BPOs eye new delivery centers overseas
By BPO Watch India Bureau
August 24, 2011
Some of India’s top BPO companies like Firstsource Solutions, Aegis, WNS Holdings and Infosys BPO could be actively considering new delivery centers or expanding the existing ones across foreign markets like the United states, United Kingdom and other European countries, published media reports suggest.
A report published in “Live Mint” quotes chief executives of some of these firms to state that factors like rising protectionism, regulatory and compliance requirements of governments and an increase in demand from clients for near shore or onshore centers are some of the reasons for this decision.
The article quotes Swami Swaminathan, CEO and MD of Infosys BPO as saying that the industry has matured from merely carrying out transactions to driving transformation for clients. “You can do transactions from anywhere in the world but when it comes to transformation processes you have to be close to the customers.”
It further quotes Mathew Vallance, MD and CEO of Firstsource Solutions to state that the nature of many upcoming deals in the telecom, banking and finance spaces require technology firms to carve out and take over a part of their clients’ operations, which requires onshore capability. The company gets over 60 percent of its revenue from delivery centers in the US and the UK, though most of its staff works out of India and the Philippines.
Aparup Sengupta, managing director and CEO of Aegis Ltd, believes that an onshore strategy can result in operating margins of 14-15% for BPO firms though it ensures that the company is immune to any emotional decisions and is shore proof. Companies that carry out a bulk of their work offshore may enjoy margins of 18-20% but suffer from fluctuations in currency and other factors, the article quotes him as saying.
On its part, WNS, which has been listed as the third-largest BPO exporter in India by Nasscom, is considering a center in the US apart from one in the UK, its CEO Keshav Murugesh disclosed. The company follows a blended profit approach, which means high profits from some locations offset low profits from other centers. “This is how we structure deals for our clients to prevent margin dilution,” he said in the article.
Source: Financial Express
“We are looking at near shore destinations like Jamaica, Mexico and Costa Rica to service the US market. Also, on the radar are Gautemala and Columbia,” HGS’ global CEO Partha DeSarkar told FE on the sidelines of the ongoing Nasscom BPO Strategy Summit.
The BPO has had some success in Jamaica where it is in talks with one client and the deal could be finalised by December. For the Indian market, however the company plans to follow a different growth model by setting up a partner network.
“The partner will help US improve our speed to market. We plan to follow this strategy in the international market also where we are not culturally aligned,” he said. For Jamaica, the BPO does not plan to take the partner way.
The BPO has also seen its dependence on the US reducing from 85% a few years back to 60% now, in line with its strategy of diversifying risk and having a balanced portfolio.
In fact, the company, which recently made two acquisitions of Canada-based firm Online Support (OLS) and another company HCCA, a prominent player in human resource outsourcing, is also looking at external funding to manage the dent that the buyouts had on it.
The $75-million refinancing will be in the ratio of 2:1 from debt and equity, respectively and is expected to be done in a month or two. DeSarkar noted that the primary reason for these acquisitions was to enter newer geographies and expects this trend to continue in the future.