Tuesday, February 19, 2013

What BPOs are dumping low cost model for


With India's BPOs remodeling themselves to move from efficiency (low costs) to effectiveness (taking on more strategic work and delivering them from locations most suited to such work), the sector is beginning to outpace the software services business.

In the coming fiscal, the sector is expected to grow faster than the IT sector.

BPOs now do a repertoire of complex work, emerging as a transformational partner to customers.
"Within each industry vertical, we are doing more and more complex work. For instance, within the insurance industry vertical that represents 45% of our business, we do actuarial calculations and fraud analytics for claims, which are difficult to do," says Rohit Kapoor, CEO of Nasdaq-listed EXL Services.
He says the growth optimism comes from the industry now developing futureready solutions and servicing the entire spectrum -- the platform, services and high value capabilities like analytics -- in one bucket.

Pramod Bhasin, non-executive vice chairman of Genpact, the largest BPO company in the country, says, "We are delivering a level of expertise now that companies value. The penetration level of this industry among customers is still low, so demand will continue to grow." Industry leaders are betting that banking, financial services and accounting, supply chain and healthcare will be the growth drivers for the sector.

"Work in the healthcare area is being driven by changes in legislation. New regulations in banking and capital markets will fuel growth there," says Bhasin.

Traditionally, pharma companies sub-contracted a part of their R&D effort to third-party BPO vendors with cost being the key consideration. But now some of them are redefining what constitutes core for them, and are outsourcing more of their work.

Many companies are making acquisitions to acquire capabilities. EXL Services acquired US-based Landacorp, a healthcare technology solutions provider with over 50 million customers.

Landacorp's policy administration platform integrates insurers' internal and external data.

"EXL is growing its business 15% organically and then complementing that by another 10 percentage points of inogranic growth," says Kapoor.

Keshav Murugesh, CEO of WNS, which does high-end work in insurance, travel and banking, says the company did a "small tuck-in-kind of an acquisition" in South Africa this year.

"We have digested that very well, and it is now offering new clients and revenue streams for us. At the end of the last quarter, we also become cash positive overall. Three years ago we had a lot of debt. We will be opportunistic in terms of small tuck-in kind of acquisitions that help us build capabilities," he said.

WNS is getting into areas like shipping and logistics, and into utilities where it is helping clients move to smart meter technologies.

"In the finance and accounting and analytics spaces, we have been growing 17% and 18% year-on-year," Murugesh says.

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