For leaders Tata Consultancy Services and Infosys, the business process outsourcing (BPO) practice is in resurgence and moving out of the shadow of its parent, the information technology services business.
Revenue from the BPO business for both nearly doubled in the last two years. Interestingly, the growth from the BPO business for both was well above the overall company growth.
While revenue for TCS grew at 15.6 per cent last fiscal, its BPO business grew 45 per cent. Similarly, Infosys grew by 4.5-5 per cent while its BPO at 18 per cent. For Wipro, the growth was marginal.
The BPO business has been extremely strong over the last few quarters. In fact, in the Americas, during the first quarter of 2013, for the first time ever, the BPO Annual Contract Value (BPO ACV) topped information technology outsourcing (ITO) activity with a sharp upturn and some significant restructuring activity, said Siddharth Pai, President, Asia Pacific Region, at ISG (formerly TPI), a research firm.
The year 2012 was by far the best year ever for BPO ACV awards. For instance, in 2012, BPO ACV in Europe, West Asia and Africa grew by 35 per cent. A sharp decline in ITO did also contribute to the relative rise of BPO. “As providers develop more and more vertical-specific expertise and solutions, we could see this trend continuing,” Pai said.
Resurgent, maturing
Sectors such as banking, manufacturing, telecom, insurance, retail and pharmaceutical continue to be the top spenders on BPO. Clients sought work in areas such as analytics, finance and accounting and supply chain.
There has been a generational shift in the BPO industry, and there is resurgence, said Abid Ali Neemuchwala, global head, BPO services, TCS.
The business process services industry, especially in India, started off by scaling up the call centre business, which over the years became commoditised and is now shrinking and moving to cheaper destinations. The second wave was shared services outsourcing, primarily of the back-office processes such as finance and accounting, human resources and indirect procurement, where the focus continued to be on wage and labour arbitrage.
The third and the current wave have been about delivering complex core functions, with focus on sector and technology-led transformation that drives business process effectiveness. The next generation of business process services are about leveraging knowledge to provide analytics and insights delivered on digital channels and process automation leveraging robotics and artificial intelligence, he said.
Greater scope
Talking to Bloomberg on the company’s annual results, V. Balakrishnan, Head, Infosys BPO, said the company is seeing greater opportunity for its BPO not only in the developed markets but even in the developing markets. “The first milestone we want to achieve is at least a billion dollars in revenue, and that is what we are focusing on. Hopefully, if we grow at the same rate, probably in the next 2-3 years, we will achieve the target.”