Karvy Global  | Newsroom

MAY 2006

SECURITIES INDUSTRY NEWS, India's Karvy in Research Ventures: Outsourcer Covers Emerging Markets

By Jeffrey Kutler,Securities Industry News
May 1, 2006
Hyderabad, India and New York

Karvy Global Services, an outsourcing venture launched last year by Indian financial services and accounting giant Karvy, has entered the research and analytics business, offering to supply or support the global research functions of brokerages, investment banks and other businesses using India-domiciled and primarily India-educated talent.

The offering, a step "up the value chain" in outsourcing parlance, was officially launched last week, more than six months after the unveiling of Karvy Global Services under the direction of ARthur R. Flew, a long-time Citigroup executive and a founder of Indian IT services shop Mphasis (Securities Industry News, Nov. 14). The research and related services are marketed as knowledge process outsourcing (KPO), an extension of the more mainstream business process outsourcing that has boomed in recent years as large enterprises off-loaded transaction processing, call centers and other operations to specialists in less costly venues.

Karvy, which saw its outsourcing start-up as a logical extension of its accounting, administration and brokerage businesses, similarly views KPO as a natural complement and a differentiator from competitors--though Flew acknowledges that Karvy is far from alone in trying to entice Wall Street and other financial institutions to farm out either data processing or higher-value intellectual tasks to India. Like them, Karvy can offer a time-zone play: Work can be handed off from New York or London and numbers can be crunched or results delivered by the time those offices reopen the next day. Said Flew: "A major challenge for the research industry is data management and technology--a lot of data is unstructured, and analysts spend their time dealing with that, which takes them away from analysis. We can help with that."

Karvy is "pretty good at accounting," which was the company's original business more than 30 years ago, Flew noted in an interview with SIN. "We're the number-two stockbroker and number-four investment bank in India, so we do a lot of research and analytics anyway. ... It's natural for us to go out with that and play to our strengths."

Flew, who is CEO of Karvy Global Services and based in Hyderabad, has a team of 59--all with MBA and PhD degrees--doing research, still a small fraction of the overall Karvy total of 6,700. The company has 518 offices in India and serves 300 corporations and 20 million individual investors through its depository, trading and banking-related businesses.

The research unit is split into two groups. One focuses on India and a few similar, regional markets, which is a traditional strength of Karvy's securities research and mergers-and-acquisitions (M&A) activities. The other covers the rest of the world, and that really means the whole world, Flew emphasized.

"You can find other, niche firms covering U.S. and European markets [from offshore]," Flew commented, noting that they are relatively easy to track because of superior transparency relative to that of emerging markets. "Few will cover all markets like we do, including the GCC [Gulf Cooperation Council] countries and others in the Middle East, or many of the markets in Africa and elsewhere, some that may only be open one day a week." Flew said that the combination of "domain expertise" and emerging-markets coverage gives Karvy salespeople an entree into large financial institutions that have a hard time distinguishing one outsourcing package from another. This aspect of Karvy's KPO "won't be as big as some of those call-center operations," Flew said, "but it's a core competency for us."

The menu of KPO services includes investment and market research, supply-chain management and customer relationship management. Targeted to the securities industry are company and market coverage, M&A valuations, portfolio modeling and transaction cost analysis, pitch-book preparation--a task that, according to Flew, is particularly well served by the time-zone difference--and market and reference data management. For one unnamed financial client in the Middle East, Karvy supplies equity research supplemented by country and industry-segment reports.

The company also does revenue analytics--in the case of a hotel chain, for which Karvy previously did bookkeeping and general-ledger accounting, it performed analysis on how to price rooms under different market conditions--as well as predictive modeling for insurance-fraud detection, customer loyalty analysis and tracking of marketing campaigns for clients in a variety of industries.

"We see a tremendous opportunity in KPO," said Flew, who spent 20 years in technology development and business-line positions with Citigroup and subsidiaries in the U.S. and Europe, and then joined ex-Citi colleagues including Jerry Rao to launch Mphasis in late 1998. (Last month, Electronic Data Systems Corp. [EDS] of Plano, Texas said it would pay $380 million for a majority stake in Mphasis, to lift EDS's Indian workforce from 3,000 to 14,000.) "Companies that have experienced the benefits of business process outsourcing are now looking to India for higher-level capabilities," said Flew. In KPO, he added, Karvy combines "a very strong team with solid backgrounds in a variety of complex, specialty areas" with a cost base that can cut clients' expenses 40 percent "without compromising quality."

Karvy Global Services' staff draws from experience working with top-tier companies such as Putnam Investments, Reuters Group, Thomson Financial and United Airlines. Karvy says that its "Fortune 2000" clients include Morgan Stanley, Principal Financial Group and Reliance Capital. In January the company announced the launch of transaction processing outsourcing with an initial client, health care comparison-shopping portal Healthia. Karvy Global Services is building a health savings account and insurance plan database for the Sunnyvale, Calif. start-up.