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| Outsourcing stares at a bleak futur |
| the fate of India’s $14.7-billion BPO industry has become a bit uncertain.
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| INDIA
, 13-June-2011
22:34:11 PM |
| With an army of suppliers cloning each other’s services within the country and eagle-eyed competitors in Southeast Asia waiting to snap up global outsourcing opportunities, the fate of India’s $14.7-billion BPO industry has become a bit uncertain. Declining volumes, pressure to maintain slim margins, reduction in cost arbitrage, wage inflation and an ongoing talent crisis have added up to paint a bleak picture. Consequently, a number of Indian BPOs may be getting ready to script their endgames.
Financially, the past two years have seen more lows than highs for Indian BPOs. HCL’s BPO unit, for instance, has been running at a loss for two fiscal years in a row, and analysts expect the trend to continue for a few quarters. Wage inflation and price correction cut WNS’ operating margins in half, from 4% in FY10 to 2% in FY11. Again, FY11 margins for Firstsource remained flat at 14.2%, and profit aftertax at the country’s largest standalone listed BPO rose a meagre 2.2%.
“Overall,volumes have come down drastically for the BPO market and there is pressure on margins because of the steep rise in wages. After the global downturn, transaction processes have come down sharply. In such a scenario, only companies that have scale and deep pockets can sustain. Most of the small BPOs are out of business,” says Sanjeev Hota of Sharekhan.
Over 6,000 small ITES companies and BPOs across the country were reported to have shut down during the recession, while several medium-sized companies which could not handle margin pressures went on the block last year.
This year is likely to see another wave of de-cluttering, with large companies like Firstsource and Nasdaq-listed EXLServices reportedly looking for buyers. In a recent deal, UK-based general service company Serco acquired Intelenet Global Services for R2,772 crore in India’s largest BPO deal. EXLServices recently acquired Outsource Partners International (OPI), a former KPMG captive firm.
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