offshore model

Cvent’s IPO success is about much more than the cloud

August 9, 2013
August 9, 2013
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Reggie Aggarwal imparting wisdom at a startup event in Washington, DC.(YouTube)

Cvent’s successful IPO today follows that of a lot of cloud-based providers. But its performance is also a good sign for a much older business model: offshoring.

Between 2005 and 2009, I interviewed Cvent CEO Reggie Aggarwal and dozens of staffers between their offices in the suburbs of two world capitals: New Delhi and Washington, DC. The event-management software company’s model features prominently in my book, My Two Indias: A Journey to the Ends of Opportunity, and I’ve kept up with its success over the years. Quite often, I find myself invoking or applying something Aggarwal said or did during the time I followed his company. So here are some takeaways that help explain Cvent’s market debut and offer lessons on the offshore advantage that emerging markets still hold, if managed correctly.

1. About that offshoring. Cvent employs what’s known as a “captive” outsourcing model, meaning it doesn’t farm work to a third-party vendor. I think this allowed it to ride out the last few years of uncertainty in both the US and Indian markets. It has had direct control over its workers and been able to quickly upgrade them from call-center, back-office types (so-called business process outsourcing) to knowledge-process outsourcing. At Cvent, that might mean that someone who once cold-called event planners to drum up business moves into a role in sales or marketing, training or human resources. This is a key transition that the rest of India’s software and software-related services sector is struggling mightily to make; a worker who has spent the last five years selling dishwasher warranties cannot suddenly crunch big data for a retail client.

2. Fighting attrition. According to Cvent’s website, more than 500 workers of its 1,100-person workforce are in India. Anyone who has hired in India has also studied retention strategies closely; the current slowdown is improving staff turnover but workers, especially the lower paid, move on quickly for incremental salary bumps. Cvent had a carrot-and-stick approach to keep people around. It required employees to sign a bond and if they broke their two-year contracts, they’d have to forgo a part of their earnings. (Understandably this is not a popular policy on Glassdoor, the employer review site.) But Indians who stuck around were also rewarded with business trips to the US—and vice versa, American staffers were sent to the Gurgaon, India office to help train, often for months at a time.

3. Aggarwal as CEO. It makes sense for a company like this to have the ultimate sales guy and smart talker as its CEO. Company lore: When Aggarwal was in college, he ran a painting business and accidentally painted a woman’s house the wrong color. He convinced her it was better than her original choice. He’s also incredibly efficient; watching him work, I was  struck by his constant mental calculations and cost-benefit analysis to determine if, as CEO, he should intervene in a situation or not. He is a presence in Washington, and the very idea for Cvent came from a networking organization he co-founded.

4. Sales and engineering. When I followed Cvent, it was much smaller but Aggarwal made the integration of these two departments a priority. This tends to be an issue in a lot of companies (and the inspiration for many Dilbert cartoons), but every Cvent employee undergoes intensive training to truly understand the product they are making and selling.

5. Honest on India, but a believer too. During the early 2000s, Aggarwal was among the few business leaders I interviewed who told the truth about India—on the record. While everyone else heralded an economic miracle, Aggarwal harped on poor English skills, applicants who showed up in jeans for an interview, the propensity for workers’s grandmothers (all six of them) to die on Fridays. But he needed India, partly to keep up with growth affordably (the dotcom bust forced Cvent to bootstrap) and also to scale. Because he wanted Americans vested in the India team and vice versa, he formed mentor pairs across countries and linked Americans’s bonuses to their Indian counterpart’s performance. During one meeting, he told employees:

“Folks, I want to be clear on something,” Reggie said, remembering how offshoring allowed the business to stay afloat. “No one here will lose their job because of India. In my view, India saved our company.”

On the Indian side, Aggarwal focused on mentoring. Consider one recruitment fair I attended in Delhi:

“Why do four Indians equal one American?” Reggie asked, citing the statistic he often used to explain why outsourcing was financially favourable, necessary even, to US companies. “Why do 60 per cent of companies who have outsourced go back to the US? Why hasn’t every single company come to India? The dirty little secret is this: all the jobs coming here are jobs Americans don’t want.”
He paused. Then repeated, “Americans do not want your job.”

And then Aggarwal promised to work with the India hires so they could be much more than cheap labor.

6. Talent management. In interviews with a potential sales rep, Aggarwal will pick up a pen, hand it to the applicant and say, “Sell this to me.” Happy hours (in India and the US) are common, and Aggarwal is the type of CEO to have staffers over to his home. I never got the feeling he was building a company for the sake of selling it in a few years. And those long-term interests seemed to have helped retain a close, über-talented network of senior managers and staff around him.

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