e4e CEO &entrepreneur Das speaks to Ross students

Somshankar Das, CEO of services company e4e, spoke to RSB students Wednesday, March 15. Das, who received his masters in physics and mathematics in India, and subsequently an MBA from Stanford, spent most of his career in Silicon Valley before founding California-based e4e in 2000. Das spoke both about his own company, a services firm specializing in reengineering companies, and about the services industry, which he constantly compared to the manufacturing industry.

Das predicted that what happened with the manufacturing industry over 30 years will soon happen to the services industry within the next 10-15 years. According to Das, the manufacturing industry was very local in nature, where different geographies had different specialties, depending upon the natural resources present. Therefore, there was less fear about commoditization and competition within the manufacturing industry. Then, with falling trade barriers and vast improvements in technology, which aided logistical planning and transportation, there were rising fears of commoditization within the industry as manufacturing and its supply chain evolved into a global entity.

Das then characterized today's global manufacturing industry as very polarized, with a heavy concentration in Asia. A large part of today's services sector is also local. For example, 50 percent of India's GDP is service-based and is local, just as manufacturing was before. However, unlike manufacturing, services are relationship based and people based, with very little machinery involved.

As gross margins in manufacturing fell, it was forced to become "lean and mean" in order to protect profits. This increase in efficiency, according to Das, will happen with the services industry as well. Furthermore, within the services industry, falling tariffs, growing skill sets in other countries, and developed datacom/telecom pipes which have been laid (which, according to Das, caused the "death of distance"), have all contributed to growing competition and fears of commoditization. These are similar trends to what has already occurred in manufacturing.

Falling prices, according to Das, translates to expanding markets, which has already started to happen with the health care services industry in developing economies. In order to make the services industry more efficient to handle these growing markets, both COGS and SGA can be reduced. Das said, "Trying to include more people in the services industry is both an opportunity and a challenge." This, of course, is aided by the help of technology, without which global supply chains would be impossible. Technologies such as telecom, CRM applications, and security/encryption have allowed collaboration from teams all around the world, as well as the ability for management in Silicon Valley, for example, to monitor factories in Taiwan.

Das, who works in the services industry himself, noted areas for opportunity in the industry. This includes the evolution of more perfect markets, as more international trade and commerce takes place, expanding the number of customers a services company can serve. In addition to this, the global availability of jobs is another opportunity as companies are not limited to their geography in terms of who they can hire. Furthermore, in addition to available labor all over the world, there is also capital in all corners of the world, as companies are now managing risks and returns by investing in places they never would have before, including India and China. Finally, the creation of relevant technologies and development of infrastructure add to opportunities available in the services industry.

Das believes that the future will hold larger and expanding markets. As today's modern economies cover one billion people, he believes tomorrow's economies will cover several billion, with the services industry being as important as the manufacturing industry.

Das started e4e, a business services company, about six years ago with a few partners because he believes that there are many services at the heart of Silicon Valley. According to Das, to be a good business services company, one needs to provide remote delivery, have domain knowledge, and want to be a demand-side driven company. e4e primarily provides solutions using technology. For clients, they strive to reduce costs, reengineer business processes, and enhance revenues. The company focuses on clients in three industries: technology, financial services, and healthcare. These three industries, Das believes, are at different stages in their respective life cycle curves, with technology being the most developed and healthcare the least. This way, "There is a host pipe we can drink from today, tomorrow, and the day after," Das said. e4e earns approximately 65% of revenues through supporting clients in the technology industry, with financial services accounting for about two-thirds of the remainder.

If his company grows too much in a domain, then they would essentially begin competing with their clients, which is an undesirable outcome, Das said. So there is a limit to the domain knowledge his company can attain. However, once that limit is reached, e4e can then grow laterally. The company primarily pays attention to improving a client's COGS, rather than its SGA, as they do not want to provide finance / accounting / HR outsourcing. Das closed by noting that the biggest challenge for e4e today is recruiting the right people, which is why he is focusing on HR development from within his company this year.