, build critical mass quickly (a key challenge for any platform strategy), and achieve increasing returns for all. In times of growing pressure, shaping strategies are particularly attractive because they are highly leveraged, inviting many other participants to share in the investment and catalyzing a powerful form of distributed innovation where participants learn faster by working together. As for Aegis, by creatively combining telecom and wireless resources, the firm has emerged as a global telecommunication power. Telecom is not the only industry that has seen a successful shaping strategy. Early examples of successful shapers using positive incentives include Malcolm McLean’s efforts to evangelize containerized shipping in the 1950s and 1960s, Visa in the financial services arena in the 1970s, Li & Fung in the apparel industry in the 1980s, and Microsoft in the technology industry in the 1980s and 1990s. And today, shaping strategies have broader application than ever before. From Facebook’s social network platform that redefines how people connect online to Spotify’s reshaping of the music industry, today’s digital infrastructure makes it easier to mobilize and coordinate the activities of much larger numbers of participants than ever before. The growing gap between digital technology performance and the much more modest growth of business productivity has also created both greater potential for business disruption and an upside in rewards that will accrue to successful shapers. More opportunity, more rewards, and more capabilities create compelling incentives for executives to adopt shaping strategies today.

In closing, I’ll again draw again upon Mr. Jobs: “Innovation distinguishes between a leader and a follower.”

Aegis

References & Background

1. So What is Strategy? – Roger Evered (1983)

2. The Strategy Concept: Five Ps of Strategy – Mintzberg (1987)

3. What is Strategy? – Michael E. Porter (1996)

4. The Search for Strategy – Gary Hamel (1997)

5. What is Strategy and does it Matter? – Richard Wittington (2001)

6. Strategy as Simple Rules – Eisenhardt (2001)

7. The Oxford Handbook of Strategy – Faulkner/Cambell (2003)

8. What is Strategy? – Deepak K Sinha (2003)

9. What is Strategy and How do You Know if You Have One? – Costas Markdes (2004)

10. Can You Say What your Strategy is? – Collis/Rukstad (2008)

11. Good Strategy/Bad Strategy – Richard Rumelt (2011)

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Annexures & Exhibits

Exhibit-1: IMPACT OF TECHNOLOGY

Source: AEGIS PRIMARY DATA

Exhibit-3: STAKEHOLDER SATISFACTION MATRIX Exhibit-4: INDIAN BPO MKT.*All figures converted to Dollars at 1 Euro = 1.95583 Dollars

Exhibit-6: ENGAGEMENT DRIVERS Exhibit-7: VERTICAL MKT SYSTEMS

Exhibit-8: PROCESS BENCHMARKING FOLLOWED BY AEGIS

US$ Cost perFTE(Full TimeEmployee)

UnitedStates India

India as of US costs

Personnel 42,927 6,179 14%

G&A Expense 8,571 1,000 12%

Telecom 1,500 2,328 155%

PropertyRentals 2,600 847 33%

Depreciation 3,000 1,500 50%

TOTAL EXPENSES 58,598 11,854 20%

Exhibit-9: CHARGES FOR INSTALLING THE DW/INNOVATIVE INFRASTRUCTURE

%

Exhibit-10: BUDGET EXCEEDING THE CEO ESTIMATES


Exhibit-11: MEETING MINUTES AND AGENDA- AEGIS

