Best of 2008 and Challenges for 2009

BPO industry leaders speak about the best things to have happened to outsourcing industry in 2008 and the main challenges for the new year 2009

Joel Perlman, President & Co-Founder, Copal Partners

Best 3 happenings in 2008

  1. 1. Strategic acquisitions by cash-rich companies to consolidate their positions in key markets. Several players capitalized on low-valuations to acquire new skills and client relationships, which we believe will strengthen their business models and deliver long-term value for stakeholders.

  2. KPOs gained wider acceptance in key markets which led to continued high-growth rates for focused players in niche segments like investment research, credit research, legal process outsourcing, etc.

  3. Emergence of rural BPOs (such as Sourcepilani) which extend the ‘cost-arbitrage’ proposition to an entirely new dimension.

Top 3 challenges in 2009

  1. Moving up the value chain will be a key element in sustaining and improving profitability. Commoditized services may face pricing pressures and stagnant volumes.

  2. Increasing productivity will become even more important in the face of pricing pressures and potential weakening of US Dollar

  3. Diversification to new markets will become important for companies in view of the slowdown in US and Europe. This will pose challenges – convincing a relatively new audience about viability of the concept, developing new language capabilities, etc.


Dr. Alok Aggarwal, Chairman & Co-founder, Evalueserve

Best 3 happenings in 2008

  1. 1. Attrition in the offshore outsourcing industry came down significantly and Indian employees became more realistic about their expectations and about their careers. The current expectations will be able to provide a more sustainable, long term growth for the Indian offshore-outsourcing industry.

  2. The euphoria about India's growth and India's potential reduced enormously and companies in the United States and elsewhere have started doing more due-diligence before opening a backend (i.e., offshore-outsourced) center in India. Earlier, it was common for large companies (especially banks and consulting companies) to "jump in the pool without looking" and try to essentially start 1,000+ employee centers pretty much on day one!

  3. Venture Capitalists and Private Equity groups have become much more cautious in investing in the Indian Outsourcing industry. In 2006 and 2007, many of them "jumped on the bandwagon" and "threw good money after bad." Now, not only have they have become better with respect to their own money, they are now also telling their portfolio companies to manage their costs better, become profitable more quickly, and not to rely on future funding. Indeed, because of this reason, many Lemmings and "Me Too" companies that started in 2005-2007 will probably die out or acquired at reasonable prices, which again, would be very good for this industry in the long run.

Top 3 challenges in 2009

  1. Especially during the first half of 2009, we are unlikely to see any substantive growth in this industry because the recession is likely to become deeper and broader (worldwide).

  2. The entire outsourcing industry will need to emphasize more on profit margins than on revenue. Because of credit crunch and because most outsourcing companies will not be able to raise money from VCs and PE groups, it will be a challenge for them to change their outlook overnight.

  3. Again, because of recession, the clients are more likely to negotiate hard about prices, and overall, the prices may come down by 5%. This would squeeze margins for the Indian outsourcing industry and would be in direct competition to point (b) mentioned earlier. In this regard, we believe that this challenge may be mitigated almost on its own especially if the Indian Rupee depreciates by another 6% to 8% (i.e., to a level of 53-54 Indian Rupees to one US Dollar), which is certainly possible since, in 2009, both foreign direct and indirect investment in India is likely to reduce significantly and the Non Resident Indians are likely to send significantly less money (probably 15% less remittance) home.

Nimish Soni, CEO - BPO Division, Cambridge Solution

Best 3 happenings in 2008

  1. 1. Due to economic slowdown the attrition rate has dropped. Suddenly the quality of talent that KPO’s are attracting has become much better. Prospective employees are realizing that the KPO career is far more stable/ secure than industries such as investment banking, real estate, retail, airlines, etc.

  2. The salary inflation is down to single digit – which is more sustainable over the long haul.

  3. The exit of the ‘captives’ – the inefficiencies of the captives finally pull them down. The captive model is now ‘dead’.

Top 3 challenges in 2009

  1. Economic downturn might put pressure on our ability to push up billing rates

  2. Severe swings (downward) of US & UK exchange rates – as these economies struggle in gargantuan debts (and recession), their currencies will be under pressure

  3. Consolidation of the industry in to a set of large players that can provide end-to-end and global delivery capabilities, with sound BCP/ DR capabilities and deep domain expertise

Rohan Dalal, MD Mindcrest

Best 3 happenings in 2008

  1. 1. 2008 has been a very positive year for the LPO industry. The demand for offshore legal services from corporate legal departments and law firms has significantly increased.

  2. 2. The economic downturn has created opportunities in certain types of legal services.

  3. The LPO space, although still relatively young, is regarded as an industry poised for tremendous growth in the years ahead.

Top 3 challenges in 2009

  1. While the growth story will continue in 2009, LPO firms will have to learn how to scale effectively in order to address market opportunities.

  2. They must do more to create a unique value proposition that is sustainable, transparent, driven by expertise and great client service.

  3. This is essential to building strong client partnerships for larger, more complex legal work.

Sandeep Aggarwal, EVP - Sales, Solutions, Transition, Intelenet Global Services

Best 3 happenings in 2008

  1. 1. Growth in the Domestic market: According to Pune-based research firm ValueNotes, the domestic BPO business is projected to employ 5.4 lakh people in the next four years.. As domestic BPO industry is capital intensive and plays a very important role in employment generation for various segments not just in metros but even in smaller cities and towns.

  2. Tier 2 and 3 cities gaining importance: As this sector brings low cost of operations, potential talent with regional language expertise, and lower employee attrition levels, many BPO companies have opened new operations in Tier 2 and 3 cities. Our domestic business subsidiary, Sparsh BPO Services recently partnered with Aircel to provide customer support services in Tamil Nadu and Chennai circles. We also opened a new delivery centre in Puducherry to service Aircel’s base of prepaid and postpaid cellular subscribers in the Tamil Nadu circle.

  3. New Trends: Newer processes and areas like KPO (Knowledge Process Outsourcing), LPO (Legal Process Outsourcing), EPO (Education Process Outsourcing) evolved over the period of time. The processes have also become more complex with areas like Engineering design, prototype development etc are also being outsourced. As the industry grows in size and scale, many firms are beginning to adopt a vertical based approach to cater to emerging market trends

Bhaskar Bagchi- Country Head, CPA India

Best things of 2008

  1. 1. The economic slow-down in the US and other economies motivated corporate legal departments and law firms to take a hard look at costs and efficiencies leading them to explore offshoring options.

  2. 2. Developments in the US financial market created additional legal work for Legal Support Services firms in India. This includes corporate governance, corporate compliance, contract drafting, legal analytics, litigation, due diligence work, risk assessments, research document drafting, bankruptcy, filing and processing. Apart from this, firms would also look at gaining assistance in internal and regulatory investigations.

  3. According to a survey conducted by law department consultant Rees Morrison and American Lawyer editor Aric Press, the US law departments will spend about US$ 2 billion on legal outsourcing by 2013. Further, it says, US corporate law departments will spend about 3 per cent of their budget on legal outsourcing, including the LPO.


Harshu Ghate, Head of Operations, KPIT Cummins Global Business Solutions

Best 3 happenings in 2008

  1. 1. Reinforcement of India’s leading position in the BPO industry

  2. 2. Trend towards off shoring high value added work such as Finance and Accounting, Analytics, LPO

  3. 3. Rise of several Indian companies as global players through global delivery centers as well global acquisitions and global listings

Top 3 challenges in 2009

  1. Currency fluctuations

  2. Pressures from customers to reduce price

  3. Delay in decisions for contracts under discussions

Sachdev Ramakrishna, Director - Marketing, Steria India

Best 3 happenings in 2008

  1. 1. In every crisis there is an opportunity. This depression consolidated and segregated the market into serious players and fly-by-night operators. The was more pressure on Indian vendors to reduce costs but that in turn brought about a pruning within the industry. Efficiency and economies became important and frills associated with the industry vanished.

  2. There was a tightening of the job market and attrition levels came down drastically. And the high increments of almost about 15%, which was making India uncompetitive in the global market, rationalized.

  3. Companies started to look at their assets very carefully. People took a relook at their business models and very expensive and overpriced M&A deals did not happen.

Top 3 challenges in 2009

  1. We saw events of a completely different size and magnitude that unfolded in 2008. If you look at the DOW Jones index, which is a great bellwether of the US economic scenario. Dow Jones in the 1929 depression fell about 40% but this time round it has taken a hit of almost 66%. And this has had a great domino effect on economies world over.

  2. Anything up for renewal may get delayed and there is the possibility of clients going shopping looking for better bargains.

  3. The industry will see 12-15% growth rates at least for the next 12-18 months. And to pick up after that is subject to how the economic crisis in the US is resolved by its new President.



Kaushal Mehta, Founder and Chairman, Motif, Inc.

Best 3 happenings in 2008

  1. 1. Women constituted 47% of entry level employees in 07-08 compared to 38% in 05-06. This is a tremendous evolution that will strengthen our social fabric.

  2. 2. The domestic BPO market got a boost with majors like Daksh, Genpact and others making inroads into the segment. This is required to make products and services for the Indian market globally competitive.

  3. The extension of STPI benefits for one year was a step in the right direction. Given the market conditions, we should expect this to be extended for another three to four years.

Top 3 challenges in 2009

  1. The decision to outsource may become slower due to the economic meltdown, though the quantum of work may not reduce overall.

  2. Clients will look for more value addition from BPO companies in terms of tools, process enhancements, etc. Companies who are not able to provide that value and who compete only on one time cost reduction will get impacted.

  3. The stronger dollar may help some Indian BPO companies but we must continue to innovate and streamline our cost structures to remain competitive in view of the increased global competition to India.

Amit Bhatia, Founder and CEO, Aspire India

Best 3 happenings in 2008

  1. 1. 15% growth despite a global meltdown

  2. 2. Consolidation in operations/ operating costs due slowdown (eg real estate, employee cost, attrition)

  3. 3. Dollar Appreciation (and some momentary respite)

Top 3 challenges in 2009

  1. Growth (especially rebuilding BFSI practice)

  2. Employee retention

  3. Increased security costs


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