The Rise of the Domestic Call Center

The biggest negative to happen for the domestic call center industry is the
offshoring phenomenon, said the CEO of one of the leading domestic call center
companies, way back in 2004, while describing her challenges. Four years later,
her company, one of the pioneering domestic call centers in India, is part of a
much bigger company (in our list of Top 10).

And no one is complaining.

The Day of the Domestic!

Around 1999-2000, India started emerging as a favorite destination for
locating call centers for interacting with customers based in developed markets
that speak English, such as the US, the UK, and Australia. It has been a
phenomenal growth story since then, with a predominant majority of consumer
companies in the Fortune 500 list outsourcing their call center work to India.
India has built a multi-billion dollar industry around it.

But, of late, many companies doing that work are realizing that it is no
longer such an attractive proposition, both from the growth and margin
perspective, thanks to the rising rupee and manageability of complex operations
in the night. In short, it was becoming difficult to sustain the momentum, if
you are a company primarily doing offshore customer interaction services

And then, there was this godsend: the booming Indian domestic consumer
market. Areas such as telecom, aviation, and retail are seeing unprecedented
growth. Indian telecom is a global case study. Sectors like financial services
and retail are fast reaching there. All this means a big latent need for
domestic service.

It is no surprise that many international call centers have started to tap
what they call the domestic opportunity.

But do not get us wrong. The story of this fast emerging marketsome have
already started calling it the Next Big Thingis not just about a fallback
strategy of the international call centers. We would grossly undervalue the
opportunity if we say that. There are two reasons why we started from there.
One, it is a market that is well understood. Two, while the demand is there, it
needs both good supply and demand to make a market move. And international call
centers bring in world-class supplya great plus point for all the stakeholders
in the market.

Let us turn to the big story.

According to a research by McKinsey Global Institute (MGI), Indias
disposable household income will contribute to a quadrupling of its private
consumption between 2006 and 2025. MGI estimates that Indian consumers will
spend Rs 69,503 bn in 2025.

That kind of consumer activity will require an underlying need for customer
interaction service, in areas such as telecom, banking, insurance, travel,
electronics, IT you name it. It is difficult to put a number to that demand,
but it will be huge, to put it as modestly as one can.

The Market Today

Unlike the offshore BPO industry, the domestic call center industry
developed in a fairly unorganized way. In many cases, the direct selling
associates (DSAs) put some people together in a place, who made calls using just
an office set-up, sometimes with a very basic ACD. Some of themlike Andromeda,
a Top 10 company in our listdeveloped into large ones. Also, a few
entrepreneurs started small call centers to serve whoever came their way. Some
of the early pioneers were Magus, Customer First, and Orion Dialog, the last two
now part of Aegis.

A few of them did graduate to what we call organized players. But many of
them still remain the way they weresmall and unorganized, with basic or no
investment on call center technologies. New ones are still mushrooming. Unlike
the offshore call centers, where both international marketing and technology
served as entry barriers, there are hardly any barriers for someone wanting to
start a new domestic call center. Even today, that is a significant part of the
overall industry.

According to DQ estimates, the organized players (classified as those with
200 or more people) together account for a market of Rs 1,097 crore; the
unorganized sector still accounts for Rs 504 croremore than half of that.
Together they size up to Rs 1,602 crore. That is the size of the Indian
outsourced domestic call center industry. That may look very small when seen in
the context of the consumer boom that is happening in India and when compared
with the offshore industry, but that is the total market size as of 2006-07.
This is likely to grow about 65%that is a fairly rough estimate based on the
growth estimates of large playersto reach Rs 2,604 crore. This will be led by a
few players who project three digit growth figures, based on their actual
nine-month performance and, hence, is close to the actual. At least three of the
players in our listAegis, Firstsource, and Omniaexpect to grow in three
digits. We expect the same for some new players, which are not in the list yet
but have already got significant traction, such as vCustomer.

A far bigger story though is that of the captives. Almost all large banks
today have fairly centralized call centers that employ in thousands. ICICI Bank
and Reliance lead the list among the private companies while SBI and BSNL lead
among the public sector ones, though, interestingly, both BSNL and SBI have
started outsourcing. The other companies that have fairly large contact center
operations in-house are HDFC, Citibank, Standard Chartered, American Express,
and HSBC. Among the airlines, two of the three full services airlines (Jet
Airways and Kingfisher) have separate legal entities, while Indian has taken the
outsourcing path by increasingly outsourcing to Omnia BPO. Even the pre-merger
Air India has taken the outsourcing path by handing over its customer service to
Intelenet. Here too, it is the public sector companies that have taken the lead.

On first look, it seems Indian public sector companies are far more
forward-looking than private companies. In reality, however, with the exception
of IRCTCwhich has outsourced to a specially created company called Bharat BPO,
a 50:50 JV of Omnia BPO and Spanco (which sold Sparsh, one of the largest
domestic contact centers to Intelenet before reentering the business)all others
have done outsourcing the same way that American corporations did ten years
back, with an immediate gain in mind. On the other hand, many private companies
that run large call centers have built them with technology and practice of
world-class call centers. In futurewhen they decide to outsourcethey could
either spin off these entities creating the domestic equivalents of Genpact and
WNS; or they could actually sell them to existing players for a premium. Either
way, they look at value creation, and not cost reduction alone. One such
company, SerwizSol, already in our Top 10 list, started by serving Tata
companies but today earns close to 30% of its revenues from non-Tata clients,
and plans to grow that part significantly. Even Anil Ambani-led Reliance
Communications, which has close to 10,000 people in its call center
subsidiaryand it is the only large telecom player that has resisted taking the
outsourcing pathcould well be a player in itself. That, of course, is never an
option for a public sector enterprise.

However, unlike Tatas and Reliance or even UB (owner of Kingfisher),
companies like Jet Airways and ICICI Bank are fairly focused and it is difficult
to believe if they will try to grow this as a business. They could well be
potential candidates for acquisitions for outsourcing companies looking at fast
ramp-up. But here is a caveat for those vendors looking for acquiring them or
getting work from them: even after close to a decade, few offshore banking
captives have gone third party. So companies like ICICI and HDFC may, at best,
outsource part of their processesthey still doand may even go for full
outsourcing in their insurance and other operations, but it is difficult to
believe they will give control of core banking.

While there is no way to calculate how much worth of business that will be,
manpowerwhich has a direct correlation with revenue in this industryis a good
indication. According to DQ estimates, the captive centers together employ close
to 130,000 people in their call centers, while the outsourced industry
(including the unorganized players) employs close to 150,000 as on December 31,
2007. In 2006-07, our estimates show that the captive industry sized up to Rs
3,600 crore. The reasons for such large discrepancy in numbers are two. One, the
salary levels are very, very different and, hence, costs are different. Second,
the captive industry has not added as much in numbers as the outsourced industry
in the last nine months; so the manpower break-up was a little more in favor of
them as of March 2007.

The Characteristics

The telecom industry has taken the lead in outsourcing. While most telecom
players did outsource regionally from 1998-99 onward, Bharti took a major step
of consolidating by announcing large outsourcing deals with some of the offshore
players that in a way also marked the entry of offshore players into the
domestic market. Since then, almost all major playersBSNL, Vodafone, Idea, and
Spicehave outsourced their call center services. Tata Teleservices has
outsourced to a group-owned company while Reliance has kept it with a
subsidiary.

Banking & Financethe top outsourcer when it comes to IThas by and large
kept the customer service work in-house but outsourced the outbound
telemarketing work. The private insurance industry, in fact, has outsourced a
lot of telesales, and SMS-generated query handling to third party service
providers. Despite being a fairly nascent industry, insurance players find
mention among customers of almost all major players.

While every company does classify its services to verticals and horizontals,
a few realities stand out. In telecom, for example, it is largely inbound
customer service. For banking/credit card and insurance, it is a mix of cold
calling, sales query handling or loyalty sellingall related to sales. These two
together constitute close to 80% of the revenues of the organized industry.
Travel, consumer care, and retail are emerging as the new opportunities. Among
horizontals, services such as collections and tech support are very small; the
healthcare industry is emerging as a major user but the third party
administrators (TPAs) in insurance usually run their own call centers.

Some companies are, of course, trying to exploit the latent opportunities for
customer care in FMCG and consumer durable industry but that is still a very
small segment as of today.

The Metrics

The domestic industry is still very, very nascent and many of the metrics
are still evolving. Here are a few.

Billing rates: The billing rates are almost always on per person per day
basis for inbound work and a mix of per day per person and incentive for the
telesales work. Today, the average realization per person is anywhere between Rs
15,000 to Rs 22,000 per person per month for the outsourced industry.

Margins: Margins too vary a lot between types of services and types of
players, and ranges between 5-6% to 20-22%. In the organized industry, the
average is around 15-16%that is, of course, lower than the offshore margins but
is fairly comparable. With companies moving to smaller locations, that is likely
to move up a bit.

Salary levels: The starting salary of course depend more on the location than
on anything else. While the range is between Rs 4,000 on the lower side to Rs.
7,500 on the higher side, Rs 6,000 for tier-1 cities and Rs 4,500 for smaller
locations is the average entry salary.

Profile of agents: Most domestic contact centers look out for people who are
clear in communication with good, if not excellent English. Unlike international
call centers, knowledge of another Indian language is almost a must. In places
like Bangalore, some companies even look for people with three language skills.

The Road Ahead

While telecom, travel, and BFSI remain the immediate opportunities, retail,
hospitality and healthcare are the immediate areas for which almost every
company has a plan of action. There is a divide of opinion regarding the
opportunities in the packaged goods and white goods sector. While a few take a
wait-and-watch policy, a few others are putting all their energy to develop
these segments, expecting an early mover advantage for them. Apart from
SerwizSol and InfoVision, Delhi-based IBS, a regional player, is betting on this
segment. Government and citizen services remain a big potential but few would
like to describe it as an opportunity. Yet, some companies like vCustomer, Omnia,
and Spanco are seriously targeting this space. We do not expect too much
momentum in this space this year (2007-08) or the next, but going forward, it
would be huge. Also, the ability to sign Bharat BPO like revenue sharing
contracts would be a great step forward in this sector.

But more than the verticals and horizontals targeted, it is how this industry
is behaving that differentiates itself from any other industry in its infancy.
The outsourced domestic contact center industry in India at Rs 1,600 croreeven
with its projected 65% growthis very small, but thanks to its world-class
experience, it is creating a framework keeping in mind the big opportunity that
is likely to emerge from the big consumer boom.

There are two distinct trends that we expect to see in the next couple of
years. And for those who follow the offshore industry, it is a fairly familiar
story.

One, a lot of focus will go to attracting, retaining, and developing
manpower, as the market enters a phase when players need rapid scaling up. The
industry has the advantage of learning from the offshore experience. They are
already showing maturity by moving to smaller locations like Durgapur,
Puducherry, and Indore. Aegis has also started a program for developing middle
level managers, called ACEAchieving Continuous Excellence. A lot of debate and
discussion in the next few months will be around that.

The other is, of course, consolidation. There are quite a few regionally
focused playerssuch as InTouch in Delhi, JSS Consultancy in Bhubaneswar, and
IBS in Delhi. Many of them have 500-plus people. They will need capital to grow.
Expect a large-scale consolidation, especially involving the regional players. A
few like Aegis and Intelenet already have those plans. We expect many offshore
players to take the inorganic route to grow the domestic market.

In short, the market is still evolving but taking some really mature steps to
minimize, if not eliminate, growth pangs. Any new market is new and, hence, can
always throw up new challenges. But then, opportunities and challenges go hand
in hand. Call it the beginning of a rupee dream or the next big thing. It is
here to stay.

Shyamanuja Das and Shikha Das

shyamanujad@cybermedia.co.in

Finding Value in India

Intelenet has finally managed to find its future in the domestic market

One of the first few companies to get into the offshoring space, Intelenet,
which started as a 50-50 JV of HDFC and TCS, changed ownership multiple times
while remaining a frontline player but never really making it to the absolute
top tier in offshore BPO. And then, it took a decision to make a new beginning
with a lot more focus on India. In 2005, it acquired Sparsh, one of the leading
domestic call center players, to make a full-fledged entry into the emerging
Indian call center services market. This decision was endorsed when Blackstone,
one of the most respected private equity players, decided to take stake in
Intelenet in a management buyout. It signaled that entering the domestic market
was a faster way of creating value.

With the #1 position in Dataquest Domestic Call Center Survey 2008, the first
ever study of the industry, Intelenets new stature is now official.

While many offshore players have decided to enter the Indian domestic market,
none has been as focused and clear as Intelenet. While many others still bank on
one or two clients, Intelenet has completely realigned itself. Today the
domestic business accounts for nearly 37% of the overall revenue pie.

It has chosen the path of a mix of organic and inorganic means to grow in
this space. When the company had acquired Sparsh, there were some 5,000 agents.
Today the domestic arm of Intelenet has over 15,000 people and facilities spread
across 10 locations in Mumbai, Pune, Gurgaon, Mohali, Chennai, Bangalore, and
Kolkata.

Intelenet Global Rank 1

Susir Kumar, CEO, Intelenet Global

Intelenets revenue mix is also healthier than many. While financial services
and insurance together account for 50% of its revenue, telecom accounts for 45%.
The service lines break-up also throws a balanced picture; customer service
accounts for 40% while telemarketing accounts for 45%. Its client portfolio is
also fairly diverse: BSNL, Vodafone, and Airtel Broadband in telecom; Air India
in travel; Citibank, ABN Amro, PNB in banking, and Tata AIG, and ICICI
Prudential in insurance are some of its marquee clients. Bringing its
international expertise to play Intelenet is able to command a premium from its
clientele for its better service.

Buoyed by its success on the domestic front, the company seems to be hungry
for more. It is on the lookout for acquisitions that will suit its needs. It is
looking at companies of size anywhere upwards of 300-400 agents that will fill
some distinct gaps. The fact that the company is majority owned by Blackstone
now means that it will move fast on its planned strategy. The industry grapevine
suggests that it is in talks with one of the companies in our Top 10 list for
acquiring it.

It seems Intelenet has been third time lucky. After changing hands twice
earlier but failing to move fast enough, the domestic thrust has given Intelenet
the much needed boost in its profile. Going forward, it plans to focus on the
emerging areas like retail and consumer goods.

The Full CLM Player

Keeping up its acquisition spree, Aegis has emerged as one of the top two
players in the Indian domestic market

Aegis is a fascinating story of one of the leading American call centers
turning desi. Acquired by the Essar Group in 2003, Aegis, like many others,
started by making India an offshore base for supporting its US business but soon
realized that the India opportunity was too large to resist.

Apart from building up organically, it bought two of Indias then largest
call center companiesCustomer First and Orion Dialoggiving it important
footprint in Southern, Eastern (Customer First) and Northern (Orion) India. It
has since kept up its acquisition spree acquiring Teletech India (a 50-50 JV of
Bharti and Teletech Europe) to emerge as one of the top two players in the
Indian domestic market, and today employs more people for its domestic
operations than for offshore in India.

Aegis, unlike many others, does not try to position in inbound or
outbound space but does what its CEO describes as cradle to grave of customer
lifecycle management, addressing customer service, tech support, telesales, and
collections. Though telecom does account for 72% of its revenues, like most
others, thanks to large customers such as Airtel, Vodafone, and Idea, the share
of its new segments is on the rise. In 2007-08, it expects the share of BFSI to
go to 15% while it expects to get 5% each from healthcare and retail where it
was virtually non-existent last year. The company has a healthy client
concentration with about 40% of revenues coming from the top three clients in FY
08.

Realizing that middle level leadership is crucial to the smooth growth of the
industry, Aegis has invested on creating a special leadership program called ACE
(Achieving Continuous Excellence) that aims at imparting management and soft
skills for leaders in the services industry. Led by senior leadership of the
company, Aegis believes that these HR initiativestargeted at addressing needs
beyond the immediatecan give it crucial edge when this industry is faced with
explosive growth.

Aegis Rank 2

Aparup Sengupta, CEO, Aegis

While many domestic call center companies have consciously gone to smaller
locations, Aegis has a mix of small and large locations in its India domestic
delivery footprint. Of course, it is also planning to expand to small towns.

While acknowledging that some of the issues that face the offshore industry
today will become issues for the domestic industry, Aegis believes that the
right way of managing attrition is not to try stopping it but as it says,
maximizing tenure yield and managing the manpower supply chain more
effectively.

The company, which will almost double its manpower this year, expects to grow
the revenue by 154% to reach Rs 336 crore in 2007-08. The company believes that
growth will come from almost all consumer industries such as healthcare,
hospitality, retail, and pharma. Aegis is looking for more acquisitions where it
can find value that will give it expertise, geographical presence, or skills
rather than only scale.

The Silent Performer

InfoVisions performance and public profile are out of sync, with the company
hardly known outside the industry

The third ranker in the Top 10 in the Dataquest Domestic Call Center Survey
2008, InfoVision is a little unconventional when compared to its brethren. While
telecom is the bread and butter for most otherslarge and small, InfoVision
draws 70% of its revenue from BFSI, which is set to grow to 75% in 2007-08. And
before you reject it as the typical low-value cold calling work, here is a
factoid: the inbound sales queries for the most premium card from the most
premium credit card brand are handled by InfoVision.

Unlike the other four in the Top 5 club, InfoVision started as a domestic
contact center and though it has a small offshore operation, it positions itself
more as a domestic player, taking up industry causes in recent times. While in
this research we have excluded its revenue from HR services, the company draws
close to 10% of its revenue from HR services, and may well position itself as a
broad-based domestic BPO services player when the opportunities open up. What
also sets it apart from the top two is that in the domestic space, it has grown
completely organically.

InfoVision Rank 3

Aditya Gupta, CEO, InfoVision

Being a player that has grown one step at a time, InfoVision has tried its
hand in multiple industries and opportunities and draws a very healthy 15% of
its revenue from the consumer durable industry and 5% from hospitality. Its
client portfolio includes Lufthansa (travel), Shoppers Stop (Retail), PVR
(entertainment), Oberoi Group (hospitality), LG Electronics (consumer
electronics), Airtel (telecom), and of course fourteen banks including ICICI and
ABN-AMRO. However, InfoVisions client concentration also looks healthy, with
15% of its Rs 121.5 crore coming from its top client and 34% from the top three.

In the future as well, it plans a full-bodied growth across verticals but
considers the consumer durables an area where maximum business is going to be
generated from for Indian call centers. In the service lines, it has a strong
hold on telemarketing, earning 47% of its revenue from it. However, a slight
decline in the number is expected in the coming fiscal. Customer service (20%)
and collections (17%) follow.

Bracing for the boom in tech services and consumer durables, it is estimated
that InfoVisions workforce would be around 11,850 in FY 08. The Chennai
facility (1,800 seats) is second only in size to its first facility in Gurgaon.
It has delivery centers in Bangalore (1,000 seats) and Mumbai (1,000 seats) as
well. Its other facility is in Hyderabad but that is a small 200-seater.

InfoVision has no facilities in tier-2 or tier-3 cities, unlike most others
in the list. That could be a challenge when it comes to managing margins in the
future.

InfoVisions president Aditya Gupta confirms that all of its growth has been
organic, and in future, the growth will come from consumer goods and technology
services which are basic in the US but are yet to find strong footing in India.
He rubbishes all categorizations and specialization in a specific vertical and
says that as markets open up companies like InfoVision will have to excel in
managing the operations of a BPO, rather than trying to do customers business.

Enhancing Domestic Services

While Mphasis entry in to domestic BPO was like any othersthrough one
large dealit has done a good job at ramping up and adding to the client
portfolio

The year 2006-07 was the year when most offshore BPO firms with majority of
voice work discovered that in terms of both topline growth and bottomline,
offshore contact centers were not exactly the best thing to do. They resorted to
one or more of the three things: acquired companies onshore, increased non-voice
work, and looked at Indias domestic market. MphasiS did all three, especially
the last two.

Yes, it started like three others, with a large contract from Bharti Airtel.
But among the four that bagged Airtels much publicized deal, MphasiS has ramped
up the domestic business most, not just by increasing Bharti business but by
bagging other large clients such as Idea and Indias largest bank: SBI. SBI is
an account that it can grow for quite some time.

MphasiS domestic thrust is understandable. It got acquired by EDS, which was
badly looking at increasing its emerging market presence. In MphasiS, it found
just the right piece. The application services market in India is not mature, so
it was but natural for Mphasis to start with BPO. Though MphasiS refused to
participate in our survey, it is clear that MphasiS India contact center story
is more than voice services. As other BPO services open up, EDS will surely like
to get a share of the pie. So, while the immediate impact on MphasiS is topline
growth, as admitted by its top managers in analyst calls, its long-term strategy
will surely include an important non-voice component. HR is one of EDS strength
and it is expected that MphasiS will also target that.

MphasiS Rank 4

Jeya Kumar, CEO, MphasiS

In 2006-07, at Rs 80 crore, the domestic market revenue was close to 20% of
its total BPO business; this year, it is likely to be higher, thanks to the SPI
deal. Its revenue mix will also be a little different with telecoms share
coming down.

MphasiS has clearly identified smaller locations to be its choice for
delivering domestic services. While headquarter, Bangalore, does remain a
location, it has gone to places like Ahmedabad, Noida, Puducherry, and Indore to
serve domestic clients. While the Puducherry and Ahmedabad facilities are
dedicated to Airtel, the Indore facility is exclusive to Idea Cellular. It
supports SBI from Noida and other locations.

One area of interest for EDS could be the emerging public infrastructure
management space such as toll management, which will involve a lot of support
and back office. MphasiS has still not articulated to its investors whether it
will target that space in India or not, but for the time being its Indian thrust
is serious and real.

Big Dreams

That HTMT Global achieved breakeven in its domestic business in two
years is an indicator of the shape of things to come

HTMT Global entered domestic business with a contract from Bharti Airtel,
three years back. Since then, while it has taken a number of steps to better
margins in that contract by moving to smaller locations like Mysore and
Durgapur, it has not really been able to diversify the client portfolio too
much, unlike other players such as Intelenet and Aegis. But that was partially
due to the restructuring and its demerger from the parent and subsequent
listing as an independent company.

The fact that it still ranks among the top five companies in the domestic
contact center market just indicates its growing business from Bharti Airtel,
which is one of the fastest growing mobile operators in the world. Not
surprisingly, telecom accounted for as much as 85% of its revenue of Rs 65
crore in 2006-07. Last year it did diversify though, managing to get clients
in BFSI. According to DQ estimates based on the first nine months
performance, the company will close the year with a revenue of more than Rs
100 crore, an impressive growth otherwise but a modest growth at best by the
domestic industry standards, where most large players expect three digit
growth.

However, that may not be the right way to measure HTMT Globals
performance. It has added close to 1,500 people and now employs about 6,000.
Most of its significant action in the domestic space may be expected this
year. According to CEO Partha De Sarkar, the company has a target of reaching
Rs 500 crore revenue mark in 2010that is in two years. It is safe to assume
that the company is looking at inorganic route as well to get to that kind of
numbers. The companys past recordit has not been shy of acquisitionsalso
points to that.

Starting its domestic delivery center in Hyderabad, it has expanded that to
Chennai, Mumbai, Mysore, and Durgapur with an eye on the available talent
pool, low cost, and lower attrition in those locations. The new domestic
business of HTMT achieved break-even status by the first quarter of the year
2007. The Mysore center, developed as a Center of Excellence will be a
1,000-seater and the plan is to double that in 2 years time. Initially, this
will be a dedicated center for the domestic business. The Vashi center in Navi
Mumbai also services domestic clients.

HTMT Global Rank 5

Partha De Sarkar, CEO, HTMT Global

According to the Annual Report 2007, HTMT Globals domestic business from
October 2006 to March 2007 formed a good 15% of the overall business which is
almost equal to the amount of business done in the Philippines during that
period.

Bharti continues to be one of largest customers of HTMT Globals domestic
business. In fact, Bharti recently presented HTMT Global the Value Partner
Award for outstanding performance in Customer Support Service category.

HTMT, despite entering early into the market, has so far been slower to
ramp up; but ambitious targets, that too as a listed company, means that the
vision to grow this business is for real.

Old is Gold

With an estimated revenue of Rs 58 crore, Magus stands sixth in the DQ
Domestic Call Center Top 10 list.

It is among the oldest independent companies in the list, with an experience
of close to two decades. The company, unlike many others which started out at
that time, has focused on the inbound customer services business and draws 90%
of its revenue from there. Magus positions itself as a customer retention
company with its extended definition of customer, including consumers,
employees, and channel partners of its clients. In fact, Magus is one of the
most acknowledged dealer-support service providers and has a successful track
record in the demanding media business.

Like most companies in the list, Magus draws a whopping 85% of its revenue
from its telecom clients that include the top three private GSM service
providers in India, though the company has a total client base of around 20.

Despite a much-hyped move by Bharti Airtel to consolidate its customer
services outsourcing, which was followed by Vodafone and Idea, Magus is one of
the few older service providers that all these companies still retain.

Magus has witnessed a growth of around 45% CAGR in the last four years and
expects that to continue in future. While it expects the share of its telecom
business to come down marginally, it is focusing on new areas like banking,
entertainment, and retail. The company will continue to focus on inbound
customer retention even in the new verticals that it expects to grow.

The Tata Entry

SerwizSol, a wholly-owned enterprise of Tata Sons, may be a small entity in
the huge Tata empire but if plans go well, it could be Indian domestic BPO
industrys own Convergys or Genpact. Starting as the in-house customer service
operations of Tata Groups telecom services entities, SerwizSol is tapping other
clients, starting, of course, with another group entityTata Sky.

Though the Tata group companies still account for an estimated 70% of its
revenues, the company is building a framework to cash in on the domestic
consumer opportunities. To start with, the company has managed to sign in a few
clients in BFSI and travel, including a low-cost airline.

Like a mature captive operation of a large company, SerwizSols distributed
delivery is not spread too thin, as in the case of its peers in similar revenue
bracket. Its delivery operations are consolidated in three placestwo 1,800-seat
centers in Pune and Hyderabd, and one 1,000-seat center in Mohali. The other
advantage of the company is that being an in-house operation, it has expertise
in all the areas of customer lifecycle management.

However, the company is positioning as a customer care organization, also
eyeing the potentially long-term opportunities of consumer care for all consumer
companies, even as most other service providers are looking at verticals such as
telecom, BFSI and travelthe areas that are easier to tap but are seeing
commoditization. This means the company has to look at a micro-marketing
strategy.

Though SerwizSol has so far grown organically, it may have to look at
inorganic ways to grow further.

The Marketing Company

Way back in 1999, when offshoring was the big wave, Andromedanamed after the
enigmatic spiral galaxy thats approximately some 2.5 mn light years awayswam
against the waters to kick-start its domestic call center business, a spin-off
from its nine-year old DSA business. It has not looked back since then.

It is only one of the three pure play domestic businesses in our Top 10.
While others swear by inbound customer care while doing telemarketing for
existing clients, Andromeda provides both inbound and outbound services, the
latter being its real forte. Not surprisingly, while most others depend largely
on the telecom services industry for their majority of revenue, BFSI is an
equally strong business for Andromeda.

The company has also quite a few banks, insurance firms, and mutual fund
companies as its clients. Apart from cold calling and follow-up based on SMS/Internet
queries, Andromeda also does collection follow-up some of its telecom clients.
The companys client concentration is also good, considering that the top client
contributes only 18% of its total revenue.

According to DQ estimates, the companys revenue likely to go up to around Rs
80 crore this year.

While Andromedas ability to run marketing campaigns and execute customer
service fairly well has got it its clients so far, the companys unstructured
organizational set-up (it does not have a business development team, claims the
director) may be a challenge going forward. However, it is a good acquisition
target with large operations, especially with expertise in telesales.

Beyond ICICI

After listing in India (while most offshore BPO firms chose the US for their
IPO), Firstsource shows yet another belief in India by seriously positioning as
a domestic player, even while being a large international (offshore) player.
Starting virtually in 2006-07, the company has risen to enter the Top 10 club.

Of course its lineage is a big, big help, and, not surprisingly, its biggest
client is ICICI Bank and it has business from the groups other ventures such as
ICICI Prudential. But Firstsource has also added major clients, Vodafone being
the most notable. This is expected to change its revenue distribution
significantlyBFSI is likely to come down to two-third in the current financial
year from a whopping 95% in 2006-07. Also, the company that grew around 130% in
2006-07 is expected to close the year 2007-08 with a growth of 215% to cross Rs
100 crore.

As seen from its manpower growth in the first nine months of the year, this
was not a year of adding to the headcount but consolidating on its rapid
increase in headcount last year. That the company is looking at the domestic
margin challenges head on is evident from its spread of operations in cities
like Trichy, Hubli, Vijayawada, and Indore.

So far, the company is playing banking on a few big clients. It has to
diversify a bit to be counted as a serious domestic player. For the time being
the big question is, if and when ICICI Bank, which has probably Indias largest
captive call center, decides to outsource, will Firstsource be at least first
among equals to bag the prized possession?

Dare to be Different

Omnias #10 position in the list this year is a little misleading. With an
expected growth of 274% in 2007-08, it would be the biggest among Indias pure
play domestic services players in the coming year. While the differentials of
many in the list are to do with the subtle positioning, Omnias USP is very,
very tangible. It is the only company in the list that draws most of its revenue
from a segment that does not even feature in the vertical list of most
otherstravelOmnia has taken a head start there. Also, with two large public
sector clientsMTNL and IndianOmnia has reference cases when this big
opportunity opens up.

Owned by the BK Modi Group, Omnias other clients include Spice Telecom and
Idea. With three major clients, it is no surprise that telecoms share in
Omnias revenue next year would rise to 49% from a mere 9% in 2006-07. Led by
industry veteran Pravin Kumar, who was instrumental in leading the creation of
an organized domestic call center industry during his stint as the CEO of DSS
Mobile Communications where he reinvented the company from a paging company,
Omnias reluctance to take assignments that are not end-to-end, has hampered its
growth in some way but has created better bottomline.

Another noteworthy initiative of Omnia is its JV with Spanco, Bharat BPO,
which serves IRCTC for providing many of the latters services like Railway
ticket booking and fair enquiry through voice call centers, in a revenue-share
model. If successful, it could change the way call centers are looked at.