'Buyers are open to looking at new vendors'

A large number outsourcing deals are expected to be renewed this year. What does this mean for the BPO industry?

According to Everest Group's report, the next 18 months will see BPO contracts coming in largely from the BFSI sector. Alongside, we also expect the tele-communications and healthcare businesses to have some contract renewals. Currently, many banks are outsourcing peripheral processes like data management to BPO service providers, while continuing high-value processes in-house. We expect more business from customer management to come in from telecom, and collections business from healthcare. I expect BPO companies to take advantage of these trends by now moving up the value chain and providing analytical services and compliance work.

Which regions will see more traction?

We are looking at traction in US, UK, Republic of Ireland, Australia, and NZ. There is a domestic demand as well for offering some specialized services such as offering customer service to alternate channels or preferential services for elite segments etc.

How will Indian service providers compete with foreign vendors to capture deals at the time of renewals?

I think the advantage is two-fold here. Keeping in mind that cost arbitrage is a thing of the past, and the recession proved this that the Indian service providers have geared up to support customers at a much deeper level to affect business outcomes by providing high value work. Productized services are one way of doing this much like FirstCustomer Intelligence which we launched in Feb 2013.

The second aspect is the fact that about a decade ago customers signed multi-million dollar contracts with single or at best two-three large vendors. I believe that these deals will become more fragmented this time round so that customers are able to de-risk their outsourcing strategy while getting the best of breed solutions. So while deal sizes will be smaller and competition fierce, given how the Indian BPO industry has scaled its offerings, service providers are better positioned to run more profitable and high-margin projects.

 

Are buyers likely to continue with existing deals or will we see a change in preferences?

In general, there is a trend of vendor consolidation. The typical tenure of the deal would be about three years. Buyers are looking for value creation, and cost arbitrage is not the differentiator any more. Hence buyers are open to looking at the new vendors if there is value addition. Parallelly to the vendors need to innovate continuously to give value addition to their clients, consolidate accounts which is basically cross-selling and up-selling in the existing accounts ensuring profitable growth of those accounts.