Big News - Citigroup put its BPO on the block

Weekly news updates on trends and happenings in the Indian Outsourcing Industry

Spiralling costs deter new entrants in the outsourcing space. Perhaps in response, entry-level salaries are seen to be stabilizing. The focus, however, is on retaining middle management, where salaries continue to rise. The big news is that Citigroup has put its BPO on the block in a bid to bring down overall costs.

- Chillibreeze Business Research Team

Genpact hires 500 in Jaipur in five months

Genpact is also working closely with the Rajasthan government to set up its third facility in Jaipur. Genpact, formerly GE Capital International Services, was among the first to set up its business process outsourcing (BPO) operations in Rajasthan in Jaipur. The facility has a capacity for over 2,000 people.

“We see tremendous demand for high-value BPO work and are expanding rapidly. We are working with the Rajasthan government to set up the third Genpact facility and currently, we are diverting our work to other Genpact centres to manage the talent and facility shortage. We have also been investing massively in training,” said Diwakar Singhal, Genpact vice-president.

May 17, 2007
Source: Business Standard

Differentiating models next step for BPOs

If the first generation of BPOs was based on cheap labour and cost savings, and the second on getting better productivity, the third generation or BPO 3.0 would be based on fetching higher returns for clients as they deliver better value to the clients. But as the industry heads in a new generation of expertise, it has become imperative for BPOs to consider differentiating business models and identifying new opportunities.

Speaking about this newer breed of BPOs at the 2007 BPO Conclave organised by economictimes.com and IBM, WNS Global CEO Neeraj Bhargava said that the way to make a substantial global presence, Indian companies need to have a comprehensive range of services based on a strong industry focus. He added that older generation BPOs too have a significant business opportunity in outsourcing from mid-sized companies.

Adventity BPO director Vivek Arora said that Indian BPOs need to have more focus on market expansion outside the US and open up to geographies like Europe, and focus on bagging a higher number of low-value contracts to be competitive with global giants like IBM and Accenture.

But along with the growth, the industry has also seen its share of challenges rise at the same pace. Not just challenges like better customer service, change management and operational excellence, but the BPO industry in the country is also facing a number of HR issues like high attrition rates.

May 18, 2007
Source: The Times of India

IT, ITeS cos bid to offset impact of rising rupee

IT and BPO majors are adopting different strategies to offset the impact of the rising rupee. These include enhanced hedging cover, denominating a higher share of revenues in euros or pound sterling, and upward revision of billing rates.

Simply put, the 10 per cent-odd appreciation in the rupee since early March would have reduced margins of top IT companies by 3-3.5 per cent. According to Srinivas Vadlamani, CFO of Satyam Computers, every one per cent appreciation in the rupee vis-à-vis the US dollar pares margins (earnings before interest, depreciation and tax as a percentage of sales) by roughly 30 basis points. Vineet Nayar, President and CEO, HCL Technologies, puts the figure at around 35 basis points.

So, how are they going about cutting their losses? Satyam Computers is looking to increase its offshore work, and employing more entry-level professionals to reduce average delivery costs. The firm has also revised its forex hedge cover from $300-400 million for about six months to $620 million for the same period.

Wipro, on its part, has started changing its billing from the dollar to euros and pound sterling. Similarly, Integreon, a Mumbai-based outsourcing company, has converted its billing into euro and pound sterling for its European clients.

Companies such as iGATE and WNS are working on strategies to pass on the cost of the appreciating rupee to their customers in the US by revising prices. EXL Services is looking to set up delivery centre in other locations to reduce rupee denominated costs

May 18, 2007
Source: Hindu Businessline

Entry-level BPO salaries steadying

Is it the calm before the storm or after one? Difficult to say, but BPOs and recruitment firms are admitting that entry-level salaries in the industry are seeing some stability.

S. Nagarajan, founder and Chief People Officer, 247 Customer, says salaries in generic BPOs (mainly call centres and some non-voice BPOs) have stabilised at Rs 10,000-12,000 per month. Citing reasons for this, he says that candidates too realise that it's important to build domain expertise in their areas of work (BFSI, telecom, retail) rather than jump jobs for a couple of thousand bucks more.

Rishi Das, CEO, CareerNet Consulting, a recruitment firm for specialised and high-end BPOs agrees, "Entry level-salaries in low-end BPOs are now around Rs 1.2 lakh-Rs 1.8 lakh per annum. This could be because of an enlarging pool of workers." The good news is that poaching in the industry seems to be less intense than as it was earlier.

Some say that this stability is shor-lived. It could change as new business comes in and companies need to fill seats quickly. The steady salaries could start fluctuating again due to a likely invasion of talent from the retail sector as both industries need similar profiles of people.

Mid-level salaries in the industry, however, have seen a 15-20 per cent rise over last year. And so have salaries in BPOs doing high-end and specialised work like in data analytics firms, business research companies and legal outsourcing firms. In fact, KPOs and LPOs are recruiting MBAs and IITians for salaries ranging between Rs 6-7 lakh per annum.

May 18, 2007
Source: Hindu Businessline

WiMax: BPO execs can work from home

It looks like thousands of BPO executives in India may stop attending offices soon! Simply because they will be converted into ‘home agents’ and start working from their residences, joining their counterparts in US and other developed countries. Today, technology makes it possible for an agent from a home-office in Florida to handle service calls that come into the contact centre in Colorado.

With the last-mile broadband access enabler, WiMax, is expected to create a sweeping change in the connectivity scenario in the country, BPO firms are not ruling out the possibility of sending agents who do not handle ‘critical processes’ but are on ‘safe functions’ home. This way, agents can save time and energies spent on commuting, while their employees make substantial saving in terms of operational costs. Creating a ‘home-agent scenario’ will also open up an additional, untapped talent pool in terms of students, housewives, retirees and physically challenged.

Working toward introducing WiMax are telecom players like Reliance, Bharti, Tata, BSNL, MTNL, VSNL and Sify. For instance, Reliance is rolling out WiMax access across the country in a phased manner in a few months’ time. The telecom major is looking at taking WiMax across the country to cover 200 cities and towns. Compared to WiFi, the magical technology WiMax signal travels as far as 30 miles.

May 18, 2007
Source: The Times of India

Citigroup's BPO arm on block

Citigroup is putting its captive business process outsourcing (BPO) arm on the block. The bank is said to have appointed a merchant banker in US for the proposed sale. The captive arm, which was last year renamed as Citigroup Global Services (CGS), was earlier listed on the Indian bourses as e-Serve International.

A highly placed source in Citigroup's Indian operation said a decision has been taken in the global headquarters to sell the BPO business, which was among the earliest captive businesses to be set up in India. If CGS goes on sale, it will be the second large BPO unit to be on sale from India in recent times.

A few days ago, India's largest BPO vendor Genpact made an application to list $600 million worth of its shares on the New York Stock Exchange. Analysts have since valued Genpact between $5-6 billion, on sales of $613 million last year. On a similar valuation, CGS may well be worth anything between $1-1.5 billion.

According to industry sources, Citigroup is putting its BPO on the block after finding it difficult to keep its costs down, especially after recruiting thousands of employees on the company's rolls. CGS spend a huge amount of money in advertising that including hoardings, which competitors like Intellinet reckon goes against the industry's practice of keeping costs low.

Captive BPO's often tend to specialise in only one domain — in case of CGS, finance and banking, because that is what their parent companies want them to do. In turn, it reduces the options their business managers have to source high end contracts.

May 18, 2007
Source: The Times of India

Kolkata, Hyderabad at bottom of BTO space

At a time when West Bengal is trying to position itself as a top-tier IT destination, a report has ranked Kolkata and Hyderabad at the bottom among potential hubs in the business transformation outsourcing (BTO) scene.

BTO, which is often described as third-generation outsourcing, combines traditional business process outsourcing (BPO) with IT outsourcing. Several firms like IBM, Accenture, Nipuna and Wipro BPO are taking big strides in this emerging segment. Though the domestic BTO turf is growing at 9%, it is expected to grow at 10-15% in coming years.

A report on potential BTO hubs prepared by Assocham identifies Bangalore, Gurgaon, Mumbai and Pune at the top of the BTO pack. In the middle rung is Chennai. Kolkata and Hyderabad figure at the bottom of the BTO barrel. The Assocham report notes that the government could play a major role in driving BTO growth by providing land and other amenities at subsidised rates.

According to the study, the prime factors that BTO vendors consider while setting up shop are availability of quality infrastructure, and talent pool, the geographic location, local climate and tax benefits available from the local government.

While in traditional BPO, the vendor makes minimal changes to the services before providing it back to customers; the BTO spectrum looks at transforming the process or service. BTO processes are expected to result in cost optimisation, increased efficiency and productivity.

May 19, 2007
Source: The Economic Times

Healthcare BPO sector looking for freshers

Over 5,000 freshers are needed in the healthcare BPO sector across the Southern cities. Healthcare BPOs, which offer jobs in transcription, billing, coding and clinical trials currently employ close to15,000 people now in Chennai, Bangalore and Hyderabad, according to Mr Manoj Pachisia, Director, NEXT, a BPO training institute. Many prefer to work with healthcare BPOs because they offer day shifts and are non-voice based processes.

To cater to the talent needs of the industry, NEXT has launched a 26-week open training programme for freshers in the industry. "Talent squeeze in the market has resulted in companies relaxing the hiring criteria by one notch and let the training companies do the rest," says Mr Pachisia.

Healthcare BPO is a Rs 200-crore industry providing solutions such as customer management systems, maintenance of electronic medical record services to healthcare service providers, health insurance companies and life sciences, and medical equipment firms.

NEXT's open programme for healthcare BPO gives job aspirants in the industry basic knowledge on medicine and its terminologies, international hospital work culture and practices, medical claims processing, medical transcription, medical billing and coding. Bangalore-based NEXT trains employees in insurance, telecom, tech support, retail and healthcare industries.

May 21, 2007
Source: Hindu Businessline

Risk factor: Entry barrier to BPO sector

Time was when everybody and anybody cashed in on the BPO euphoria and set up call centres in India. That was in 2001-02. Circa 2007 and many of them have disappeared or are languishing. The wall seems to have got higher now for anybody thinking of entering into the BPO sector as costs and domain expertises is a big entry barrier.

Today, it costs anywhere between $10,000-25,000 per seat and one needs about 1,000 seats for running a viable voice-based operation. Unlike IT outsourcing, BPO is a capital-intensive segment as one needs to make heavy investment in setting up the infrastructure and hiring people.

The Indian BPO sector, excluding that of KPO, has by and large not seen any third party service provider entering into this segment in the recent past and if there are any, it is the existing players expanding or opening captives’ centres. According to market estimates, there are around 700 ITeS companies in India and only 400 of them are serious players. Brand building and getting established is expensive, but necessary.

Most Global 1,000 firms are only likely to work with the established brand players for BPO. Also, many large organisations look beyond India for their BPO, a requirement that only large vendors are able to support with near-shore, Eastern European and China/Asia-Pacific operations currently.

The high entry barrier applies for both voice-related activity as well as transaction based processing. In the case of transaction-based processing, any new player needs to make heavy investment in training people in having deep domain expertise in a particular segment. For a couple of years, it is expected that captives will continue to be the ones setting up new centres in the country.

May 23, 2007
Source: The Economic Times

IBM, Genpact, Infy in Citi’s BPO biz race

The first round of bids for Citi’s business process outsourcing operations — Citigroup Global Services (formerly known as e-Serve) — is likely to be completed this week. A host of global IT companies and also private equity firms are said to be in the initial race. However, Citi is likely to look at selling part of its operations only to a strategic partner, given the sensitivities involved in the deal. According to sources, IBM, Automatic Data Processing (ADP), Genpact, Infosys and private equity firms such as Blackstone and General Atlantic are in the race for Citi’s BPO business.

Citi is likely to follow the Genpact model, where it is likely to sell off over 50% stake in the BPO firm. It is likely to retain a part of the stake in the firm so that they can not only get the benefits in case of a future listing but would also handhold the firm. According to sources, one of the main reasons that the group is looking at bringing in a strategic partner is to bring down the overall costs and not monetising the stake.

Citi had delisted Citigroup Global services in 2004. Citi held 44.4% stake in the BPO company. It had accepted an exit price of Rs 975 per share while delisting the firm. At that price the company was valued at around Rs 1,200 crore. According to i-bankers the value of the company now would be at around $700 million.

Citi globally has been on a major cost cutting spree. It had recently announced that it would cut 17,000 jobs on the back of a restructuring plan that is targeting billions of dollars in cost savings over the next few years. It is also looking at moving out 9,500 jobs overseas and to smaller American cities. Citi’s BPO operations have over 9,000 employees with nearly 4,000 servicing its international businesses.

According to Forrester Research, nearly 60% of the captives in India are struggling due to spiralling costs, high attrition and lack of integration and management support. “Nearly, 10% of these struggling captive BPOs are most likely to sell off and go the outsourcing way,” a recent Forrester study says.

May 24, 2007
Source: The Economic Times