The Neon Show
00:41:51 · Siddhartha Ahluwalia, Bhaskar Ghosh
[00:41:51] S0: So let's imagine a new age AI services company, sitting out of India, maybe targeting BPO industry, right, and serving The US market, for example. Like how could that kind of company, you know, if you have to think first principle, grow their business in The US, and what would they replace? [00:42:14] S1: So if you look at the BPO companies, I don't know about the really small ones, but I have looked... Taken a look at the mid market a lot. You know, the state called Texas? Yeah. You go to the two cities called Houston and Dallas. Yeah. Huge number of the mid market Indian BPO companies CEOs are sitting in these two cities. So think about it, 90 of the employees, 95% of the employees are sitting in India. But the CEOs are often sitting in these two cities and some in New Jersey. Those are the places where I found it. That is not going to change. I think the same way they are hustling and growing BPO output about getting same analogy as what you and I just talked about in the context of SaaS. Same thing has to be true. That the go to market, the expansion factor of... So the sales and marketing discipline and landing mode has to happen sitting in USA more and more, as it's already been happening. But the actual AI enabled BPO and the services, large part of that headcount and the and kind of the disrupted model of delivering more with less and growing faster with less could happen sitting in India.
00:42:14 · Bhaskar Ghosh, Siddhartha Ahluwalia
[00:42:14] S1: So if you look at the BPO companies, I don't know about the really small ones, but I have looked... Taken a look at the mid market a lot. You know, the state called Texas? Yeah. You go to the two cities called Houston and Dallas. Yeah. Huge number of the mid market Indian BPO companies CEOs are sitting in these two cities. So think about it, 90 of the employees, 95% of the employees are sitting in India. But the CEOs are often sitting in these two cities and some in New Jersey. Those are the places where I found it. That is not going to change. I think the same way they are hustling and growing BPO output about getting same analogy as what you and I just talked about in the context of SaaS. Same thing has to be true. That the go to market, the expansion factor of... So the sales and marketing discipline and landing mode has to happen sitting in USA more and more, as it's already been happening. But the actual AI enabled BPO and the services, large part of that headcount and the and kind of the disrupted model of delivering more with less and growing faster with less could happen sitting in India. [00:43:27] S0: And let's think from first principle wise, right? So they are not building a new industry or they are not getting contracts from a new industry. They are getting contracts from existing industries, let's say banking in The US, where like a Bank of America or JP Morgan is outsourcing the BPO. [00:43:47] S1: Yep. Right? And to be fair, the BFSI sector is a massive sector.
00:43:47 · Bhaskar Ghosh, Siddhartha Ahluwalia
[00:43:47] S1: Yep. Right? And to be fair, the BFSI sector is a massive sector. [00:43:52] S0: Yeah. Yep. So how would they would have to replace the existing BPOs there?
00:44:00 · Bhaskar Ghosh
[00:44:00] S1: Yes and no. That's a great question. So I some people will probably disagree with me. I think these transformations are going to happen in phases. I think the existing BPOs, many... The majority of them are Indian owned companies, in the, say, the India US corridor companies. They... What I'm pointing out is that they shouldn't wait to be disrupted. There will be two kinds of companies coming. One is new age BPOs. That hey, I'm bringing this new BPO which only has 10 employees instead of 100, which can do the same thing as you. Aspirationally, that's where the market is growing. I am betting on that that is not going to happen in one or two years. There's a phase wise refinement of that that's going to happen. So I feel the current BPOs who own these contracts have an unfair advantage in making themselves better. That's like crossing the chasm, that's like the whole problem of... I'm forgetting the phrase... It's like the whole Innovator's Dilemma problem, right? They have an opportunity to make their own processes much more efficient, and I'll give you one anecdotal example. We have spoken to at least five or six India US Colorado CEOs sitting in Dallas and Houston, who are in the... Playing in the mid market. Very often younger founders. $40.50, 60,000,000 in annual revenue. Not hundreds of millions. Not in billions. Tremendous eagerness in changing their how, you know, how their business model. They want to be design partners of these startups. So to me, that group, that ecosystem of mid market founders who are forward facing have a massive opportunity. Partly is, can you disrupt yourself? Will others come in and cannibalize? Third question is, people who are buying from them, is that growing or not? Are those the three parts? Let's get back to your question one more time.
00:46:02 · Siddhartha Ahluwalia, Bhaskar Ghosh
[00:46:02] S0: So my question is, how will the new age AI services company get the business? And I don't think that the older BPO businesses will be able to cannibalize themselves. [00:46:16] S1: They will not be able to cross the canyon. [00:46:18] S0: And they will not be able to realize importance of AI in their business. Because the leaders have to reeducate, they have to replace themselves, right? And it's not possible. So but then there's a business setting and a new company which has built AI enabled services. They have to eat the business which is for example in banking. So they either offer less cost or they offer more efficiency to these banks. So my question is on along these lines.
00:46:50 · Bhaskar Ghosh
[00:46:50] S1: I think the way I would phrase it, that's a great question is how do you sell these new services? So I think and you are hinting at that, so I'll take the bit. I think today a lot of the economic model is time and materials. It is going to go towards outcome based pricing. We are already seeing that. In one of our companies, a very well known company, a young company named Bespoke Labs, a founder of Google DeepMind, Mahesh. Co founder is a professor of CS from Berkeley, Alex DeMarcus. Which are doing something very deep in the post training phase of models, both in the data curation side and in RL environments. You sent me a bunch of questions. They are doing some very deep work in these areas. They are already working with one data science consulting company, very well known mid market company. Which are... Which are... Then the partnership is... Bespoke Labs is helping them deliver software for say analytics use cases, data science use cases, which is deeply AI enabled, building new models, where that consulting company is changing its business model. So, inevitably, you mentioned banks, the acquiring the person buying the service provider service will be is beginning to ask questions around outcomes versus time and material. I feel feel it is going to go through phases. I think this outcome based pricing is just beginning to hit the market. It is being proven out and a lot of this will be dependent on the customer's taste, and how do they manage their own hierarchy and incentives inside. Because it depends on the complexity of the... It depends on a lot of multidimensional problems, where Siddhartha is now a big exec on the BFSI side, comes to BG, and BG is this new AI enabled entrepreneur, and he knows that the old money that Siddhartha spent was in the context of time and material, and says no no no, you have to get this outcome done. It has to do with the nature of the project. It has to do with is that outcome measurable? Is there a customer support and success phase? You begin to ask SAS like questions also there. Not going to oversimplify it. I think you were anticipating that. That is very interesting. Outcome based pricing in services has traditionally not happened. So when you change business models, I think some of it is going to stick.