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It is difficult to put a date to when exactly the offshoring of business
services to India began. Even before Raman Roy convinced his bosses at Amex to
try doing some stuff out of India, there were companies in Chennai doing medical
billing and transcription, some of them even from early nineties. But if one
goes by what really got the world to sit back and take notice of the India
potential, it has to be the setting up of the captive unit of General Electric
(GE), championed by no other than the then CEO of the company, Jack Welch,
considered by many as the most influential CEO in corporate America at that
time. And if one goes by thatsetting up of GEs captive unit at Gurgaonas the
kick-off point for BPO offshoring to India, then 2007-08 was the year when the
Indian offshore BPO industry completed a decade of its existence.
The decade has been fabulous. Not only has it grown to become a $10 bn
industry, the Indian BPO industry has defined many rules of global outsourcing,
redefined many morearguably far more than the IT services industry. The IT
services industry played on one advantagethe India advantagefor at least ten
years. That was because it was competing against a well-defined,
well-established competitor in the form of the onshore IT services industry,
which had built a lot of inertia. The BPO industry, right from its baby days,
had to compete with a far more formidable opponent: the captives. Selling India
was a strategy available to them only for a couple of years, if at all. This
writer remembers meeting with a dozen odd members of a fact finding team from
a large European insurance company way back in 2002, most of whom were more than
convinced about the India potential but wanted to know why they should not do it
themselves out of India (ultimately, that is what they did). In fact, the
captive versus outsourced model that ceased to be a debate as far as IT is
considered, a few decades back, continues in BPO even today. And for good
reasonsbusiness, social and political.
It is to the credit of the industry that it grew against all odds and still
gave the world quite a few new ideas to experiment withpure play multi-services
BPO firms, for one. As many as eleven of the top 20 BPO firms, who feature in
our ranking, are not part of an IT company. Knowledge Process Outsourcing (KPO)that
started separately but leveraging the BPO success and with a similar model,
before getting assimilated with the BPO industry, is another such contribution.
Many companies outsourced for the first time to India what they might never have
thought they would outsource one day to anyone, let alone to a company thousands
of miles away. One could go on and on with such examples. The point is the
Indian BPO industry has almost shaped the global BPO trends in the last few
years.
Within India, it is the BPO industry that is responsible, for the first time
in independent India, of creating a situation wherein supply of jobs became more
than the demand for the educated young people. Starting with the large metros,
this trend is now spreading to tier-2 and even tier-3 cities.
A Tryst with Slowdown
The performance in FY 08 was not exactly the kind of culmination one would
expect from such a spectacular journey of a decade. The growth (of third party
service providers) slowed down to 21.4%, the industrys lowest since the
momentum picked up in 1999-2000, though that was partially due to an external,
technical factorthe rupee appreciation. In dollar terms, the industry still
grew a very respectable 36.6%.
Percentage growth apart, FY 08 was a year when very few newsworthy events
happened. Yes, Genpact, the top company, got listed on the NYSE but that was
itas compared to some four listings by Top 20 BPO companies in the previous
year. Little big-bang acquisitions happened, as compared to the previous two
years, when TCS, Transworks (now Aditya Birla Minacs) and HTMT Global went for
big-bang onshore acquisitions. Even most of the defining acquisitions that saw
the KPO companies getting assimilated into the BPO industry happened in FY 07.
The acquisitions of FY 08 were few and far between. Only onethat of MedAssist
by Firstsourcewas in the real big league. Other notable ones were those of AOL
offshore operations by Aegis; of Capital Stream by HCL BPO; and Upstream by
Intelenet. Genpact and WNS also did acquisitions but they were neither large in
terms of value nor significant in terms of changing industry dynamicslike those
of Marketics and Inductis by WNS and EXL respectively, a year before. Of course,
FY 08 would also be remembered for the big acquisition that never happened. The
sale of Citigroup Global Services was stalled at the very last moment. Of
course, news about sell-offs of many others such as Dells offshore operations
and Amexs offshore subsidiary hit the headlines, but unlike the Citgroup Global
deal, others were never confirmed by the parent companies.
Trends 08
Starting an analysis of an industrys performance with what did not happen
rather than what happened is not the usual way, but such is the expectation from
this industry. Lack of big-bang events does not mean the industry lacked
momentum. Most of the trends that we had identified in our last years analysis
as the ones to watch gathered momentum, among them the move toward
platform-based BPO, the increasing integration of analytics to customer
interaction services and the move by offshore BPO firms to tap Indias domestic
market.
In FY 07, with the exception of a handful of companies, few had a real
platform to offer. This year saw almost every multi-service player joining the
bandwagon of platform BPO. Apart from early movers TCS and Genpact, the year saw
Infosys BPO, Wipro BPO, MphasiS BPO, WNS and EXL becoming active on
platform-based offerings. TCS BPO not only added HR and payroll platforms to its
existing insurance platform, IIMS, it created a separate SBU within its BPO to
push platform-based offering. WNS also saw its business based on its auto clams
and airline platforms doing very well. Wipro BPO saw its Base platform going
live with four customers. Infosys BPO also launched its procure-to-pay platform.
IBM Daksh also started working on platform in its non-voice areas. MphasiS is
creating a platform on the healthcare side of the business. vCustomer, focused
on the customer interaction space, not just created a complete CRM suite but
started leading with its software in the Indian domestic market and signed more
than a dozen clients that have licensed its CRM, apart from services.
The other big piecealmost the equivalent of platforms in the customer
interaction spacewas the application of analytics to customer interaction.
Almost all companies have flirted with this in some way or the other. While
Genpact, WNS, Infosys BPO and EXL have huge divisions providing analytic
services to back them up on this, companies like MphasiS BPO, Wipro BPO, IBM
Daksh, Firstsource, Aegis, vCustomer and 24/7 Customer have developed this
capability internally to support their customer lifecycle management offerings.
The integration of KPO firms into mainstream BPO also continued with another
large KPO firm, MarketRx being acquired by Cognizant to supplement its existing
offering to the pharmaceutical industry, which is in the area of clinical data
management. MarketRx would supplement it with offering in sales and marketing
support to pharma companies. In fact, clinical data management, an essential
function as part of the new drug development process by pharma companies has
become one of the most high-profile BPO work to be outsourced to India, though
much less hyped, primarily because the most successful companies in this areaTCS
BPO, Accenture BPO and Cognizant BPO are among the least vocal companies in the
media. A host of major pharma companies including GlaxoSmithKline, Pfizer, Eli
Lilly, Wyeth, Bristol-Myers Squibb, Merck, AstraZeneca and Novo Nordisk have
outsourced their clinical data management to India. As many as four large deals
in this area were announced last year. While TCS, Accenture and Cognizant
together hold the lions share of the market, companies like iGate have also
entered this space.
| The Numbers |
| According to Dataquest estimates, the
total BPO exports from India by third party exporters stood at Rs 26,423
crore, up from Rs 21,760 crore in 2007-08. That is up 21.4%. In dollar
terms, the industry grew from $4.8 bn to $6.6 bn. That is a growth of 36.6%.
So, while the rupee growth looks non-impressive, the performance looks good
in dollar terms. The Top 20 companies accounted for 74.2% of the total
industry revenue, down from 77.4% in FY 07. That means, like the IT
industry this year, the Top 20 players have collectively grown less compared
to the others. They grew 16.3% to the 38.9% growth by the rest of the
industry, though on a small base. For our calculation, we have included the
revenue of eFunds Global, Cognizant BPO, and third party revenue of
Citigroup Global in others.
While we have not really studied the captive industry in detail, rough
estimates based on headcount puts the figure at approximately $3.6 bn, that
is a little more than half of the third partya major change from the days
when they accounted for 60-65% of the industry revenue. However, there is
one clarification: for most companies in the list, which are Indian (which,
in our definition means they are either headquartered in India or their
first delivery center was in India), their onshore revenue is part of the
industry size that we have estimated. If we take only the offshore revenue
from India, the share of captives would be significantly higher.
The list contains 17 firms that are either listed or are part of a listed
entity. The pure play companies take ten of the ranks while the rest ten
goes to companies which have IT operations as well. Out of that two, Genpact
and Cambridge draw higher revenue from BPO than from IT. | Page(s) 1 2
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