Time 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.

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. 

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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