BANGALORE: The IT sector is slowing down, but the business process outsourcing (BPO) segment – which has always played second fiddle to IT – has emerged as a silver lining in the cloud.
In the quarter ended June, the BPO segment, which had been growing relatively slowly, showed a clear revival for many companies, especially the integrated IT-BPO companies whose.
For every one of the big IT BPO companies, the sequential rise in growth rate of their BPO businesses was the highest in the last four quarters.
TCS‘s BPO business saw an amazing 27% increase in growth compared to the preceding quarter to touch Rs 1,887 crore. Infosys‘s BPO business grew 15%, the business had grown sharply even in the preceding quarter.
Wipro and HCL, both of which had seen a sequential decline in the March quarter, witnessed good growth in the June quarter. HCL’s BPO business, which had been making losses of $10 million in the last several quarters, broke even in the latest quarter.
Ankita Vashistha, MD of outsourcing advisory firm Tholons, attributes this to the global economic challenges that are pushing companies to outsource non-core processes. On the IT side, clients were limiting their budgets now.
On the other hand, BPO is growing for everyone because customers want to take their non-core processes and outsource them. So there is a bigger opportunity there,” she says. Vashistha adds that IT firms are focussed on offering integrated services, leveraging their IT platforms and analytics to deliver business outcomes for clients.
Technology is increasingly emerging as a crucial differentiator. For instance, e-discovery in legal process outsourcing (LPO) is not possible without technology. “This gives integrated ITBPOs an edge over pure-play BPOs,” says Martin Conboy, a Sydney-based BPO analyst.
Many leading IT companies have decades-long relationships with Fortune 1,000 companies. These companies are able to ginto conversations with senior managements of client companies and are able to secure integrated IT & BPO projects. “India has a nicely balanced spread of service lines, with 42% in customer care, 22% in F&A (finance and accounting), 18% in knowledge services and 14% in vertical specific BPO services,” said Conboy.
Swami Swaminathan, CEO of Infosys BPO, says the company’s BPO model has also changed significantly in many ways. “From a transactional BPO, we have become a transformational BPO, helping to grow customers’ businesses. Three years ago, we had 7-8% of our revenues coming from Asia-Pacific. Today, 18% of our revenues is coming from Asia-Pacific. And from a BPO, we have become a BPR (business process right sourcing ) provider. It’s no more just about picking up a piece of work from the US and then moving it to India. We have delivery centres around the world and we choose the best location to offer that service out of. This is what we believe will help us move up the value chain,” he said.
But will the June quarter trend sustain? Wipro’s CEO for the IT business T K Kurien says it will. Although Sangeeta Gupta, vice-president of IT industry body Nasscom, says it’s too early to make any projections.