Why Syntel dumped under graduates
By Bala Shah

Over the last ten months, Techgoss had published a series of exclusive reports giving details of all that was happening inside the BPO, KPO and IT divisions of one of India’s most successful IT-ITES companies Syntel.  One report showed how that in the recent past Syntel BPO was overly reliant on couple of key clients. Also, reported were the exits of the CEO and key HR people.

Regular readers of Techgoss are well aware that a large number of our articles are crowd sourced by insiders working in the Indian IT / BPO / KPO sectors.  A well informed Tipster tells us

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The name Syntel Sourcing Private Limited (SSPL) was changed to State Street Syntel Services Private Limited (SSSSPL) with effect from April 1, 2008.This change was made to prominently reflect the client’s name, State Street. State Street is one of the largest custodian banks in the world. Majority of the activities carried out in SSPL are related to Reconciliations i.e. reconciling the records between the Investment Manager and the Custodian; Trade Processing and similar activities. There are no voice based processes which are carried out at SSPL.

Prior to April 2009, SSPL used to recruit only graduates and above for the job profiles which can only be done by people of a certain education level and experience. However, with the year 2010 fast approaching, the company was targeting a goal of 1-5-10 meaning 1 Billion Dollars in revenue, a Market Capitalization of 5 Billion Dollars by the year 2010.  It soon realized that it would be unable to achieve its targets and so, out of misguided desperation, was born the policy to recruit undergraduates i.e. employees with a qualification between 12th Standard and Second Year B.Com.

To implement this new flexible HR policy, job opportunities were floated for undergraduates and the salary offered to them were between Rs 50,000 to Rs 70,000 per year. Usually, graduate trainees are recruited on a salary of 1,00,000 (CTC) which works to approx Rs 7,000 in hand per employee. By recruiting undergraduates, the company hoped to achieve a savings in cost of Rs 30,000 to Rs 50,000 per undergraduate recruited. In some cases two or more undergraduates could be recruited at the same cost of recruiting one graduate.

(Techgoss had evidence of jobs being advertised in Naukri, Monster, Vfreshers, Oncampus, Efreshers and other sites visited by that demographic)

The major source of revenue for KPO companies like this Syntel vertical is mainly from the billing charged to the client.

For example if person X in USA is doing a job for 80,000 USD per annum (36 lakhs per annum) then, if the job were outsourced to India the same job can be carried out for a lesser cost. The client would pay a billing amount of 40,000 USD to the outsourcing company (saving 40,000 USD) which in turn would pay a lesser amount to the employee who does the job in India.

Starting March 2009 onwards the recruitment of the undergraduates started. Such recruitment caused considerable heartburn to the existing graduate employees who had to deal not only with youngsters out of their depth, but was also a slap to the morale of the employees. Many of the employees decided to quit the company unable to tolerate the falling standards of the company. This activity of recruiting undergrads was carried on till approximately September 2009 after which all of the employees were asked to leave in one go.

The reason for asking the undergraduates to leave was probably because of the high number of errors committed by them. Whatever the reason might be, it seems that Syntel has learnt its lesson the hard way.

Syntel management probably realized that the financial services domain works differently from Customer Care Services.

There has been a history of BPO companies engaged in Customer Care (Call Centre) recruiting undergraduates as the only major skill required is English speaking skills which 10-12 years of education can provide. However, the Financial Services Domain stands on a different footing altogether. The implications of not doing something right in finance are huge as the NAV of a fund could be affected or misstated resulting in potential losses not only for the Vendor Company but also losses for the client.

A customer would surely not mind listening to bad English as compared to incorrect financial data.

The policy of recruiting undergrads even though fundamentally wrong, might have worked in case the company has a STRONG in house training system; however this is not the case with Syntel. Most third party BPO Companies do not have an adequate training system what the companies follow is "On the Job training System" where in one employee is entrusted with the task of training the other. One can imagine how frustrating it must have been for a graduate or an MBA training an undergraduate doing the same job as him. At best, the undergraduate can do the work mechanically without proper understanding of the implications.

As on November 2010 undergraduates are not being recruited by the company.  Syntel had learnt its lesson by burning its fingers.

There is talk that some of these policies were implemented locally, and some of the very top management was kept out of the loop.
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