BPO: An Industry by Itself

A growth of 33.5% to reach Rs 37,800 crore, as estimated by
Nasscom, is just one measure of the Indian offshore BPO industrys evolution
in FY 07. More importantly, FY 07 is a year in which three significant
trends marked the coming of age of the industry as a whole.

Firstly three of the top ten BPO companies in India were listed
on the bourses. While two of them, WNS and Exl Service, decided to list in the
US markets, the third, Firstsource, decided to share its wealth with the
location from which it serves, India. Notwithstanding the differences in
countries and exchanges all got rousing response from investors. Genpact also
filed with SEC in the US for an IPO.

If pure play BPOs like Genpact, WNS and Transworks consolidated
their positions, the IT companies integrated their IT and BPO offerings. For the
late entrant, TCS, it was the most logical thing to do. But, even Wipro BPO
decided to follow suit and managed successful completion of the process, though
slowing down growth for some time. That made TCS BPO overtake Wipro and Infosys,
which started somewhere midway, closing the gap.

The third big trend was the serious focus of international
players on the domestic market, especially on the voice side. All the top voice
playersTransworks, IBM Daksh, Wipro BPO, Firstsource, Intelenet, Hinduja TMT,
Aegis and MphasiS BPOare testing out the domestic market.

The other interesting trend is that the captivesboth for
reasons of growth as well as unleashing of valuecontinued to look at the
third party opportunity.

The sector saw a steady growth across horizontals like finance
and accounting, customer interaction services and human resource administration.
The expansion of emerging service lines like legal and risk management along
with M&A, complemented the organic growth of this segment. Direct employment
also grew by 33% to 553,000 in FY 07 from 415,000 in FY 06.

The domestic market too was not to be left behind as it grew to
Rs 5,400 crore in FY 07 up from Rs 4,050 crore in FY 06, the result of a
significant increase in demand. Domestic BPO spends are growing steadily,
led by customer interaction and back office processes for the BFSI, telecom, and
airline industries.

The building of global delivery presence by Indian firms
continued. Genpact set up operations in China and the Philippines apart from
opening new centers in Indian cities, while FirstSource set up outsourcing
centers in Northern Ireland.

During 2006-07, hiring of lawyers was stepped up with legal
outsourcing in India expected to grow more than ten-fold by 2010. LPOs are
headed for consolidation as only a few are doing high-end legal work.

The year will be remembered for the acquisitions done by Indian
BPOs including Apollo Health Streets acquisition of US-based Armanti
Financial Services for Rs 3.1 crore; EXL Service acquiring Inductis and Hinduja
TMT; acquisition of Affina for $30 mn. But the topping on the cake was the
acquisition by Transworks of Canada-based Minacs for $125 mn, likely to rank as
one of the largest ever cross border BPO acquisitions from India.

Stuti Das


stutid@cybermedia.co.in