Financial Daily from THE HINDU group of publications
Friday, Jan 27, 2006
Financial Daily from THE HINDU group of publications Friday, Jan 27, 2006 |
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Outsourcing Info-Tech - Outsourcing BPO players in consolidation mode — Forrester details trend towards building up offshore-onshore capabilities Moumita Bakshi Chatterjee
New Delhi , Jan. 26 RECOGNISING the need for broader geographic footprint for enhanced client comfort, Indian offshore business process outsourcing (BPO) players, including TCS and Genpact, are going aggressive on initiatives including geographic expansion, acquisitions, outsourcing contracts, and partnerships to evolve into consolidated offshore-onshore players. "Offshore providers BPO services have benefited from their ability to start small and build relationships from the bottom up. In the context of finance and accounting, offshore BPO players can start with image capture and reconciliation, moving up the value chain toward more strategic offerings. However, offshore BPO players are recognising that without a broader geographic footprint, they face a `ceiling', above which their customers will not feel comfortable engaging with them," a latest report by global research firm Forrester has said. With perception of operational risk acting as one of the principal barriers to offshore BPO, the providers in many cases were being limited to relatively low-level BPO engagements where labour arbitrage became a key ingredient. Now as the limits to pure labour arbitrage became visible, these offshore providers are seeking a broader geographic footprint with which to offer higher levels of service with lower perceived risk. "Offshore BPO providers are expanding their capabilities in different geographies using a variety of mechanisms, including direct captive centres, partnerships, and outsourcing transactions," it said. "Many observers believe that alternative geographies represent a substantial threat to the Indian offshore suppliers, but they are moving aggressively toward mastery of these geographies themselves. This transition is well under way, with suppliers like Genpact having already established capability in China, Hungary, Mexico, and Romania. One principal driver is the need for greater language capability. While India is renowned for its strength in English, it is not as strong in languages such as Spanish or German," Forrester said. This has prompted Wipro's recently announced move into Romania, where European language skills are plentiful and where other suppliers, such as Genpact, are already present. Other suppliers such as Tata Consultancy Services (TCS) are also moving aggressively to expand their global reach, Forrester report noted. The recent outsourcing transactions and partnerships have been made with an eye toward the emerging joint offshore/nearshore value proposition, Forrester said citing the case of TCS establishing a new UK company with Pearl Group, which will be majority-owned by TCS. Similarly, in 2005, Genpact (formerly GECIS Global) announced a partnership with Liberata, similarly aimed at the UK insurance industry. Moreover, companies have embarked on acquisition as a strategy to extend their BPO capabilities. KPO specialist OfficeTiger acquired MortgageRamp from General Motors Acceptance Corporation to broaden its capabilities in the US mortgage processing market. TCS also acquired Comicrom, a BPO provider based in Santiago, Chile, which provides services to banks, insurance companies, pension funds, and other companies and government agencies. With this acquisition, TCS has expanded its capabilities in Latin America and has also furthered its platform-centric BPO strategy in banking. The report noted that the offshore BPO players were addressing their structural challenges. "With the desire for international presence growing, offshore suppliers are becoming more willing to transfer employees like the multinational suppliers have always done (and as TCS has done in the Pearl deal). This reverses a longs-tanding preference by offshore suppliers for hiring only their own employees," Forrester said.
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