Outsourcing: Arul Murugan, Founder and CEO of Enrich IT (Part 6)

Sramana Mitra: You said that it’s not easy to do IT services. That’s not entirely true, you know. I think what you are going to see — and you have not seen this yet — but in a way, what you are doing right now with the services business is almost, as you said, very specialized, and it’s almost productized services.

Arul Murugan: What I meant was if  I am a doing pure services, like consulting services, it’s hard to scale up a consulting services business. It’s easy to scale up a cloud computing business, because cloud computing is more productized. For example, what I am doing on the supply chain as a private cloud model, it is easy to scale up. For example, if I want to grow to $100 million in the next few years, I cannot just grow that in my consulting services. It’s plenty of hard work for me to do that, but on the private cloud model, it’s easy for me to grow.

SM: That’s right; that’s my point. If your business is still a services business, but it’s a productized services business and in that model, you can actually grow fairly fast, especially because there is a trend that is coming in your favor. I think that these trends are important. The one caveat I will say is that it’s not that easy to scale a consumer business, either. Customer acquisition costs are not at all cheap.

AM: Got it, yes.

SM: Something may really take off the way Facebook or LinkedIn has taken off, but it has taken them years to build those businesses. I remember I joined LinkedIn in 2003. It took them a while to get to any kind of serious revenue. Now, they are scaling really well, because the viral effect has taken hold. In the beginning, it was not so simple, and the monetization was not so simple. Part of the problem with the consumer cloud or these mobile apps businesses is that the market expects everything to be free.

AM: Yes, I agree.

SM: So, making money off that market, unless you really think it through and you can charge for something, is not so easy. Your point is well taken that there are opportunities there, but I don’t think it’s easy at all.

AM: Yes, it’s tough. If you have a specialized services or specialized area that you want to get in, what I am saying is that for young entrepreneurs, there are opportunities for them to get in.

SM: There are opportunities, yes. There are opportunities; that’s the right word. It’s not easy, but there are opportunities. You need to find those opportunities. I think you have done a very good job of identifying your opportunity with Enrich IT, and it’s a very good case study for entrepreneurs to look at.

AM: Thank you. If you take Groupon, they started, three or four years  back, a coupon business with a simple concept. It’s not very complicated.  But how they went in and did it as a group theory and applied predictive analytics through social networking is amazing. Now, the market is talking about $10 billion to $20 billion in valuation. They got up to $1 billion in revenue within three years. That’s an amazing story.

SM: It is, most certainly. There is no question that today’s killings have become significantly easier than they used to be just because there are 750 million people on Facebook. By 2020, there are going to be five billion people on the Internet. So, if something takes off in the Internet, if it’s something that people are paying for, the viral effect and the multiple effect of that and the scaling effect of that is tremendous.

AM: Definitely, yes.

SM: Is there anything else you would like to add?

AM: I think that’s it. We had a great discussion and I enjoyed it; thank you very much, Sramana.

This segment is part 6 in the series : Outsourcing: Arul Murugan, Founder and CEO of Enrich IT
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