Exceptional magazine: Americas edition, July 2013

Fieldglass

Fieldglass CEO Jai Shekhawat has become a pioneer in managing the contingent workforce. And it didn’t hurt that he based his solution in the cloud.

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In an industry where being first to market is a cardinal virtue, Fieldglass CEO Jai Shekhawat is a case study in planning for the long term.

Over the past decade, his Chicago-based technology firm has become the industry leader in helping companies manage their contingent workforce — not by offering something entirely new, but by building a sustainable competitive advantage.

Finding the gaps in the system
“The real originality comes at the micro level, in the details,” says the 50-year-old entrepreneur, whose cloud-based software streamlines the procurement of temporary workers and outsourced services, allowing companies to track the cost and performance of suppliers.

When he talks about the primacy of a sound business model, Shekhawat acknowledges the benefit of hindsight.

When he founded Fieldglass in 1999, he thought he was introducing the first technology platform of its kind. “I went to an industry trade show and noticed these other companies presenting their own solutions,” he says with a smile.

“The real originality comes at the micro level, in the details”

While the presence of five advanced competitors was daunting, Shekhawat studied the nascent industry and realized there were important gaps remaining.

For instance, one firm offered an online talent exchange that only handled one-off assignments. Another was established by a staffing agency — something Shekhawat saw as an inherent conflict of interest for an application that employers rely on to compare suppliers and drive down costs.

What the market needed, he believed, was a technology solution that took a supply-chain perspective of talent. This insight grew out of his own professional journey, in which he had been both supplier and buyer of outsourced talent.

The son of an Indian naval officer, Shekhawat spent his childhood moving from one coastal town to another — and even to Russia for a year and a half. His first steady job after college was as a software developer for Tata Burroughs in New Delhi, where he worked on various contract assignments.

When the firm hired him out on a project in Georgia, Shekhawat naturally thought he was headed for the Soviet republic; only later did he realize he was going to Atlanta. He concedes that either destination would have satisfied his intrepid nature — “When you’re young, everything’s an adventure” — but he has remained in the US ever since, gaining citizenship in 1997.

He would later become an executive at Syntel, a firm that undertook offshore IT projects for large US firms, before earning an MBA from Northwestern University in Chicago and joining McKinsey & Company as a strategy consultant.

It was there that a young Shekhawat experienced the other side of contingent labor issues, helping a major client manage its non-employee staffing needs.

He began envisioning an application that brought value to both sides of the transaction — what’s now referred to as a Vendor Management System (VMS) — after first hearing about the problem from his former boss. That meant making it easier for the hiring manager to evaluate talent and process requisitions and giving suppliers the ability to plan for future demand. “It allows the parties to operate the supply chain in a collaborative way,” he says.

Street-fighting man
The existence of several competitors wouldn’t be the only hurdle for Shekhawat’s new venture. Just months after the launch of Fieldglass, the dot-com bubble burst, making investors extremely wary of technology start-ups. Despite signing deals with big names such as Verizon, AIG and GlaxoSmithKline, the organization struggled to add clients and raise fresh venture capital for several years.

“Business is hand-to-hand combat, it’s a street fight. “You do whatever you can to get customers and build great products.”

Shekhawat’s experience at Syntel — and lessons learned from its founder, Bharat Desai — would help sustain him during those challenging times. One of the most important messages: always give it your all.

“Business is hand-to-hand combat, it’s a street fight,” Shekhawat says. “You do whatever you can to get customers and build great products.”

So he made sure his early leadership team was cut from the same cloth. Having personnel with a broad skill set and the ability to take on various challenges was key. “The founder sees things strongly enough to launch the business, but executives have to be entrepreneurs, too,” he insists.

By the middle of the decade, the organization’s cloud-based platform and culture of empowerment were starting to pay off. Fieldglass made its first profit in 2006 and in 2007 doubled its largely blue-chip client base.

Two broader trends in the industry certainly helped. The increased recognition of VMS among large corporations put wind into the firm’s sails, as did the growing demand for outsourced labor and a flexible workforce. As employers sought lower costs and this kind of flexibility, many started relying more on temporary placements and contractors.

According to business research firm Aberdeen Group, contingent workers now comprise about a quarter of the total workforce. With the ability to cut non-employee labor costs by as much as 15% to 20% in the first year, VMS is a compelling solution.

Along the way, Shekhawat’s knack for seeing the big picture proved invaluable. When some of his competitors decided to add an on-site program office capability — actually screening candidates and evaluating suppliers — Fieldglass kept its focus on technology, preferring not to compete with staffing firms that provided the same capability.

As a result, these firms became more inclined to bring the company’s software with them into new deals.

“We decided to partner with them, not compete with them,” explains Shekhawat, whose organization now enjoys an industry-leading market share, with more than 200 clients in close to 80 countries.

Fieldglass was also ahead of the curve in terms of a global strategy. Since its inception, the company has cut costs substantially by having part of its development team in India.

In recent years, the firm has also opened field offices in London and Sydney to expand its reach.

Shekhawat says that serving international clients means adapting to the needs of each market, whether that requires incorporating new languages into the software or addressing local labor regulations. While the process can be painstaking, Fieldglass is seeing enormous dividends. “It took a while to show results, but now we see almost a third of our new business originating overseas,” he says.

Know your competitors
Despite a diverse résumé and important influences such as Desai, Shekhawat insists that much of what he’s learned about business comes not from the boardroom, but from the athletic club. He is a long-time enthusiast of racket sports and his current passion since childhood has been competitive squash.

While two Achilles tendon repair surgeries have slowed him down a notch — he’s eased back on larger events in favor of club tournaments — he retains an obvious respect for the game. “It’s all about positioning and denial of resources to your competitor — the whole idea of strategy, really,” he says.

In 2010, the hobby produced a much more tangible benefit. It was through a squash partner and former McKinsey colleague that Shekhawat helped secure a buyout from Chicago-based private equity firm Madison Dearborn Partners, which valued Fieldglass at US$220m.

For the former software programmer, the deal was a reminder of how far he had come. As a youth, Shekhawat says he never dreamed of moving to the US or starting his own business, a possibility that was closed off to many Indians at the time because of the country’s bureaucracy.

In America, he says, he was free to pursue his aspirations.

For an organization that has enjoyed three consecutive years of more than 30% revenue growth, the goal is to keep the momentum going. The sizable investment from Madison Dearborn is playing a big role. “It’s changed our mindset into thinking bigger,” says Shekhawat, who recently received the EY Entrepreneur Of The Year® Award Midwest Region.

To sustain the company’s growth, it needs to continue expanding in regions such as Europe and Asia, which have yet to embrace VMS on a large scale.

Fieldglass is also trying to sell clients on untapped spend categories, such as project-based work. Many organizations have been slow to consolidate such expenses, largely because tracking detailed requirements and deliverables is more complex than handling time-and-expense transactions.

As much as anything, Shekhawat believes lasting success will come from listening to clients and continuing to make his widely embraced solution even better. “It’s a great gift when a client allows us to take ownership of their problem,” he says. “That is where the real innovation begins.”