09: How a German entrepreneur redefined the KPO market in India: Alexander Henn’s story
What is the difference between KPO and BPO? Why India is the leader in the KPO industry? This and more in today's newsletter, talking with Alexander Henn, CEO of Squared Circle Ecom
Hello Kula readers,
This week we had the pleasure to discuss with Alexander Henn, CEO of Squared Circle a Bangalore-based knowledge process outsourcing company that provides end-to-end e-commerce solutions for global clients. With Alexander, we delved into the Knowledge process outsourcing Industry in India, the opportunities for European companies to arbitrage India’s knowledge pool, and the importance of education in India. With a specific focus on building and managing e-commerce, Squared Circle is leading the digital transformation for many European and Indian brands.
Read till the end to discover more about Alexander’s story, the opportunities of the e-commerce sector in India, and well cultural differences in Business between Europe and India
Key Takeaways
🤝 India's Services Growth: India's services exports reached US$254.5 billion in 2021-22, driven by Information Technology (IT) Services and Business Process Outsourcing (BPO), with a workforce of over 5 million, positioning India as a potential technology and innovation hub globally.
🏃🏼♂️Alexander Henn's Journey: Alexander Henn, CEO and co-founder of Squared Circle Ecom Pvt. Ltd., has over 15 years of industry expertise in the Indian e-commerce sphere, starting from Amazon and later joining Lazada-Alibaba group, focusing on customer-centricity and talent empowerment
🇮🇳 India's Dominance in KPO: India covers up to 70% of the KPO industry worldwide, boasting a large talent pool and English-speaking workforce.
🤩Key Emerging Industries: Fashion and grocery sectors are emerging as key growth sectors in India, driven by digital adoption and changing consumer preferences, particularly in the Fast-Moving Consumer Goods (FMCG) segment.
🏦 Government Incentives: The Indian Government has launched schemes like the India BPO Promotion Scheme (IBPS) and the North East BPO Promotion Scheme (NEBPS) to promote the IT/ITeS industry, create employment opportunities, and ensure balanced regional growth.
Ok, let’s get started
Alexander Henn’s story: living in India since 1998
In the ever-changing realm of e-commerce, Alexander Henn emerges as a prominent figure, serving as the CEO and co-founder of Squared Circle Ecom Pvt. Ltd. With over 15 years of industry expertise, he has etched a significant footprint in the Indian e-commerce sphere.
Alexander’s journey in India started in 1998 when he moved there to work for an Indo-German joint venture in the Jewellery. The initial plan was to spend a year there, however, a turn of events led him to stay till the present. At the beginning of his Indian journey, to better understand the Indian culture and way of living, Alexander decided to spend a month living with an Indian Family. Alexander shared with us that this decision has been crucial for his success in India, having had the opportunity to see firsthand how locals live and think and their set of values.
In 2009, Amazon India was building its first development center in India and looking out for German and French speakers to launch the business and scout the market. That’s how Alexander started his journey into the e-commerce industry, with a pivotal role at Amazon India. Alexander was among the pioneering team members to introduce Amazon Retail Business Services in India. His tenure at Amazon not only allowed him to have a comprehensive understanding of e-commerce dynamics but also instilled in him a profound commitment to customer-centricity.
During his role at Amazon, Henn's dedication and innovative approach garnered recognition, earning him the esteemed "Above & Beyond" award for his instrumental role in implementing global processes with significant impacts. During our interview, Alexander shared with us that he attributes much of his achievements to the power of collaborative teamwork. He believes that assembling the right talent is pivotal for business success, consistently prioritizing the nurturing and empowerment of employees throughout his career journey.
Following his success at Amazon, he embarked on a new chapter in the e-commerce realm by joining the Lazada-Alibaba group. Here, he focused on spearheading the establishment of a thriving non-tech1center of excellence in Bangalore, India. His endeavors included remotely steering the promotion of the Lazada grocery channel, RedMart, in Singapore, a venture that operated as a standalone entity at the time. This experience not only enriched his understanding of the global e-commerce landscape but also honed his leadership acumen.
Strong on his experience and knowledge of the Indian market, Alexander launched in 2020 Squared circle, with the ambition to fully develop India’s potential in the tech as well as the digital merchandising sphere and work to build a brighter future of collaboration and growth. Along with the co-founders of Squared Circle are Alexander’s wife Rajeswari Henn and daughter Priyanka Henn and the business is to date owned by the family.
We square circle for our clients - The story of “Squared Circle”
Squared Circle was Incorporated in 2019 out of Bangalore, India as a “Knowledge process outsourcing” company, providing its customers with a helping hand throughout their business ventures.
We believe that the customer should always come first and providing solutions is in our DNA. Teamwork and taking care of our employees helps them to develop, grow, be creative and become more productive. We strive with the motto "One for all and All for one”.
At the beginning of the Interview, we asked Alexander what is the mission of Squared Circle and he replied:
👉🏻 We Square Circles for our clients
Meaning that they aim to simplify problems for their clients and make the Indian market more easily understandable from the outside.
SCE's unique selling point is its strong expertise in e-commerce management, reputation in digital merchandising and catalog management, and also its focus on recruiting top talents
However, Squared Circle's story dates back to 2014, when the business was operating as a Satellite office for Lazada Alibaba Business in Southeast Asia via the then stand-alone RedMart grocery channel.
Squared Circle provides its clients with a variety of services such as Digital Merchandising, catalog management, Channel marketing, and more. You can find here their website to find more information on what they do.
With a strong focus on the customers, SCE believes that looking after the customers is the best way to look after the business.
During COVID-19, online commerce soared, allowing to establish itself as a key partner in building and scaling e-commerce platforms, running the online stores for various businesses, managing the content and creative designs
Squared Circle Ecom has also been featured in the Fortune India November'21 edition in the "Super 30 Companies India 2021" segment
Why is India a global leader in the KPO industry?
According to recent research, India covers up to 70% of the KPO industry worldwide, underlining the high talent pool available in India. In the news, India is often portrayed as a place to arbitrage cheaper labor, which is somewhat true, with research showing that hiring someone in India is significantly cheaper than in Europe. However, Alexander told us that India’s potential is not limited to labor arbitrage, but lies in many more aspects:
English Proficiency: India Asia’s largest pool of English speakers, making cross-country communications smoother.
Large talent pool: India boasts a well-established education system that produces many skilled professionals across various disciplines, including engineering, finance, and IT. With almost 8.5M graduates every year and 1.5M only in engineering, India talent’s pool is unlimited.
Time Zone Advantage: India's time zone (GMT+5:30) allows for overlapping working hours with key markets such as North America and Europe. This enables real-time collaboration and communication between Indian outsourcing firms and their clients, facilitating smoother workflow and project management.
Government Support: The Indian government has implemented policies and initiatives to support the growth of the outsourcing industry, including tax incentives, infrastructure development, and regulatory reforms. These measures create a conducive environment for outsourcing firms to thrive and expand their operations.
Quality Focus: Despite cost advantages, Indian outsourcing firms prioritize quality and professionalism in their service delivery. Adherence to international quality standards, continuous training and upskilling of employees, and implementation of robust quality assurance processes ensure that clients receive high-quality services that meet their expectations.
KPO risks management
Although Key process Outsourcing allows companies to gain efficiency and reduce costs, it poses a multitude of risks that should be carefully managed.
Firstly, since KPO often deals with sensitive data and key company information, the KPO business must be managed carefully and for companies choosing the KPO partner, an extensive audit process must be done.
Secondly, security risks may occur when including a third party in your business, with the vendor potentially sharing Intellectual Property (IP) or other proprietary information outside the company. In the case of offshoring, security protocols and IP laws may differ from country to country, necessitating compliance with regulations. Protective measures include asking about data security and compliance protocols, checking past client testimonials, and seeking legal aid to draw up a secure outsourcing agreement.
Thirdly, the physical location of the KPO business represents a significant risk. Something that made India a popular KPO destination in recent years is its relatively stable political situation and collaborative government.
Finally, the risk of reduced communication due to language barriers looms, particularly when engaging in business with countries where English isn't the primary language. KPO vendors persistently strive to enhance language proficiency, whether through accent neutralization training or establishing offices in regions with stronger English capabilities. Ensuring effective communication between employees and KPO vendor resources stands as a cornerstone for the triumph of the KPO model. India again ranks as the best destination for KPO due to its largest pool of English speakers.
Managing cultural differences between In and EU
With 16 years of immersive experience in the outsourcing industry, Alexander brings a wealth of knowledge and expertise to the table.
Recognizing the inherent challenges posed by cultural diversity, Alexander emphasizes the importance of mindfulness and cultural sensitivity in fostering a harmonious work environment. To address this, his company offers cultural training programs, mainly via digital training platforms or instructor-led workshops, providing employees with the necessary tools and knowledge to navigate cultural nuances effectively.
Operating in a multicultural environment, Alexander's company embraces diversity and inclusivity, with employees hailing from various regions of India and representing diverse backgrounds and religious beliefs. Leading by example, Alexander sets the tone for inclusive leadership, championing diversity and equality within the workforce. With 52% of women comprising the workforce, his company is committed to gender diversity and empowerment, with many women assuming leadership positions.
Furthermore, Alexander recognizes the transformative power of education in driving social and economic progress. By opening up opportunities in the university field, his company contributes to educational improvement, empowering individuals, especially women, to pursue higher education and excel in their chosen fields.
How to set up your business in India: Alexander’s take
During our interview, we asked Alexander: “What is the secret to running a successful business in India”
Alexander wanted to share with us, what does not work instead, and we liked this approach
According to Alexander and his experience, attempting to transplant the exact business practices from Europe into India, or vice versa, often leads to inefficiencies and challenges.
Several factors contribute to this:
Cultural Differences: India and Europe have distinct cultural norms, values, and communication styles. Failure to understand and adapt to these differences can hinder effective collaboration and relationship-building with clients, partners, and employees.
Diverse Workforce: India boasts a diverse workforce with varying educational backgrounds, skill sets, and language proficiencies. Managing and motivating teams in India may require different approaches compared to Europe, necessitating a nuanced understanding of local dynamics.
Business Environment: India's business environment presents unique regulatory, legal, and bureaucratic challenges that may differ significantly from those in Europe. Navigating these complexities requires flexibility, patience, and a willingness to adapt strategies to local regulations and practices.
To succeed in the Indian market, businesses must adapt their strategies to align with the requirements and expectations of the local market. This includes building strong relationships with stakeholders, understanding cultural nuances, and tailoring products or services to meet the specific needs of Indian consumers. Sometimes finding a respectable local partner or consulting company is necessary.
E-commerce trends and affected industries: Alexander’s take
Fashion and grocery industries are emerging as key growth sectors in India, driven by changing consumer preferences and increasing digital adoption. In particular, the Fast-Moving Consumer Goods (FMCG) segment, encompassing grocery and everyday essentials, has witnessed significant expansion in the digital space. Traditionally reliant on brick-and-mortar establishments, businesses in these sectors are undergoing a digital transformation to capitalize on the e-commerce market.
The FMCG sector, in particular, is experiencing a paradigm shift as traditional grocery retailers transition into e-commerce brands. This transformation involves digitizing various aspects of the supply chain, from inventory management and order fulfillment to customer service and marketing.
Alexander explained to us that he is now seeing the digitalization of these businesses extend beyond mere online presence to encompass a holistic digital transformation. This entails adopting cutting-edge technologies such as data analytics, artificial intelligence, and machine learning to enhance operational efficiency, optimize customer experiences, and drive innovation in product offerings. For companies like Squared Circle, this means investing more in education and talent sourcing to ensure that the market demand is met.
Knowledge process outsourcing (KPO) industry in India
As per a KPMG report, Knowledge Process Outsourcing (KPO) is defined by the concept of "intellectual arbitrage," distinguishing it from Information Technology Outsourcing (ITO) or Business Process Outsourcing (BPO), which primarily focuses on cost efficiency. KPO is marked by specialized services, and a proficient workforce, and operates on a smaller scale. It encroaches upon the conventional "core competencies" of numerous organizations.
According to a 2020 article in the Economic Times of India, KPOs already employ an estimated one million graduates in India directly, and another 6-8 million indirectly, showing the huge potential of this sector.
EY states that India’s services have grown over 14% in the past two decades reaching US$254.5 billion in 2021-22, with the KPO industry in India accounting for 5.7 billion USD. A substantial portion of these exports comes from Information Technology (IT) Services and Business Process Outsourcing (BPO) services. This growth is fueled by both Indian and global IT companies, along with multinational corporations tapping into Indian talent through capability centers, employing over 5 million individuals.
Government incentives:
The Ministry of Electronics & IT, Government of India has launched two schemes - the India BPO Promotion Scheme (IBPS) and the North East BPO Promotion Scheme (NEBPS) - under the Digital India Programme. These schemes aim to promote the IT/ITeS industry and create employment opportunities, particularly in smaller cities and the North Eastern Region. STPI serves as the nodal agency for implementing these schemes, with a total budgetary outlay of Rs. 543 Crore.
Key objectives of the schemes include the creation of employment opportunities for youth, the promotion of investment in the IT/ITeS sector, and ensuring balanced regional growth. The IBPS seeks to establish 48,300 seats for BPO/ITeS operations across the country (except NE), while the NEBPS aims to establish 5,000 seats specifically in the North Eastern Region.
Salient features of the schemes include financial support of up to 50% of expenditure on permissible items per BPO/ITeS seat, with an upper ceiling of Rs. 1 lakh. Special incentives are provided for employing women, differently abled persons, and local entrepreneurs, as well as for exceeding employment targets. Additionally, training incentives are offered for regular employees to enhance skill development in the sector.
If you are interested in opening your KPO business in India we’ll leave you the link to the government website in which you can find all the incentives outlined
Indian KPO Industry services and business models
India excels in providing various KPO services across multiple industries. Some of the most sought-after KPO services include Data Analysis and Management, Engineering Services Outsourcing (ESO), Financial Services, Legal Support, and Research and Development (R&D), and these services operate through three primary business models:
Captive Business Model: Foreign companies establish their own KPO centers in countries like India to leverage operational efficiency and access skilled professionals. These captive centers cater exclusively to the parent company's requirements.
Third-Party Service Providers: Numerous third-party firms in India offer specialized KPO services to clients. These firms cater to multiple clients, enhancing their domain expertise and flexibility in service delivery.
Virtual Captives: A hybrid model that combines features of both captive centers and third-party service providers. In a virtual captive setup, a KPO firm establishes and manages a dedicated center on behalf of a foreign company, offering cost transparency, control, and minimal associated risks.
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A non-tech Center of Excellence typically refers to a specialized team or department within an organization that focuses on developing and disseminating best practices, knowledge, and expertise in a particular area that is not primarily related to technology.
For example, a non-tech Center of Excellence might be established in marketing, human resources, finance, customer service, or project management. These centers aim to centralize knowledge, provide guidance, and drive innovation and improvement within their respective domains.