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Follow UsTime changes but some things just remain the same and FY '06 was no
exception to the rule. India continued to sporadically reel under the threat of
global terrorism, the political shenanigans of a coalition government showed no
signs of abating, reservation issue kept on raising its ugly head, the cricket
team's fortunes continued to yo-yo and the sunshine BPO sector just kept
growing and growing. For the third year running it clocked a more than
impressive 39% growth to reach Rs 31,839 crore in revenues as against Rs 22,930
crore in the previous fiscal.
No surprise that exports still contributed the lion's share of the pie
touching Rs 27,789 crore (a 37% growth), but the more interesting story could be
found in the domestic BPO segment. A 53% growth to close at Rs 4,050 crore might
look a tad disappointing after the 85% growth in FY '05, but this was the year
when domestic BPO finally shed off its poor cousin tag and even attracted a
number of the top players in the sector to take the plunge. Unlike earlier
years, it was not just the captive call centers of the banks and telcos who
brought up the domestic BPO segment, but even many of the members of the elite
DQ Top 25 club too made serious domestic forays in 2005-06.
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Domestic M&A Many Genpact |
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Domestic BPO Comes of Age
Take the case of Intelenet Global Services which acquired 51% of Sparsh, the
domestic BPO business of Spanco Telesystems, and subsequently demerged it into
its subsidiary Intelenet BPO Services (IBSL). This new entity, IBSL, made its
domestic debut with 39 clients including the likes of HLL, HDFC Bank, Punjab
National Bank, Air India, ICICI Prudential and Tata AIG among others. With 5,500
people spread across 7 centers in 5 locations including Mumbai, Pune, Kolkata,
Gurgaon, Bangalore and Chennai, services provided by IBSL included customer
care, order fulfillment, collections, retention and lead generation.
Aegis Communications, coming from the Essar stable, saw nearly Rs 132 crore
in revenue coming from India, making it one of the largest BPOs with a domestic
focus. It managed 30% of India's telecom volume (had a distinctive domain edge
because of its parentage) and the client list included most telecom majors,
including Airtel and Hutch. It had a presence in 11 Indian cities, with 17
delivery centers. Airtel, in fact, played a pioneering role in the coming of age
of domestic BPO when it outsourced its call center operations to four
third-party BPO players-IBM Daksh, MphasiS BPO, Hinduja TMT and TeleTech. The
deal size was reported to be Rs 1,000 crore and spans 4-5 years. Whirlpool, on
the other hand, outsourced a range of customer interaction services including
inbound complaint management and queries, plus outbound dealer calling to
Infovision.
MphasiS BPO's other serious domestic venture involved customer support
operations for the State Bank of India, the country's banking behemoth. Under
the Rs 250 crore deal, MphasiS provided predominantly voice-based inbound
services for the bank. Incidentally, the company's Noida facility was
earmarked to support only domestic clients. The Aditya Birla Group entity,
Transworks, too started domestic work especially for the other group companies
like Birla Sun Life Insurance and Idea Cellular. Hinduja TMT too gained
significant traction in the domestic market; its business accounted for 11
clients, employed 3,000 people and contributed 15% of its overall revenues.
SerWiz Solutions (a Tata Sons subsidiary) serviced Tata Group companies like
Tata Teleservices, VSNL and Space TV from its three centers in Pune, Hyderabad
and Mohali.Â
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Traditionally, captives had made up the domestic BPO market and those like
Reliance Communications (6,000 people at DAKC), ICICI Bank (2,000 seats in
Mumbai and Hyderabad), HDFC Bank (13 centers across the country) and Indian
Railways (set up call centers in Bangalore and Patna) continued to flourish in
2005-06. One catalyst for the domestic success was the capacity to service
clients in multiple regional languages-IBSL supported 15, Aegis 14 and
Reliance eight of the regional lingos. True, the quality of service still left
much to be desired; but with agents coming at nearly half the salaries of their
export counterparts, the companies were not complaining. However, some of them
did initiate quality mechanisms and incentives in terms of transferring high
performers to the exports side.
Going Global Through M&A
Notwithstanding the lucrative domestic appeal, Indian BPOs still raked in
the moolah from exports. Therefore, there was no respite from most of them
trying to set up global footprints: both the M&A route as well as organic
growth by means of delivery centers in new locations were tried out. While
Genpact marked its first year of third party existence with a few acquisitions,
even traditionally conservative players like TCS went ballistic on bagging new
companies to spread out globally. The experience of Datamatics Technologies,
which suffered owing to wrong choice of acquisitions in 2004, should serve as a
fitting example for others about the importance of proper due diligence before
scouting for targets abroad. Even global players like eFunds and Convergys with
significant India-centric delivery tried their luck with acquisitions. (For full
details, see Table The M&A Scorecard for 2005-06)
Indian BPO players also gained in global standing especially after WNS
listing in the NYSE and now EXL Service's plan to do so in the Nasdaq. What
took the IT services industry nearly two decades (Infy listing in Nasdaq
happened in its seventeenth year) was emulated by the BPO sector in nearly a
fourth of that time. Unlike their software services brethren, Indian BPO
companies competed with their US/UK counterparts more as equals, especially when
it came to newer areas such as industry-specific services and
knowledge-intensive services. In FY '06, they looked at bridging yet another
gap-the ability to offer true global service delivery. Almost all large
India-centric BPO companies have either built or are building delivery centers
in offshore locations other than India, in addition to some onshore capability.
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Rank |
Company |
Revenue |
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1 |
Genpact |
2,691 |
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2 |
Convergys |
1,376 |
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3 |
WNS Global Services |
895 |
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4 |
Wipro BPO |
763 |
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5 |
Aegis Communications |
662 |
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6 |
OfficeTiger |
613 |
|
7 |
IBM Daksh |
573 |
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8 |
HCL BPO |
554 |
|
9 |
ICICI OneSource |
547 |
|
10 |
Progeon |
379 |
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11 |
EXL Service |
375 |
|
12 |
vCustomer |
353 |
|
13 |
Sutherland Global |
309 |
|
14 |
e4e |
305 |
|
15 |
24/7 Customer |
303 |
|
16 |
MphasiS BPO |
298 |
|
17 |
Hinduja TMT |
284 |
|
18 |
Intelenet Global |
270 |
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19 |
Techbooks |
265 |
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20 |
TCS BPO |
264 |
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21 |
eFunds |
258 |
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22 |
GTL BPO |
176 |
|
23 |
Transworks |
163 |
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24 |
Datamatics Technologies |
152 |
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25 |
Sitel |
145 |
| DQ Estimates                       CyberMedia Research |
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The Philippines and nearshore locations were the hot favorites. Hinduja TMT
was the first Indian BPO company to open a facility in the Philipines. Besides
Hinduja TMT, Genpact, IBM Daksh, and 24/7 Customer have their centers in the
Philippines, while ICICI Onesource is seriously considering it. Wipro BPO is
looking at Vietnam. Eastern Europe is yet another favorite amongst the Indian
players, with Genpact having two centers in Romania and Hungary, and Progeon in
the Czech Republic. Northern Ireland is becoming another favorite with HCL BPO
now being followed there by ICICI OneSource. The Americas have not exactly been
the favorite destination though MphasiS BPO was present in Mexico, 24/7 Customer
in Guatemala and now TCS BPO in Chile.
The Market Dynamics
By now everyone know the key growth drivers of Indian BPO exports, and in FY
'06 there were little indication that India would surrender any of these
inherent advantages in the near future. This year, rather, witnessed the
consolidation of a few key service lines for the BPO exports sector-finance
& accounting, customer interaction services and HR administration finally
emerged as the top three in the pecking order accounting for 89% of the total
revenues. Voice-based call centers still dominated, the proof being customer
interaction services, accounting for 46% of the revenues.
In addition, the high-end knowledge-based BPOs or KPOs too prospered:
investment research support, legal services, content development and publishing,
econometrics, data analytics, modeling and forecasting besides animation and
gaming were the preferred areas. Dataquest, in line with Nasscom, however,
segregated animation & gaming from BPO, though some analysts considered that
too as KPO. Both third-party services providers like WNS, OfficeTiger or
Datamatics Technologies as well as captives like Morgan Stanley, Reuters or even
the World Bank were involved in KPO services.
Just like software services, BFSI remained the most prolific vertical for BPO
too. In addition to the expanding scope of services in this relatively mature
sector, there was a growing trend in 2005-06 towards sourcing higher-end,
complex, analytics and research-based services required in capital and debt
market investment, fund management, M&A and corporate finance, economic and
policy analyses. A look at the client profiles of the DQ Top 25 club vindicates
the preference of BFSI players to outsource their processes to Indian players.
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Company |
Acquisitions |
Strategic |
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Genpact |
MoneyLine Lending |
Wachovia; NDTV |
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Convergys |
Deloitte Consulting |
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WNS Global Services |
Trinity Partners |
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Wipro BPO |
Enabler |
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eFunds |
WildCard Systems; India |
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OfficeTiger |
Got acquired by RR |
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HCL BPO |
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ICICI OneSource |
Rev IT Systems |
Metavante |