Source: sify.com

Chennai: A ship’s journey is complete when it returns home. Having sailed through the Americas, Europe and some parts of Asia-Pacific, Indian BPO companies in recent years have been heading home to dock their businesses.

“From a few domestic (BPO) operators in 2003, today the number of players is in thousands,” says Anish Zaveri, Associate Director, Sourcing Advisory, KPMG.

A strong rupee and recession in the US market (which contributes over two-thirds of total Indian BPO exports) have pushed companies, who were hitherto reluctant to start Indian operations, to look inward. If this momentum continues, the dip in overseas revenues will be offset by the rise in domestic revenues, he says.

HTMT Global Solutions chose to go domestic in 2004-05 when the US Presidential elections were around and there was a wave against outsourcing. “At that time we chose to de-risk and look inward. This model has been successful and we have been consolidating operations,” says Viswanath Rao, Senior Vice-President, Operations, HTMT. From bagging its first domestic client in September 2005 and closing the year with Rs 25 crore in revenues, the company today earns over Rs 100 crore and has about 6,000 employees dedicated to the Indian business.

About 25 per cent of Intelenet Global Services’ revenues come from the domestic market. With 15,000 employees the company provides services in 15 Indian languages for over 40 clients in telecom, banking, retail, consumer durables, aviation and public sector.

More complex processes

Radhika Balasubramanian, Chief Operating Officer Intelenet - Domestic BPO Services, says revenues are growing at 40 per cent (year-on-year), and the complexity of work has increased – processes are becoming more end-to-end as opposed to being purely voice-based.

Unlike the offshore BPO industry which works on cost arbitrage, the domestic industry is more focused on managing non-core processes. Anirudh Prabhakaran, Executive Director and President, South Asia, 3i Infotech, says clients are asking for process capability, efficiency and domain-specific value additions. The company focuses on customer acquisition operations in the BFSI and telecom verticals and has a dedicated employee base of 5,000. It reported revenues of about Rs 100 crore last fiscal, a 50-per cent growth over the previous year.

In 2003, most deals were a year-long discreet customer relationship management contracts valued between $50,000 and $1,00,000 (Rs 20 lakh- Rs 40 lakh), subject to quarterly reviews. Today, they range between $2,50,000 and $5,00,000 (Rs 1 crore- Rs 2 crore)and extend over 2-3 years, says T.J. Singh, Research Director BPO, Gartner Research. “Today if you are not in (the domestic market), you are late. For companies with extra capacity (manpower), the best option is to deploy personnel for Indian clients,” he says.

But can servicing a growing domestic clientele compensate for the losses incurred in overseas business?

Yes, say industry players, albeit margins in the domestic business are lower than those in international business.

What is important is that seat utilisation is higher. For many, the day shift is dedicated to domestic business while night shifts are for overseas business. To maintain margins, employees working on domestic business are paid at least 20 per cent lower than those servicing foreign clients. This is because domestic recruits do not undergo the same technical, domain, socio-cultural and accent training as recruits for foreign business. Employee wages form 45- 60 per cent of BPO company revenues and the lower the cost, the higher the profitability margins.

Prabhakaran of 3i Infotech says his employees are paid only marginally higher wages for servicing foreign clients. The company is able to achieve comparable margins from domestic and international businesses because of robust in-house technological platform and well structured processes. This, industry players say, will become the key to grow a successful domestic business and achieve an optimum revenue mix of 40(domestic): 60 (international). Developing proprietary technology and systems that can be customised for clients and innovative delivery mechanisms will help companies make the most of their buck in India.

Source:http://www.bangkokpost.com/Business/16May2008_biz55.php

TalkTime Asia, a Bangkok-based call-centre consultancy and training provider, forecasts the number of call centres in Thailand will increase to 397 this year, up 15% up from 317 last year. Managing director Deirdre Hutchinson said the call-centre industry in Thailand had grown by at least 15% a year in terms of agent seats, a trend likely to be sustained by new outsource vendors entering the market and the growth of outbound telemarketing and telesales centres.

She said that well-run call-centre companies in Thailand should not be concerned about the impact of the country’s economy on their businesses if they focused on managing operating expenditures and on revenue-generating activities.

According to the company’s professional services manager, Pimpaka Maneethai, the economic slowdown is enhancing the role of call centres among organisations, particularly outbound call centres, because they can reduce marketing costs when compared to the one-by-one selling approach.

She said outbound call centre services or telemarketing were booming, particularly among insurance, finance and banking businesses.

For TalkTime Asia, the company must select customers because it has limited human resources and has problems retaining staff.

”This is not our problem alone, but is also a big problem of this business in Thailand. The call-centre career is a stepping stone for young graduates before moving on to other careers,” she said.

The company plans to open its outbound service with 60 seats next month, to increase to 200 seats by the end of the year. Ms Pimpaka said all the 60 new seats had been booked already under a three-year term of agreement.

She added that this business had little competition and as far as she knew, TalkTime Asia may be the only direct expert in this business in Thailand. Established in February 2004, the company now has five customers for which it provides consulting services and 10 more are in the pipeline.

”At that time, Thailand had only 165 call centres. We wanted to upgrade the standards of the Thai call centres,” Ms Hutchinson said.

However, she said serving the outsourcing offshore market from Thailand could be difficult, mainly due to the English-language proficiency of the staff. The average monthly salary of an inbound call receiver is around 10,000 to 15,000 baht while an outbound caller can earn about 100,000 baht, including commission from sales.

Source: economictimes.indiatimes.com

CHENNAI/BANGALORE: Indian hospitals are upping the ante on outsourcing. Instead of making heavy capital investments on expensive diagnostic equipment, costing Rs 1.5 to Rs 5 crore for MRI & CT scans, hospitals are opting for newer pay-per-use and outsourced models.

And, government hospitals are more actively latching on to this trend, that promises lower ownership cost and technology redundancy risk. The outsourcing model in the domestic medical equipment market, estimated at $2.25 billion, is nascent but picking up, says Jayant Singh, industry analyst (healthcare practice), Frost & Sullivan.

It is working well with governments, notably in Gujarat, West Bengal and Rajasthan. Companies like GE are working with the Gujarat government and Hindustan Latex has a pact with CGHS, he adds.

This trend is likely to continue in the government sector, according to Siemens Medical Solutions executive vice-president D Ragavan. In the case of private sector, the risk-return formula will drive this model, and more so, when they expand into tier II and tier III towns, he adds.

Basically, there are three players in this outsourcing game: The customer (hospitals), service provider and the medical equipment companies. In some cases, equipment companies themselves act as service providers.

High-end imaging and pathology equipment account for lion’s share of the market followed by cardiology, orthopaedics and laboratory equipment. Since the equipment cost is high, companies are constantly looking for low-cost models.

“Medical equipment cost has been skyrocketing in the last five years. To capitalise on their intellectual property rights, equipment suppliers try to recover their cost in the initial years of the equipment lifecycle,” notes Federation of Hospital Administrators of India veep UK Ananthapadmanabhan, who is also president of Kovai Medical Centre.

The outsourcing, in fact, goes beyond physical equipment to cover technicians as well. Given the huge skillset shortage, technicians are being outsourced in mega establishments like M S Ramaiah of Bangalore.

Other models such as equipment contract with five-year consumable supply leading to its eventual possession by the hospital and outsourcing of specialist functions like radiology and pathology labs is catching up too.

Apollo Hospitals Group veep (materials) Narotham Reddy says, it has several reagent rental contracts for over 10 years now. “Such contracts account for 5% of the total investments on equipment. Asset possession usually happens at the end of three years, he says. Typically, Apollo spends Rs 100 crore annually on new technologies and sources equipment from Philips, Siemens and GE.

Citing a typical revenue-share model, Chennai’s Deepam Hospital chairman Dr A Pandian says, cathlab, MRI and CT scans are “fast moving” category of equipment with much greater revenue realisation. For example, a vendor invests Rs 3 crore on an MRI machine in a hospital that carries out at least five MRIs a day.

With a monthly revenue of Rs 4.5 lakh, the sharing arrangement typically is 75:25 between the supplier and the hospital. Equipment suppliers typically target hospitals that enjoy robust patient footfalls but lack financial muscle to buy hi-end equipment and quickly scale up.

Source: www.businessweek.com
With Indian wages rising and the rupee strengthening against the dollar, some IT services companies are opening facilities in the U.S.

It’s hardly news when India’s Tata Consultancy Services (TCS) opens a new outsourcing facility, unless it happens to be in Ohio.

TCS, one of the world’s top hired guns for corporate IT and back-office services, opened its first U.S. software development center in a suburb of Cincinnati on Mar. 16. And it’s hardly alone. Rivals including Accenture and India’s Wipro are pursuing similar ventures in unexpected places around the U.S., from Oregon to Arizona to Georgia.

Make no mistake. There’s still plenty of money to be saved by shipping work to far-away places with cheaper labor. Yet the economics of outsourcing are changing: With wages rising sharply in India and the dollar’s value sliding against the Indian rupee, “there’s been a 30% change in cost over the last year,” says Andy Singleton, chief executive of Assembla, a company that organizes distributed software development teams. Three years ago, it didn’t make sense for Assembla to hire anyone in the U.S. because labor costs were so low in India. But now, “as costs change, we end up with a lot more Americans,” Singleton says.

Niche Opportunities for the U.S.

While India is still a great deal for many companies that want to cut costs on high-tech workers, some experts predict the labor savings there could evaporate in 5 to 10 years. That has spurred some interest in lower-cost labor markets in the U.S. “We’ve seen quite a few small, rural sourcing projects,” says Doug Brown, partner of Brown-Wilson Group, an outsourcing consultancy.

If nothing else, these new IT facilities in unexpected places provide an intriguing alternative to Silicon Valley and other pricey high-tech hotbeds. A July, 2007, report from the Information Technology Association of America (ITAA) estimated that midsize metropolitan areas and rural communities could provide a 30% cost savings over top-tier IT hubs in the U.S. The report acknowledged that overseas outsourcing is here to stay, but stressed there might be a niche opportunities in low-cost domestic outsourcing.

Tata says it opened the new software center in Milford, about 16 miles northeast of Cincinnati, because it is trying to be more global and it also wanted to show its commitment to the U.S. The facility is expected to employ up to 1,000 people. “People have criticized the Indian outsourcing industry as exporting people and not investing in the U.S.,” says Gabriel Rozman, executive vice-president of emerging markets at TCS.

Cheaper Cost of Living

Rozman says TCS chose Milford in part because of its proximity to customers in the Midwest and on East Coast, as well as its strong talent pool. It also helps that the cost of living in the greater Cincinnati area is nearly 10% below the national average, according to the American Chamber of Commerce Researchers Assn. (ACCRA). And compared to Silicon Valley, the cost of living is 42% lower.

The notion that lower-cost U.S. markets might be ripe for outsourcing businesses began percolating a few years back. Accenture (ACN), which already had considerable outsourcing operations in major U.S. markets, announced a five-year deal in late 2006 to manage Cayuse Technologies, an outsourcing business started by the Umatilla tribes on a reservation in Northeast Oregon .

Kathy Brittain White latched onto the idea even earlier, starting Rural Sourcing in Durham, N.C., and Jonesboro, Ark., back in 2004. “Why do we have to go offshore when there are many areas in the U.S. where there are good universities and 50% less cost of living?” asks Brittain White. The cost of living in Jonesboro is 45% lower than in Silicon Valley and 13% below the national average, according to the ACCRA.

Shortage of Talent

It wasn’t until more recently, though, that foreign outsourcing firms began setting up shop in the U.S. Aside from TCS, India’s Wipro announced in August, 2007, that it would open a global software development center in Atlanta with plans to hire 500 workers. Brown says his firm has done some site evaluations in the rural Southwest around Phoenix and Albuquerque for foreign companies interested in starting outsourcing operations in the U.S.

But one big obstacle to this trend is the limited availability of highly skilled IT professionals, according to the ITAA report. AT&T (T), for example, had trouble finding talent when it agreed to move 5,000 jobs back to the U.S. from India, forcing the company to set up a training program.

At least one outsourcing firm in the Cincinnati area is concerned that Tata will boost competition for talent. “I will certainly now have competition that I’ll run up against [in recruiting],” says John Bostick, chief executive of dbaDirect, a database outsourcing firm. DbaDirect is located in Florence, Ky., about 30 miles from the Tata’s new center. Still, Bostick says he’s happy to welcome TCS to the neighborhood. “Inevitably it will help the economy by bringing capital to the area.”

Source: www.business-standard.com

Indian export-oriented information technology (IT) and business process outsourcing (BPO) firms may be grappling with an appreciating rupee and clouds of doubt looming over the extension of tax sops for the sector beyond 2009.

However, the business of BPO firms that cater to the domestic market appears to be booming.

BPO demand in the domestic market has witnessed noticeable growth over the past few years.

An Everest-Nasscom study points out that the domestic BPO market, with a growth rate of 50 per cent over the last five years, has grown faster than the overall Indian BPO market to reach nearly $1.6 billion (Rs 6,400 crore) by end of FY2008, against an overall BPO revenue of around $11 billion.

The potential opportunity in the domestic BPO sector is expected to be $15-20 billion by 2012 compared with the $50 billion projected for the overall BPO sector by 2012.

Jimit Arora, senior research analyst, Everest Research Institute, notes there is a definite increase in the interest among vendors across the board to pursue the opportunity for domestic BPO.

Global IT services player IBM has already cannibalised the home turf by winning multi-million dollar deals in India. Taking the cue, BPO players too are gearing up for the exponential growth.

For instance, Infovision, India’s third largest BPO firm catering primarily to the domestic market is looking to more than double its headcount to 25,000 over the next two years.

“We are currently a Rs 250 crore company with about 70 per cent of our business coming from domestic operations. We are aiming to increase this four-fold to Rs 1,000 crore by 2010,” said Aditya Gupta, president, Infovision.

Added Ramachandra Panickar, CFO, Intelenet Global Services, “Our domestic BPO revenues are around Rs 240 crore. We expect the market to grow at over 50 per cent per annum in the next two years. We employ over 15,000 people across seven locations in India, which we plan to increase by 20 to 30 per cent a year”.

“This market depends on the economies of scale. Many contracts are given on the basis of the reputation of the company. The country is going through an inflection point where the customers are willing to pay, but it is still at a growing stage so the companies are looking at bigger domestic players,” said Aparup Sengupta, CEO and Managing Director of Aegis BPO.

Radhika Balasubramanian, COO - India Domestic BPO Business, Intelenet Global Services, noted: “The tremendous growth potential in the domestic BPO market and opportunity to derisk revenue model by providing a balance between international- domestic revenue have spurred international BPOs to enter the domestic market. We see a huge potential here. We have no intentions of making our international business more dominant than our domestic business.”

Similar sentiments are echoed by Sengupta who said, “With consumer spending on the rise in India, our business will also receive an indirect boost, so we intend on keeping half our revenues coming for our domestic business.”

Ameet Nivsarkar, VP, Nasscom added that the domestic BPO market has witnessed an over 40 per cent growth last year, and “we expect it to continue especially with the growing economy”.

Is their optimism well-founded, given that BPOs do not get any tax benefits from their domestic revenues, and the income is taxed at the normal 33 per cent? The cost pressures on a domestic BPO are lower than the international businesses, notes Nivsarkar.

Moroever, their skill requirements are different. For a domestic BPO fluency in a local language as well as a national language is needed, due to which they can easily shift to a smaller city without much difficulty. This would help ease cost pressures as well.

Analysts also explain that catering to international markets give companies margin of at least 20 to 30 per cent whereas back home it is 12-13 per cent. However, while the margins of a domestic BPO are marginally lower than an international BPO, it’s the volume, size and scale that comprise the differentiating factors.

Anish Zaveri, associate director, KPMG Advisory, explains: “The two main investments in any BPO are infrastructure and manpower. These are relatively less expensive for a domestic BPO given the lower salary structure, lower cost of training and business development expenses. They also have the ability to move to lower cost tier-2 and tier-3 cities with greater ease.”

The salary structure for a domestic BPO employee is almost 30-35 per cent lower than an international BPO employee.

He adds: “The efficiency rate in the domestic BPO space is also much higher than its international counterpart. Utilisation ratios are also better. All these factors culminate to lower capital costs.”

Moreover, as the country reaches new high points in its various industries like telcom, retail and hospitality it throws up new opportunities for the domestic BPOs as well.