Buzz word - Recruitment Process Outsourcing - RPO

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

The profit margins in the BPO sector are expected to be under severe pressure due to the rising rupee. On the brighter side, reports from KPMG have reiterated the fact that insurance outsourcing is the next biggest opportunity for India in terms of outsourcing and offshoring. One more buzzword just got introduced in the industry this week: Recruitment Process Outsourcing (RPO). This could well be that billion dollar business which could save India from losing its edge in outsourcing to countries like Philippines, Vietnam, Kenya etc.

- Chillibreeze Business Research Team

Tricom acquires US firm for $2 mn

The acquisition was funded through internal accruals and finance from banks or other financial institutions. Tricom India expects to enter into a definitive agreement in the next two weeks, the company said in a filing to BSE. The acquisition enables Tricom to enhance the value chain in the Litigation Support Vertical by offering a full suite of both on-site and offshore engagement models and widen its market presence.

24 September 2007
Source: Economic Times

Citigroup PE in race for group BPO subsidiary

Private equity player Citigroup Venture Capital (CVC) is learnt to have entered the race for buying Citigroup’s BPO arm — Citigroup Global Services. Sources in the industry say BPO majors Genpact and WNS Holdings and PE firm CVC are the final three players who are interested in the transaction. While NYSE-listed Genpact is believed to be as the front-runner in the deal, CVC may benefit from being part of the Citigroup family.

While valuation was earlier learnt to be hovering around $750-800 million, sources say it has now come down to $600 million. The captive is expected to report revenues of about $200 million this year. This means a valuation of three times its revenues. Genpact, which got listed on the New York Stock Exchange in August, has a market cap of $2.98 billion. The country’s largest BPO reported revenues of $613 million in 2006 — this gives it a valuation of about four times its revenues.

The bidders are also looking for assured outsourcing work for a few years from Citigroup but so far there has not been no agreement on this. While selling a majority stake in its captive Genpact to General Atlantic and Oak Hill Partners for $500 million in 2005, GE had promised six years of business to the BPO.

Another potential bidder, Mumbai-based Firstsource Solutions, is learnt to have moved out of the race after its $300-million acquisition of US-based MedAssist recently.

The sale process for the captive was initiated in June and is learnt to be nearing the last leg. Citigroup is expected to retain around 20% in the BPO, which was earlier known as e-Serve International, and the management control of the firm will be with the new investor. It’s expected that the buyer would offer cash and stocks in its company to Citigroup.

24 September 2007
Source: Economic Times

RPO is BPO's new billion-dollar-baby

High attrition rates may be a blot on the great Indian BPO success story, but this problem has helped spin off a niche industry - Recruitment Process Outsourcing (RPO) - which is expected to grow by a billion dollar this fiscal to about $3.5 billion. The industry is set for rapid growth with a large number of companies in India and from abroad seeking to outsource their hiring-related jobs to third-party vendors here in order to save costs as well as time. This new buzzword is already enjoying taste of success with a number of corporate giants adopting the RPO model for their hiring needs inside and outside India. Closer home in India, the BPO arm of the country’s third largest IT firm Wipro has outsourced its recruitment process to MeritTrac and aims to reduce its hiring costs by 15-20 per cent by this move.

Hiring process
Besides saving costs and reducing cycle time, RPOs also help companies improve quality of hiring, industry players believe. While companies had reservations initially about outsourcing their recruitment process, rising attrition rates and expanding sphere of overall HR functions have made them accept and welcome borrowed hands to handle the hiring process. All that a firm seeking to outsource its hiring functions needs to do is to provide an RPO with the details of job openings and the salary range in the offering.

From here the RPO takes over, advertising for the position, screening resumes, shortlisting candidates and finally going to the employers with the right professionals. The openings can range from a fresher to a very senior employee of a company.

24 September 2007
Source: Deccan Herald

Four Indian-American makes it to Forbes list

Four Indian Americans -- Acoustics pioneer Amar Bose, Google founder director Kavitark Shriram, venture capitalist Vinod Khosla and Bharat Desai CEO of an info-tech outsourcing firm -- have made it to the Forbes list of richest Americans. NRI Bharat Desai and his wife Neerja Sethi, founders of an info-tech outsourcing firm Syntel, have been ranked 286th with a fortune of USD1.7 billion in the list. The 54-year-old Desai, who was born in Kenya but moved to India at the age of 11, studied engineering at Indian Institute of Technology, took programming job in US at Tata Consultancy Services in 1976. Desai earned MBA from University of Michigan and founded info-tech outsourcing firm Syntel with his wife Neerja Sethi, while in school. The price of admission to America's most exclusive club is now USD1.3 billion, instead of a billion. There are a record 313 billionaires in the country, up from 262 last year, says Forbes magazine.

23 September 2007
Source: The Hindu

Indian offshoring strong in insurance outsourcing

The Indian insurance offshoring sector is expected to get a fillip in revenues and job opportunities in three years, according to a recent KPMG study. The latest edition of its publication KPMG foresees revenues from offshore insurance BPO (business process outsourcing) services in India to rise to about $2 billion by 2010, from the current $790 million. Employment in the Indian insurance offshoring sector is also expected to more than double, from 41,600 to around a lakh over the same period.

To cash in on the growth potential, several niche providers with relevant expertise are encouraging insurance companies to outsource more value-added services. The study identifies several key drivers of insurance offshoring, apart from cost saving, such as: focus on core processes, speed to market, technology risk, better quality through specialized services, insurance regulation and statutory documentation in the US, deregulation of insurance markets, health maintenance organizations moving their processes offshore, availability of credible service providers, minimizing risk through multiple delivery locations and resolving inquiries without handing off the caller to other administrators. However, on the flip side, cultural differences, perception of loss of control and local data protection and regulation can inhibit insurance companies from offshoring, fears the study.

21 September 2007
Source: The Hindu

Rising Rupee will maul IT margins

The profit margins of technology and BPO firms will be under severe pressure with the rupee hitting the nine-year high it did on Thursday. The rupee scenario has already been sending shivers down the spine of the industry over the past couple of quarters. The latest rise is expected to do further damage to margins, said market observers.

Most tech/BPO companies are seen not to have factored in a currency risk of this magnitude. There is no single antidote to fix the problem. Religiously following a range of hedging activities is seen to be important. But more critically, efforts are likely to be made in terms of decreasing the bench size, enhancing utilization, improving productivity, spreading the geographical mix, reworking on billing rates, and exploring low-cost resources like freshers. Analysts say companies will also need to include a currency risk clause in contracts, encourage indexing prices rather than follow a fixed-price regime, reduce delivery costs, expand to low cost locations and increasingly move towards less risk-based managed services.

21 September 2007
Source: The Times of India

Security outsourcing on the rise

As companies get more comfortable with outsiders managing security, the amount of security services being outsourced is growing steadily As one of the world's largest outsourcing providers, Wipro Technologies is ramping up its security services business in a big way.

While the massive Indian company has had a security practice in place since 1998, Wipro officials say that the group has seen dramatic expansion over the last several years as customers gradually warm to the idea of offloading IT systems protection to external specialists.

With five individual areas of business, nearly 1500 workers, 170 customers, and a claimed internal growth rate of 100 percent per year, the Bangalore-based outsourcer contends that the time for security outsourcing take off has already arrived.

By expanding its footprint slowly within customers over time, a top executive in Wipro contends that any negative perceptions of security outsourcing are being rapidly conquered.

20 September 2007
Source: www.infoworld.com

Indian embassy to outsource visa services

The Indian Embassy in the US has contracted an American firm to outsource its visa collection and delivery processes at its five diplomatic missions from October 1. Indian Ambassador Ronen Sen said the new system will offer "speedy and efficient" service against the backdrop of a growing number of Americans travelling to India.

Travisa Outsourcing Inc will handle the outsourcing service for the embassy in the capital and the Consuls General in Chicago, Houston, New York and San Fransisco.Sen said the outsourcing was necessary due to rapid transformation of India-US relations in recent years which has "manifested in an unprecedented growth of business travelers, tourists and other US residents to India and the introduction of several non-stop and additional travel services between the two countries".

September 19 2007
Source: The Hindu

Growing pains dim India's outsourcing edge

Indian outsourcing companies are shifting some of their operations to China, the Philippines, Vietnam and Kenya in a bid to stay competitive as higher wages, expensive property prices and a rising rupee eat into profits. Back-office services companies thrive on doing jobs such as taking customer calls, payroll management and accounting at a fraction of the cost for big multinational firms or governments. But costs in India are climbing on the back of a robust economy that has lured skilled workers to other sectors, forcing companies to look elsewhere to stay in business.

The Bangalore-based back-office services provider used to generate all its revenue from India by providing services to its clients in the United States. But India now accounts for little over half the total and rapid expansion in the Philippines and Mauritius has helped it offset the impact of a stronger rupee. It plans to enter China and Vietnam soon.

India's share in the global back-office services pie will drop to 50 percent in the next 3-5 years from about 60 percent now, according to U.S.-based Tholons Inc, which offers management consultancy for offshoring.

18 September 2007
Source: Financial Express

Opening the floodgates in India

India witnessed heightened deal activity in the first half of 2007 with the value of M&A transactions crossing $55 billion, spread over 550 deals, far exceeding the total deal value recorded for all of 2006. Notable amongst deals during the period were the sharp acceleration in outbound activity by Indian corporates, and significant growth in private equity investments in the country.

Paradigm shift

This has broken the myth that Indian businesses are all about IT and outsourcing, as most of the outbound M&As were by companies belonging to the ‘traditional old economy sectors.’ Sectors such as energy, oil & gas, steel, cement, aluminum and other metals accounted for over 50 per cent of the total deal value compared to just 20-25 per cent of deal value a couple of years back. This is reflective of the fact that Indian companies in these sectors are looking to be competitive globally.

18 September 2007
Source: www.infoworld.com