Distributed risk and reward

Distributed risk and reward

Through its distributed delivery model, NextWealth Entrepreneurs, a business process outsourcing company, aims to empower more than 10,000 rural graduates with jobs over the next two to three years

POORNIMA KAVLEKAR

DR. SRIDHAR MITTA, MANAGING DIRECTOR AND FOUNDER, NEXTWEALTH ENTREPRENEURS

When Dr. Sridhar Mitta, former chief technology officer of Wipro, went to the U.S. in 1998, he was enamoured by the concept of entrepreneurship and wealth creation. When he returned to India, he started a company called e4e India, an IT enabled services and business process outsourcing company, in 2000.  However, he always wanted to do something socially relevant – and he ruled out philanthropy – after his retirement from his professional life.  During this period he was approached to help a small IT company in Elagiri in Tamil Nadu. “It was essentially helping the local graduates to be self sufficient,” says Dr. Mitta. This experience and his subsequent visit to a college near Salem made him research the number of colleges, students and their capabilities in smaller towns. This is when he realised that there are many small town graduates who do not migrate to cities for various reasons – like girls prior to their marriage and people with disabilities. This was also when the IT industry was beginning to suffer from three problems – rising cost, increase in the rate of attrition and non-availability of skills. “These are not different problems but a single problem of demand and supply not being met.  There is a demand on one side and there is supply on the other side. But they are not connected. I wanted to find a profitable and scalable business model to connect these,” recalls Dr. Mitta. That’s when he came up with the idea of a distributed delivery model and along with the three other founders (Anand Talwai, Mythily Ramesh and S. R. Gopalan), he started NextWealth Entrepreneurs (NextWealth), which promises social upliftment through an entrepreneurship model.

Incorporated in 2009, NextWealth, is a for-profit social entrepreneurship organisation that employs engineering and other graduates in non-metro centres (tier II, III, IV cities and rural areas) to perform simple to complex, technical or non-technical work for client organisations. It involves local entrepreneurs to run these centres and provides them the right training to run it effectively.

The delivery model

“The distributed delivery model is not very much different from the AMUL model and can be applied to any business,” says Dr. Mitta. The size of the centre is governed by a common set of principles like the geography, quality of the entrepreneur, staff training, performance measures, remote management, access to information and so on. This model ensures a large number of small centres located in non-metros in India, which is similar to the Internet or cloud model of computing.

We measure our success by the number of jobs we create and not by the profits we make.

As it is a distributed and entrepreneur-led model, the investment required is also distributed. As a result, capital efficiency becomes very high and the entrepreneur not only takes the risk but also gets the reward. The total project cost to setup a NextWealth centre is Rs. 90 lakh which includes working capital costs until the centre breaks even. On an average, NextWealth offers 74 per cent of the equity structure to the entrepreneur while it retains 26 per cent.

An ideal centre starts by employing 20 to 30 people and increases to about 250 people in a year or two. Sometimes, it can even grow to a 500 people centre. Currently, the company has three centres – Mallasamudram which is close to Salem; Chittoor in Andhra Pradesh and Amargol which is between Hubli and Dharwad, Karnataka. The criteria for NextWealth’s selection of location for its centres are : the cost of living should be low, there should a good talent supply in terms of a college or university, Internet bandwidth should be available from at least two independent service providers and access to the location should be a reasonable four hours from the city.

Delivery model

The company employs fresh graduates, mostly women, and trains them for a specific job. “Unlike a typical IT company, we do not have a pitch. We do not take general engineers and train them in everything,” says Dr. Mitta.  The company first gets its customers, understands their processes and then hires people for that process and the resultant training quantum is less and more specific. The employee, after the training, gets into the actual delivery. “One of the reasons for very high attrition in cities is that there is a mismatch between the quality of people and the jobs they do. We see a lot of people resigning within a few months of joining.  This does not happen much with us,” adds Dr. Mitta.

As far as the customers go, NextWealth’s services cost at least 50 per cent less when compared to what they would pay for in the city. “In absolute terms, it works out to US $3 to US $5 an hour. In the city, I do not think they get anything less than US $12. This is because we do not have any bench cost and transportation cost and have low retraining cost due to very low attrition and low real estate cost,” he explains. NextWealth also has the flexibility to try out new models and new customers without affecting the current structure.

Addressing the challenges 

When NextWealth was incorporated the team had three concerns. One, whether the company would be able to get sufficient quantity and quality of graduates; two, whether they would be able to identify an entrepreneur who has the right qualification and experience to start a centre, and three, the company’s ability to access customers. While the first two concerns were addressed without much fuss, customer acquisition continues to be a challenge.  “We are still facing the mindset issues which are similar to what the American managers felt 15 to 20 years ago,” says Dr. Mitta.

The company currently has more than a dozen customers. It is using its work to get new customers and is also marketing through the web. In addition to the traditional IT and BPO services, NextWealth is also setting up new types of services like a social media command centre. Some of the services it offers include content monetisation, chat-based support, digital image applications and tech services. NextWealth also picks up processes and customers in such a way that it does not test its staff in what they are not good at. “We do not take up any call centre jobs as we do not want to test them in their weakness area. On the other hand, the processes where input and output is well defined are where they perform,” says Dr. Mitta.

NextWealth has its eye on the ever expanding healthcare sector as part of its growth plans for the future.  While around 500 graduates are currently employed by the company, its aims to create about 10,000 jobs in the next two to three years. It plans to meet this target by setting up about 40 centres and identifying good entrepreneurs to lead these centres. In fact, it has already identified 10 other centre locations and entrepreneurs. Through its business model, NextWealth hopes to impact the social and economic ecosystem of its centre locations. “We measure our success by the number of jobs we create and not by the profits we make,” concludes Dr. Mitta.


SNAPSHOT

NextWealth Entrepreneurs

Founder:  Dr. Sridhar Mitta, Anand Talwai, Mythily Ramesh and S. R. Gopalan

Year: 2009

City:  Bengaluru

Number of centres: 3


Concept in brief:

NextWealth is a for-profit social entrepreneurship organisation that employs engineering and other graduates in non-metro centers (tier II, III, IV cities and rural areas) to perform simple to complex, technical or non-technical work for client organisations. Some of the services it offers include content monetisation, chat based support, digital image applications and tech services. It involves local entrepreneurs to run these centres and provides them with the right training to function effectively. As it is a distributed and entrepreneur-led model, the investment required is also distributed. The total project cost to set up a NextWealth centre and run it until it turns profitable is Rs. 90 lakh, which includes capital expenditure and working capital. On an average, NextWealth offers 74 per cent of the equity structure to the entrepreneur while it retains 26 per cent. 

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