Call centers and business process outsourcing providers are among industry sectors in India that are likely to cut more than 25% of their staffing

Call centers and business process outsourcing providers are among industry sectors in India that are likely to cut more than 25% of their staffing soon, according to a report by a trade body.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said on Wednesday that companies in those sectors were faced with shrinking margins.

The prediction comes as the Diwali festival in India draws to a close. Companies postponed layoffs until the festival was over on humanitarian grounds, ASSOCHAM said.

Earlier this month, top Indian outsourcers like Infosys, Wipro and Tata Consultancy Services reported slower revenue and profit growth in the quarter to Sept. 30. These companies get most of their revenue from the U.S. and Europe, with a large number of their customers in the troubled banking and financial services sectors. (Listen to a podcast asking whether outsourcers can survive the down economy.)

India's economy is also slowing down. The country's central bank, the Reserve Bank of India, last week cut its estimate for the country's gross domestic product growth for the fiscal year ending next March 31 to a range of 7.5% to 8%, from an earlier forecast of 8%.

New hiring by India's IT and services outsourcing industry has slowed down, but companies are not yet considering large-scale cuts, according to analysts.

Eastern Europe could soon become a favorite location for offshore outsourcing, with activity in the region estimated to triple between 2005 and 2008.

That’s according to consulting firm McKinsey, which predicts that the business process outsourcing (BPO) industry will support 130,000 jobs in the region by 2008.

Although only 1 percent of the world’s total BPO spending–worth $30 billion–is currently located in Eastern Europe, the region emerged as one of the favorite locations for Western European companies to invest in between 2004 and 2006.

McKinsey identifies three main advantages for companies locating BPO operations in Eastern Europe in the winter issue of McKinsey on IT.

The region offers low wage levels, comparable to India’s, with slow wage inflation looking likely to keep the region economically competitive for at least 15 years.

Also, compared with competing regions around the world, Eastern Europe is a relatively low-risk location for investing, due to the reliable infrastructure already in place.

The other benefit is the region’s geographical and cultural proximity to Western Europe, making the process of setting up offices much easier. There are also fewer language barriers compared with elsewhere, with German and French both being widely spoken.

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Indian BPO ranks high - BPO News

Satyam BPO also ranked fourth on the Knowledge Process Outsourcing vendors list. more than 4,000 organizations were evaluated in compiling the listsSatyam Computer Services Ltd announced on Monday that Satyam BPO, its business process outsourcing BPO arm, has been ranked second among the worlds leading BPO vendors in BrownWilson Groups Black Book of Outsourcing. Satyam BPO also ranked fourth on the Knowledge Process Outsourcing vendors list. more than 4,000 organizations were evaluated in compiling the lists.

For the third consecutive year, Satyam BPO has been ranked among the top 10 in BrownWilson Groups Black Book of Outsourcing. In 2007 and 2006, Satyam BPO, formerly Nipuna, had been ranked in several categories such as FAO, KPO and Energy and Utilities.

The categories in which we have been ranked this year BPO and KPO are the key growth areas that we have been focusing on basing our Specialty BPO positioning on. This ranking fits in extremely well from a strategic perspective for us, said Satyam BPOs Chief Executive Officer Venkatesh Roddann. Recognition from the BrownWilson Group shows our commitment to developing partnerships with clients and enabling transformation through superior delivery.

Satyam BPO is powered by a combination of domain expertise, operational excellence, process skills, and superior technology. The company is the worlds first eSCM Capability Level 5 service provider and Indias leading integrated endtoend outsourcing service providers. Satyam BPO offers proven,fullservice expertise for multiple industries, including telecom,pharmaceuticals, financial services, and manufacturing. Its global delivery standards have resulted in numerous longstanding client relationships with Fortune 500 companies.

Source : http://www.offshoringtimes.com/

Global BPO’s To Rely Upon Shareholder’s Approval

The warrants have a strike price of $6 and Global BPO is trading at $7.80, allowing the warrants to have an intrinsic value of $1.80 and time value of another $1.50 for a total of $3.30. However, the warrants only trade for $0.67. There are two main reasons they trade for such a low value, which we’ll get to later, but more importantly, there is a good chance that one of these reasons will no longer be a factor when shareholders approve the pending merger with Stream Holdings on July 29th.

The shareholder vote is important because warrant holders can’t exercise the warrants until shareholders approve an acquisition. Global BPO is a special purpose acquisition company, or “SPAC,” created to find an acquisition in the outsourcing arena. Earlier this year, Global BPO’s management announced a deal to acquire Stream Holdings. The deal looks like it is priced attractively, plus the CEO of Global BPO, Scott Murray, used to run Stream Holdings from 2000-2002 until he sold it to Solectron. Shareholders have a choice to approve the attractively priced acquisition and own shares in the ongoing company or vote against the deal and receive $7.93 in proceeds from the Global BPO’s IPO trust fund.

The recent history of SPAC stock performances after acquisition approval is horrendous, so it had seemed likely that shareholders would vote against the deal and warrant holders would have worthless warrants. However, in early June, Global BPO’s management increased the likelihood of shareholder approval by announcing an interesting deal with Ares Capital, a private equity firm. The deal would have Ares Capital pay $150 million for convertible preferred stock at $8. Global BPO would use the money from Ares to tender for 70% of its publicly-held shares. This event significantly increased the probability that shareholders would approve the deal, but it didn’t make the vote a foregone conclusion.

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Top 10 outsourcing companies 2008

Curtains went up on the Black Book of Outsourcing list. The survey of global service users aims to identify the 50 best-managed global outsourcing vendors through surveying client experience and assessing industry developments.

The 2008 issue of the annual list released by US-based Brown-Wilson Group once again proved the fact that change is the only constant in the dynamic outsourcing industry.

The 2008 list saw last year’s leaders Infosys, Hexaware, EXL Service and ICICI Firstsource failing to feature in the Top 50 this year due to low client approval ratings, a fact which clearly shows that Indian BPOs need to work on their delivery levels. IBM Global also lost its position this year. Firstsource (formerly ICICI), a four-year top ranked performer fell the most of any BPO to 1550 of 1690.

The top 50 list this year comprises six Indian companies Wipro, Satyam, TCS, HCL, NIIT and Patni. Interestingly, the survey shows that outsourcing is no longer seen as a refuge of the financially weak or technically-deficient enterprise, nor is it a stick to threaten US workers. It is increasingly being accepted as a strategic tool. As the outsourcing Juggeranaut rolls on, we bring to you the top 10 best BPO vendors globally.
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Cos moving out of outsourcing business

NEW DELHI: Outsourcing vendors could see more and more clients move back customer service work onshore or in-house, according to the Black Book of Outsourcing’s latest report. While telecom firm Orange UK recently announced plans to stop outsourcing call centre work to India, banks like New Zealand’s ANZ National and UK’s Lloyds TSB have in the past said no to offshoring contact centre work. In its 2008 State of the Industry Report, the Black Book noted, “Companies are bringing parts of their customer service back onshore and even in-house, because it is a key part of the customer experience.” As part of its new strategy, Orange UK had recently announced that it would move back call centre work done in India to centres in the UK. Stating its goal of being the best-loved telecom company in Britain, CEO Tom Alexander said, “To reach that goal, we need to give our customers consistent quality, quality of network, products, service and experience.” Says ExlService president & CEO Rohit Kapoor, “The India offshoring story is intact though companies will reshuffle processes and portfolio. Customer service has always been more sensitive and BPOs have to look beyond just voice based work to high end services like analytics and risk advisory services. This is absolutely key to retaining clients.” Read more Article...

Indian BPOs may lose Orange pie

NEW DELHI: Business process outsourcing (BPO) companies like 24/7 Customer , Convergys and EXL Service may be impacted post Orange UK’s announcement of job cuts and reduction in the telecom major’s reliance on India based call centres.

Orange, the mobile services arm of France Telecom, is amongst the largest cellular players in the world. Orange’s new UK CEO Tom Alexander, while announcing a cut of 450 middle management jobs this week, also announced a change of strategy: Reduce its dependence on its Indian call centres, where the company directly employs about 1,500 executives. The company has not clarified as to how many of the 450 job cuts will be from its Indian operation. The immediate impact of the move is that Orange will be halting its call centre expansion in India.

In the next stage, the company will gradually bring ‘back home’ its call centres to the UK, in a bid to sell British customer service as the heart of its new strategy. It’s likely that the employees working on Orange UK’s Indian call centres will be redeployed in other processes over a period of time.
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BPO firms confident of beating US recession

At the concluding session of Nasscom's BPO Strategy Summit in Bangalore recently, 24/7 Customer's co-founder S Nagarajan made an unusual and passionate plea. He asked the large audience to write letters to newspapers whenever they found articles that portrayed the BPO industry in a negative light. "If you have different experiences from that stated in the articles, you should all write to the editors concerned," he said.

The reference was clearly to articles that have highlighted issues like sex and drugs at the workplace, much of that said to be provoked by the young age of those who work in such jobs, and the fact that most BPO jobs involve working through the night. We won't get into the merits of that here. But the reason Nagarajan was provoked to make that statement was this: He believes those articles are exaggerated, and, more importantly, he believes if there is anything that can put the brakes on the industry's growth, it's people's belief that BPOs aren't 'good' places to work in. Parents will discourage their children from entering the profession. In short, the industry won't get the talent it requires.

That's certainly not good for Nagarajan's firm, and especially now when the industry believes it's at the threshold of super-growth. While most admit that the coming year will see a slowdown on account of what looks like an inevitable recession in the US, the country from where most offshoring work comes, the industry's medium term projections are likely to beat that of most businesses. A study conducted this year by Nasscom and research firm Everest estimates "conservatively" that between 2008 and 2012, the industry will see a compounded annual growth rate (CAGR) of 28-30%. But it believes this could go up to as high as 45-50 % if supply constraints are eased.

"Supply is the constraint, not demand," says Pramod Bhasin, CEO of one of India's biggest BPO companies Genpact. India, he says, is already creating the biggest pool of business reengineering talent in the world and is fast consolidating its position as the No. 1 BPO destination. So anybody anywhere looking to outsource their non core areas is likely to look first to Indian BPO companies. In fact, Bhasin would perhaps be unhappy that we continue to use the term BPO to describe his firm. He thinks that given the specialized expertise companies are moving towards, the generic term is no longer meaningful.

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BPOs grapple with inflation

IT-BPO firms, which are already facing a US slowdown and currency fluctuations, are now busy in firming up their plans to tackle a rising inflation in the country and its impact on salary, sales, general and administrative (SG&A) and travel costs, which can dent their profit margins.

According to analysts, the immediate impact of a rising inflation would be on salary. Avinash Vashishta, Tholons Investment Advisory Research, said: "Salaries will now have to be hiked by more than what the companies had decided. Last year, there was almost a 15 per cent rise in salary, while this year it may go up by 8-9 per cent."

Most companies, including India's largest IT services provider Tata Consultancy Services (TCS), Infosys and Satyam , implemented their annual wage hike in the first quarter of the financial year beginning April 1. Others such as Wipro do it during the year. If inflation continues throughout the year the firms would have to effect a mid-term hike or raise the salary by a good measure in the next financial year.

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Business Process Outsourcing 2008: The Year Ahead

The sub-prime mortgage crisis and the weakening of the US Dollar have rendered several rude shocks to the outsourcing industry in 2007. Indian companies were especially hit as the Rupee appreciated by 10.9% in the last 12 months (14.2% in the last 15 months) against the US Dollar. Investors, analysts and the media have been speculating about the impact of margin pressures, risk of business loss in the US, further Rupee appreciation coupled with domestic inflation, etc. This will continue through 2008, as we watch the US slowdown play out – much depends on the extent of the slowdown (will it become a full-blown recession?).

Interestingly, despite worries on the margin front, outsourcing growth expectations stand tall. In our interaction with vendors across the outsourcing spectrum (IT, BPO and KPO), optimism is the prevailing mood, especially as concerns top-line growth. As a result, companies are gearing up to face the year with aggressive plans coupled with some innovative strategies to fight margin pressures. Either way, 2008 promises to provide plenty of action for the outsourcing industry. Our analysts have put together a list of key trends that we believe will make an impact in 2008.

1. Shake-up likely as smaller un-differentiated BPOs will be badly hit
Smaller BPOs with low-end, commoditized services are worst affected by margin pressures, and the worst is far from over. These players will find it difficult to raise prices, and will be unable to pay enough to retain the best talent. Small Indian vendors will be forced to innovate with a focus on "differentiating" their services. In 2008, we believe that this will become critical not just for sustaining competitiveness but also for the very survival of smaller vendors. The vendors that succeed in differentiating their offerings and thereby climb higher up the value chain, will see new growth or exit options open up via better access to funding and M&A activity by larger players. The others, who are unable to get out of the low-price, low-cost game, will start fading away from the competitive landscape.

2. Rigorous cost cutting by vendors inevitable in 2008
The larger companies may hedge forex exposures in the near term, but cannot disregard the threat of lower competitiveness in the long run. Large global vendors and focused, niche providers may be able to raise billing rates, but this will not compensate for the entire exchange loss, and will need a parallel productivity increase to prevent margins from weakening further.

Cost rationalization will be inevitable in 2008 for Indian vendors – whether small or large! The most obvious impact will be on wage hikes and executive perks. Recruitment too is expected to slow down marginally until mid-2008, as vendors push up utilization rates aggressively. But we expect recruitment to pick up again in the latter half of the year as the slack gets wrung out. The impact on attrition rates will also be interesting to see, as large premiums on poaching may no longer be affordable.

Apart from the obvious cost heads, companies will also look to optimize various administrative or marketing costs. Traditionally, the weak Rupee has meant that margins were never threatened for Indian IT and BPO service providers. This has led to considerable slack, in areas like transport costs, procurement, travel, telecom, etc. In the past, management attention was focused only on growth, but now, the quality of growth will matter more.

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