India’s share of the EPO market is set to go up

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

The Indian Outsourcing industry is certainly moving up the value chain. Teleradiology is the current buzzword, and by all accounts a win-win for everyone concerned. Even as some studies predict a slowing down of the growth rate for global BPO business, India’s share of the EPO market is set to go up.

- Chillibreeze Business Research Team

Teleradiology outsourcing... the new buzzword

The estimated market potential for outsourced teleradiology services is about half-a-billion dollars worldwide, according to a senior official of Wipro Technologies. "Indian solution providers have not yet managed more than one per cent of this growing market," he said.

Companies like Teleradiology Solutions and Wipro Technologies have been early movers in providing `night hawking' services, a term used as description of overnight teleradiology services, by taking advantage of time zone differences. Diagnostic companies such as Metropolis, Wellspring and others are readying themselves to grab a share of this large pie.

An aging population coupled with the shortage of trained radiologists during night hours have ensured that the US, UK and Singapore are traditional customers, accounting for 90% of the business. Demand in the US is especially high as there are about 6,000 hospitals there, which average 10-15 scans a night.

A C takes 21 days to submit a MRI scan report in the UK, said Dr Maheshwari. As India has over 4,650 trained radiologists, Indian nighthawk companies are able to offer reports in 20-30 minutes in case of emergency.

Added to it is the cost advantage. "Depending on training and experience, we pay our radiologists between Rs 8 lakh-Rs 30 lakh annually," said the Wipro official. This is double of what a radiologist working in an Indian hospital makes. On an average an US radiologist earns about $5,00,000 (about Rs 2 crore) a year.

Global acceptance of outsourcing has brought about a major change in this business in the last couple of years. "We have been seeing expressions of interest from the Netherlands, France and other European countries as they have realised that we have a stringent quality benchmark," said Dr Maheshwari.

Specialists say that this is because Indian radiologists have a reputation for maintaining 99.8 per cent accuracy.

June 01, 2007
Source: Hindu Businesline

EPO to keep the Indian BPO story rolling

"The estimated demand for engineering process outsourcing to India has grown at 30-35 per cent since 2004-06," said the study released here by Commerce Minister Kamal Nath, adding the momentum would be sustained in the ensuing years.

The global EPO market, on the other hand, will grow to around USD 110-USD 140 billion by 2015, taking India's share to 20-27 percent, said the study conducted by the state-run Engineering Export Promotion Council (EEPC).

June 01, 2007
Source: Economic Times

Global BPO biz may slow to 2 percent growth

Global business process outsourcing sector is likely to see only a modest growth of 2% in 2007, after growing at a compounded annual rate of 14% during the last five years, going by some of the recent indicators, according to a senior industry observer.

Mr Indraneel Banerjee, project director, Technology Partners International, a sourcing advisory firm, said the first quarter of 2007 saw the lowest number of contracts signed since the first quarter of 2003. The contract value was also the lowest since the third quarter of 2002.

There was also a shift away from large multi-process BPO agreements to single function contracts of a smaller size, he said. He was speaking at a seminar “The Changing BPO Landscape: Can India become a knowledge services hub?” organised by Nasscom on Wednesday in Chennai.

Mr Lakshmi Narayanan, chairman, Nasscom, and vice-chairman, Cognizant Technology Solutions said that BPOs often moved up the value-chain driven by demand from customers, and they build the capabilities to service those demands. BPOs also move up the value-chain by proactively coming up with solutions.

In a customer-driven model, pricing is usually based on (full time employees) dedicated to the project. In the competence-driven model, BPOs had a greater flexibility in pricing. Here, pricing could be based on the value added to the business, he said.

Speakers at the seminar contended that though the KPOs offer immense potential for India in the out-sourcing industry, this innovation-driven model would require a high degree of investment in domain and process capability and also employees with specialised skill-sets.

Also, the pricing model would move from being resource-based to value-based. The KPO sector also faces challenges like security, innovation and attrition. Security was especially a matter for concern among players in healthcare and the legal outsourcing arena.

May 31, 2007
Source: Economic Times

Mumbai firm to train Chinese staff on BPO ops

First, it was the software companies; now, it is the turn of BPOs to set up shop in China. Effort BPO, based in Mumbai, has been roped in by Asia Star, a private Chinese telecom services company, and Triple Three, the investment arm of Hong Kong-based export company Mulitex, to set up domestic BPO operations in Shanghai.

Effort will partner with Asia Star and Triple Three to set up a 1,000-seater BPO operation catering to domestic companies in China. The yet-to-be named new venture would see an initial investment of $ 1 million, with another $ 6 million to be invested in the company over the next two years, according Gene Chu, CEO, Asia Star. Effort will hold 51% equity in the venture while Asia Star and Triple Three will hold 24% and 25% respectively.

“China lacks trained manpower for telemarketing. Call centres and BPOs are really the missing link in the value chain for the growing service industry in the country; hence, with this new entity, we would look to have a first-mover advantage in the space in China,” Mr Chu added. Effort will train the Chinese speaking staff in the newly-formed BPO on running operations.

Effort’s clients include HSBC, Reliance Telecom and Tata Indicom. In India, the firm has operations in Mumbai, Indore, Delhi and Pune with about 2,000 employees.

May 31, 2007
Source: Economic Times

IT township model could end urban woes

The government is drawing a framework for IT towns, on the lines of the petroleum, chemical and petrochemical investment regions approved by the Cabinet recently. The lure of these proposed townships would not be tax sops per se (although each township could consist of tax-free SEZs) but the huge cost benefit and business facilitation, which modern urban infrastructure created out of state and private funds would offer. Between them, the Centre and respective state governments would play a major role in setting up these townships called IT investment regions (ITIRs).

Each ITIR is envisaged to have a minimum area of 20-sq km, with at least 40% of that designated for processing. In short, the types of units located in an ITIR could be a combination of IT and ITeS units, electronic hardware manufacturing units, public utilities, logistics, environmental protection unit and residential areas and administrative services blocks. The region could include one or more SEZs, industrial parks etc. ITIR developer could be the government, private entity or a PPP, transparently selected by states. There would be institutional mechanisms to implement and run these township projects.

According to the draft model prepared by the IT ministry, the Centre would provide external physical infrastructure linkages to ITIRs such as national highways, railways including mass rapid transport systems, airports and state-of-the art telecom. On its part, states would play the “lead role” in the setting up of the investment region—it would identify the site, prepare a proposal, seek approval and make available out of its own resources or means local infrastructure like good quality power, bulk water supply, smaller roads, sewage, effluent treatment plants etc, as well as facilities for health and education and other social infrastructure.

As per the IT ministry, the country would benefit from this plan in myriad ways. ITIRs would play a major role in urbanisation of the country and, that too, in an even manner. It would curb concentration of population in large cities, which causes congestion, high cost and virtual denial of the even bare minimum amenities to large sections of population. Further, high-tech industries could reduce costs, in turn reducing their dependence on tax sops and enhancing their global competitiveness.

The proposed townships would encourage private investment in urban infrastructure by way of assured market and complement the concessions such as viability gap funding offered under PPP policy. Even for the government, the model would be an additional incentive to invest in infrastructure. These townships would go a long away in collecting the missing links in India’s manufacturing industry like electronic hardware.

May 31, 2007
Source: Economic Times

Wipro, Airtel, BoI grab 'Oscars of Outsourcing'

India's prowess in the BPO space continues to win accolades at the global arena with three Indian companies - Wipro, Bharti Airtel and Bank of India - bagging The Outsourcing Excellence Awards, dubbed as 'Oscars of Outsourcing'.

The awards, presented by the online community Outsourcing Center, are given for the world's best outsourcing arrangements. Wipro-Nortel Networks, Bank of India-Hewlett Packard and Bharti Airtel-Nortel Networks combine are among the nine winners for this year, US-based consultancy firm Everest Group said in a statement on Tuesday. The Everest Group and US-based business magazine Forbes are sponsors of the awards, which would be presented in New York in August.

While Wipro-Nortel have been awarded the "Best Offshore" award for their 15-year old partnership, BoI-HP won the 'Best IT Infrastructure' award for implementing a core banking solution a year ahead of the schedule and Bharti-Nortel combine have been recognised for as the "Best First Steps" award for best practices in outsourcing, the statement said.

Other award winners include Best Partnership (Old Mutual Financial Network and Perot Systems), Best EU (Thomas Cook and Accenture) and Best BPO (Illinois State Toll Highway and ACS), the statement added

May 29, 2007
Source: Economic Times

Avaya reportedly in talks to be sold

Telecommunications equipment maker Avaya is in talks with private equity and strategic bidders about selling all or part of the company, according to a report by The Wall Street Journal.

Avaya, which has a market capitalization of more than $6.1 billion, is in talks with private equity firm Silver Lake Partners about a leveraged buyout, according to the report.

Avaya also has held recent talks with rival Nortel Networks about a possible deal, but the two sides failed to agree on a price or on whether Nortel would use cash or stock to fund the deal, according to the report. Avaya and Nortel are still in contact, however, and a deal could materialize, the newspaper said.

Avaya could not be immediately reached for comment. Nortel and Silver Lake declined to comment.

May 29, 2007
Source: Economic Times

Attrition, property prices to impact BPOs

The growth of India's BPO industry is likely to get adversely impacted due to high attrition rate and unprecedented hike in property prices, industry body ASSOCHAM said on Monday.

"High attrition rate of around 40 per cent and almost 100 per cent hike in property prices in metros, BPO firms might have to satisfy at 25 per cent growth rate in next two-three years as against the projected rate of 35 per cent," the chamber said.

High attrition rate experienced by 60 per cent of BPO units are because of higher salary expectations, a study on 'Rising property prices and high attrition in outsourcing industry' showed. Over 80% of the respondent BPO companies felt their attrition rates would rise over 40% in future, whereas the remaining 20% were optimistic that it will drop down and should stabilise between 20-25%.

"The impact of attrition would be increase in expenditure of training and development, loss of clientele, failure to attract more business based on high output, inconsistent delivery and loss of productivity, high turnaround time, costly recruitment process which would create a dearth of 300,000 professionals by 2009," Assocham President Venugopal Dhoot said in the statement.

Following the sealing drive, the property rates in the capital and its suburb has gone up. During the last six months, the rentals have increased by 20-30% in Delhi. About 80% of the BPO companies believe that the property prices have grown by nearly 100% in the last decade.

May 28, 2007
Source: Economic Times