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The year 2004-05 saw the Indian BPO industry move two steps forward and then
a step back. The industry as a whole registered 41% growth to reach Rs 25,080
crore, up from Rs 17,830 crore a year earlier. While this was less than last
year's 45% growth figure, it was still spectacular, reaffirming the status of
BPO as India's sunshine sector. However, the BPO exports slowed down
considerably, growing only 36% to reach Rs 22,440 crore. A heartwarming surprise
was the 85% growth registered by the domestic BPO industry, which reached Rs
2,640 crore, up from Rs 1,425 crore in 2003-04.
The year also saw the emergence of a new breed of high-end knowledge based
BPOs that complemented the growth in traditional service lines. This knowledge
process outsourcing (KPO) comprised vendors like WNS, Office Tiger and
Datamatics Technologies, providing higher-end research and analytic based
services-in traditional service lines as well as new business areas. The high
growth areas amongst traditional services included customer analytics and CRM,
HR outsourcing, and legal transcription support.
| Market
consolidation was in full swing. GECIS, Daksh, and Intelenet emerged
as significant players and also witnessed change in ownership |
| Lack
of information protection laws and misuse of data privacy threatened
the BPO industry, strengthening the arsenal of the anti-outsourcing
brigade |
| Domestic
BPO industry grew by 85%, thanks to the increase in domestic
telemarketing and tele-support activities, pushing up the entire
industry growth trajectory |
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Yet another positive trend was the continued momentum of market
consolidation, which proved the maturity level attained by the industry. IBM's
$150 mn acquisition of Daksh, and General Atlantic Partners and Oak Hill Capital
Partners' acquisition of the controlling stake in GECIS for $500 mn were the
mega deals of the year. Equally important were Barclays Bank's acquisition of
a 50% stake in Intelenet Global Services, ICICI OneSource's acquisition of
Account Solutions Group (ASG) and Hinduja TMT's, Source One Communications.
Less noticed, but not the least important, were the strides of the nascent
domestic BPO market, primarily driven by domestic telecom and BFSI players like
Reliance, Tatas, and ICICI, which are increasingly emphasizing on customer
fulfillment and CRM activities. So too are retail chains like Pantaloons or
Pizza Hut and a spate of new airlines and courier companies that are going
gung-ho on telemarketing and tele-support. The domestic BPO industry never had
it better. For instance, Tata's domestic BPO venture, e4e clocked Rs 500 crore
in revenues.
Notwithstanding these positive vibes, a spate of fundamental problems gnawed
away at the the industry. Despite 95,000 new people joining the sector,
attrition levels reached alarming propositions. Even mutual non-poaching
agreements between companies and the Nasscom guidelines could not buck the
trend. Add to it the psychologically debilitating effects the industry had on a
majority of people due to time, work, and cultural pressures.
The first half of the year involved countering the anti-outsourcing wave that
fomented throughout the year in the US and the UK. The second half was more
serious as lack of adequate data protection laws in India badly punched the
Indian BPOs. The witnesses: the mPhasiS imbroglio and the sting operation by the
Sun involving an employee of Infinity e-Services.
However, the success and drawbacks of the Indian BPO industry are just the
tip of the respective icebergs. The top players in the industry, be it the
Indian or MNC third-party providers, or the captive units, merit significant
profiling. We will come out with all this and more during Volume Four of DQ Top
20.
Rajneesh De
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