India’s (third-party) BPO exports grew 47% during 2006-07 to record revenues of $4.6 billion (Rs 20,890 crore), according to a study by CyberMedia’s flagship publication, Dataquest, in its 20th Annual survey of the Indian IT Industry (Vol 3). The magazine ranks the Top 20 BPO firms in India. 

This makes the (third party) BPO chunk over 55% of the entire BPO-ITES pie as estimated by Nasscom. By definition, BPO or ‘business process outsourcing’ firms are third party firms offering BPO services, and are not captive units of companies like HSBC or Dell, where outsourcing (BPO) is not involved.

The DQ Top 20 BPO companies grow 59.4%
The Top 20 companies on Dataquest’s BPO list contributed US$ 3.57 billion (Rs 16,094 crore), nearly three-fourth of the total BPO exports. While Genpact with BPO revenue of Rs. 2220 crore held on to its No 1 position, there has been major changes in ranking from No 2 onwards. Transworks, IBM Daksh, TCS BPO and Cambridge Solutions were the next four BPO firms with revenues of Rs 1,510 crore, Rs 1,260 crore, Rs 1,107 crore and Rs 1,000 crore respectively.

The next 5 slots were taken up by WNS Global Services (Rs 990 crore), Wipro BPO Rs (935 crore), Convergys India (Rs 890 crore), Firstsource (Rs 809 crore) and HCL BPO (Rs 746 crore). Interestingly all the Top 10 Dataquest BPO companies are either listed companies or a division/subsidiary of a large group. Among the next 10 players, however, five are privately held companies. 

The Top 20 BPO companies added 57,784 new employees during the year and employed 216,967 people at the end of financial year 2006-07. 

Commenting on the BPO industry performance, Dataquest Chief Editor Prasanto Kumar Roy said, “Thanks to large onshore acquisitions by Indian firms, the Dataquest Top 20 BPO ranking table has changed significantly. We expect this trend to continue.”

“We expect the Indian BPO industry to redefine rules of the game by setting up non-India delivery centres, addressing the KPO opportunity, and offering better-integrated IT-BPO offerings,” Mr. Roy adds. 

The Dataquest study goes on add that the within the Top 20, there are two tiers. The first tier--consisting of 13 firms are all public companies or subsidiaries of large companies. This group is diverse, being well-represented by the captive-turned third parties (Genpact, No. 1; WNS, No. 6 and EXL, No. 13); the BPO arms of the IT services firms (TCS, No. 4; Infosys, No. 12; Wipro, No. 7 and HCL No. 10;); the neo-monoliths--Transworks, No. 2 and Aegis BPO No. 11--belonging to two established old-economy giants of India, AV Birla and the Essar Group; and two companies that have grown by a mix of organic and inorganic means — Cambridge Solutions No. 5 and Firstsource No. 9. 

The second tier is dominated largely by call center players, the only exception being Aptara at No. 18. Even e4e at No. 19 and MphasiS at No. 20 are changing their services mix to include a lot more non-voice services. 

The top 13 BPO players have grown by 67.4% while the next seven have grown by 27.5%. 

"While DQ research did not cover the captive offshore units, it is very clear that the third party exports from India have overtaken the captives’ exports," says Dataquest analyst and Executive Editor Shyamanuja Das. 

“This change has happened because of two reasons. One, captives have not really grown much. And two, the revenues of large Indian third party providers like Genpact, Transworks, and TCS include significant onshore components now, because of acquisitions,” Mr. Das adds.

5 of the top 20 DQ BPO firms list on stock exchanges
In the last twelve months, as many as five Indian BPO firms have listed on the stock markets, making it one of the most important years in the evolution of this industry. WNS was the first to get listed abroad when it started trading on the New York Stock Exchange in July 2006. It was followed by EXL Service which listed on the NASDAQ in October 2006. In August 2007, Genpact debuted on the NYSE. Firstsource Solutions decided to share its wealth with the Indian public by listing on NSE and BSE in January 2007. HTMT Global, part of the Hinduja Group's Hinduja TMT, was spun off and started trading independently on the stock markets. 

Global Acquisitions
The acquisition of Minacs by Transworks, Affina by HTMT Global; Global Vantedge by Aegis; MoneyLine and ICE by Genpact; Inductis by EXL Service; and that of Marketics and PRG Airlines by WNS are expected to add to the growth momentum to the Indian BPO industry, the Dataquest study notes. Transworks acquisition helped it to grow nine times, and jump to No. 2 position this year from last year's No. 23. 

The stake in Unilever's shared services unit by Capgemini, and acquisition of OfficeTiger by RR Donelley, were announced by March 2006 but were completed in the year under review. 

Global delivery becomes reality
With most large BPO players opening delivery centers outside India global delivery became a reality. A few overseas delivery centres came through acquisitions and many centers became operations from scratch. Manila was a hot favorite of all BPO companies, as a back up for India. Genpact, IBM Daksh, HTMT Global, Sutherland Global, 24/7 Customer, Transworks, Firstsource, and vCustomer now have facilities in the Philippines’ capital. Eastern Europe and Latin America are becoming hot destinations now. Larger players, of course, through acquisitions, have significant onshore presence now. 

KPO presents new growth opportunity
Many players entered the KPO space—primarily research and analytics, equity research, and legal services—through a mix of organic and inorganic means. Infosys BPO opened up a dedicated knowledge services arm, while WNS Global Services strengthened it by acquiring Marketics. EXL acquired Inductis in the analytics space and Aptara entered into legal services by acquiring Whitmont Legal Technologies. 

As the Indian consumer market—telecom, financial services and insurance—boomed, the domestic demand for customer interaction services grew. Many Indian firms wooed the offshore call center companies to take up their work. IBM Daksh, Aegis, MphasiS, Intelenet, HTMT Global, Sitel India increased their domestic focus. Aegis and Intelenet even bought companies in India to grown their regional footprint in India. 

IT and ITES integration 
And, finally, something that started happening in a major way though it did not make it to the headlines, was the much-awaited leveraging of IT for BPO. While the IT services firms have maintained that this is their competitive advantage, on the ground, Genpact and WNS, two BPO players, stole a march over others in offering platforms. TCS also gained from this approach by bagging the Pearl deal in FY '06. Infosys and Wipro too started creating some platforms. vCustomer even started bundling solutions and services for its clients. 

This year may see many of these trends continuing, with domestic focus and platform creation get-ting special attention. What this year may also see is acquisition of customer contracts through asset transfer, in the lines of TCS-Pearl, HCL-BT, and Capgemini-Unilever. Infosys BPO has already announced such a deal with Philips, and TCS may be considering such a deal with Prudential Insurance. 

Notes to the Editors:

• “BPO” refers to business process outsourcing, necessarily by third-party BPO companies, i.e. standalone companies that offer outsourcing services to other enterprises that are their customers, such as Genpact, WNS, etc. This analysis does not include in-house or captive units (where the firm’s owner is the sole customer), such as AmEx, AOL, HSBC and Prudential etc, where BPO or “outsourcing” is not involved.

• For India-headquartered companies as well as companies who had their first delivery center in India, the entire revenue has been considered. For others, only BPO exports from India have been considered.

• All companies have been ranked on the basis of their BPO services exports. Their domestic revenue as well as non-BPO (IT services) revenue has been excluded. 

• The US dollar averaged INR 45.05 for 2006-07 and INR 44.11 for 2005-06

About CyberMedia
CyberMedia is South Asia's first and largest specialty media house, with thirteen publications (including Dataquest, DQ Channels and DQ Week, PCQuest, Voice&Data and Global Services) in the infotech, telecom, consumer electronics and biotech areas, and is a media value chain including Internet (www.ciol.com), events and television. The group’s media services include market research (IDC India), job board (CyberMedia Dice), content management, multimedia, and media education. 

For more information, please contact:
At Strategic Communications and PR
Sanjiv Kataria
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At CyberMedia:  
Shyamanuja Das 
Executive Editor, Dataquest,
Cyber House, B-35, Sec 32, 
Gurgaon 122001 India
Ph: +91 124 4031234 +91 98102 97587
shyamanujad@cybermedia.co.in