Source: www.siliconindia.com

New Delhi: Indian business process outsourcing (BPO) companies are moving up the value chain with an increase in the share of high-end judgement-based work, says a study prepared by leading global information services firm Dun and Bradstreet (D&B).

The fourth edition of D&B’s annual study of Indian BPO companies, titled “India’s Top ITeS and BPO Companies 2008″, was released here Tuesday.

The study is based on a survey covering 440,000 employees of 177 companies, or 63 percent of the Indian BPO sector’s total employee base of around 700,000.

“In comparison to last year’s study, conventional BPO services have lost their share by almost 10 percent whereas emerging service lines such as knowledge process outsourcing, legal process outsourcing, engineering process outsourcing and e-Learning have increased their share considerably,” the study said.

“In terms of services offered, traditional BPO services continue to be the most popular service line, with a share of 53.9 percent in the total range of services offered pie.”

These services include customer care, data capture and management, contact centre, document management, medical transcription, claim processing and technical support.

However, the study said: “Of late outsourcing firms have begun to look at the higher end of outsourcing spectrum.”

“Faced with increasing competition and constant margin pressures, judgement-based work (broadly categorised as higher-end and value-added work) provide outsourcing firms the opportunity to offer services at much higher price points,” it added.

“Firms are now concentrating on this end of the spectrum as well.”

The study found IBM Daksh Business Process Services as the largest BPO firm in India in terms of employment with 29,865 employees, followed by Genpact with a workforce of 25,366, and Intelenet Global with 25,300.

The study found that although the economic slowdown in North America and Europe will have some impact on the Indian BPO sector, most companies believe outsourcing and offshoring are more likely to become an alternate means for survival as they focus on cost rationalisation.

“This would pave the way for long-term growth for the BPO industry,” said D&B India’s chief operating officer Kaushal Sampat, leader of the research team that prepared the study.

The study also found that a high proportion of companies - as much as 45.7 percent - expect revenues for the BPO sector to grow by 20-35 percent annually as compared to a growth of 31.6 percent in fiscal 2007-08 year-on-year.

Source: economictimes.indiatimes.com

In a recent analysis of India’s continued suitability for offshore outsourcing based on 10 key criteria: language , government support, labour pool, infrastructure, education system, cost, political and economic environment, cultural compatibility, global and legal maturity , and data and intellectual property security and privacy, India has retained its position as a ‘leader’ amongst the 30 countries studied (see table: India’s Outsourcing Rating).

In maintaining this global leadership position in the offshore application services market, India still ranks high in most of the criteria. However , factors such as salary escalation , attrition levels and increased cost of living have reduced the country’s historical cost advantage. Strangely enough, the current economic climate offers the industry a much needed respite, with both salary raises and attrition having come down dramatically , as employees’ somewhat mercenary behaviour turns to caution.

Despite dramatic investment increases, infrastructure remains India’s biggest weakness. Strained power capacity, inadequate local and international connectivity remain challenges. The industry needs to and, in an encouraging sign, is starting to, place a greater emphasis on business and behavioural skills, as opposed to only technical skills. Tier 1 providers have also recognised the need to break the linear relationship between revenue growth and resource growth and move to higher-value service offerings.

Overall, Gartner’s strategic planning assumption (SPA) is that “Through 2012, India will continue to respond effectively to growing country competition and will retain its leadership position as a destination for offshore application services delivery .”

However, in today’s economic climate, the biggest threat to the Indian offshore industry, as well as, in a correlated assessment, the domestic industry is not any of the above challenges, but the shortsighted ‘knee jerk’ reactions by Indian management! Similar to the domestic industries’ perplexing IT investment pull-back during the dot-com burst of the early 2000s, at a time when they were just beginning to fuel badly needed productivity improvements and competitiveness , we are seeing a maddening reversal of sentiment now, though any true economic recession is still far from our shores.

And whatever slowdown we are seeing in some sectors (real estate being the most visible) is increasingly fuelled by negative sentiments in the other globally visible driver of the Indian economy, the offshore IT services industry. Considering the fact that every dollar of offshore services revenue supports at least 3 dollars of local Indian spend by these companies and their employees (primary, secondary and tertiary spending in real estate, retail, entertainment transport etc.), a slowdown in this sector has a profound and disproportionate impact on the Indian economy. Why we are seeing such high levels of negative management sentiment in the offshore industry is baffling.

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Source: www.siliconindia.com

Bangalore: Indian outsourcing firms are optimistic in getting big deals from foreign companies. They believe that Indian offshore industry is now facing short-term challenges due to the financial crisis which causes many companies either delay or cancel the projects. As most of overseas companies plan to cut the cost aggressively to overcome the crisis, the long-term growth prospects of Indian outsourcing sector look safe.

“The overall outlook for us is fairly positive. However, the industry will face short-term challenges as a temporary set of events has created a level of uncertainty in decision making by clients,” said Anantha Radhakrishnan, a Vice President at Infosys BPO.

BPO arms of India’s IT majors like Tata Consultancy Services and Infosys have acquired many large deals from overseas clients, mostly from U.S. The presence of English speaking work force and relatively cheap wages help these firms to get big deals.

The flow of deals started declining when Wall Street banks, some of whom are major clients of Indian IT companies, began to announce staggering write-downs related to the subprime mortgage crisis, and the wider U.S. economy headed towards recession.

“We are absolutely seeing some delays happening but it’s pretty small right now. Amidst the doom and gloom there are new markets to be explored, new territories to visit, new products and services to launch and new customers to be won,” said Pramod Bhasin, Chief Executive Officer, Genpact, a business process services provider.

Radhakrishnan, Infosys BPO expects the high-margin knowledge process outsourcing (KPO) business, which accounts for about five percent to six percent of its revenue, to form about eight percent to 10 percent of its revenue pie in the next couple of years. “We will continue to aggressively make investments in the newer delivery models, be it KPO or business platform solutions,” he said.

Suresh Senapaty, Chief Financial Officer, Wipro said, while the company was not seeing much pricing pressure now, it would not be “unrealistic” to face demands for price cuts in the near future.

Source: www.business-standard.com

Over 20 German companies from the state of Bavaria are on a mission to find their business partners in India. The delegation from Information and Communication Technology, infrastructure and biotechnology sector is visiting Mumbai, Bangalore and Delhi during their six day visit to India, says Guido Christ, Deputy-Director General, Indo-German Chamber of Commerce (IGCC).

The companies in the Information and Communication Technology sector are keen on joint ventures (JV), collaborations as well as merger & acquisition (M&A). They are looking at India for IT outsourcing, campus management solutions, to import managed services and IT development of latest Microsoft technology i.e silver light and WBF.

The biotechnology companies wish to expand their trade network with India by importing various enzymes for biocatalysis, bioinformatics tools, preclinical models in inflammation, etc and export diagnostic test kits, antidepressants, & chemical proteomics services, etc.

While, the Infrastructure companies are looking for both, collaborations as well trading. These companies are interested in M&A and to import hardware and software development while they are keen to provide project and system consultancy as well as market entry projects for Indian companies in Europe and supply them adequate software and hardware.

Source: economictimes.indiatimes.com

BANGALORE: India has the potential to attract € 8-10 billion investment in R&D operations by European software companies as the continent lowers its traditional resistance to offshoring and outsourcing, a study shows.

The study done by Zinnov Management Consulting suggests that European software companies will lead the future outsourcing wave, which will grow at 12% CAGR.

“With the changed ecosystem in India and Europe, offshoring shows an aggressive growth trend. And some of the drivers that are helping increase offshoring to India include the available talent pool, cost arbitrage and the innovation capabilities.

All these factors have resulted in the potential of over € 8-10 billion of addressable market for European companies’ R&D operations in India,” Zinnov director CS Chandramouli said. The European market is estimated at € 125 billion and currently accounts for 35% of global research and development spend. According to the study, while North America contributes about 42% to the global R&D spend, Asia accounted for 22% and rest of the world stood at 1%.

European companies setting up captives in India has gone up by 200% in the last three years. The companies from the continental mainland are realigning their global strategies in wake of the recent US meltdown, and Europe continues to hold strong growth prospects for India and other countries in the region.

The study reveals that out of the top 100 European companies, 18 companies already have 23 captive centers in India, with Bangalore accounting for bulk of them. National Capital Region (NCR) and Chennai are the other preferred locations for European captive centres in India.

European companies have been very slow to adopt offshoring and about 60% of the market is still untapped ; only 10% of the top 100 companies have their subsidiaries setup in India.

The main driver for the growth are the more relaxed labour laws in Europe, which were very strict earlier. Countries such as Germany and France are taking huge initiatives to ease the labour laws that will help them increase outsourcing and offshoring, and some may now consider offshoring service providers to handle government contracts. All these spell big opportunity for India despite the current economic slow down, the study explains.