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Vishwanath Kulkarni

BPO firms may have near-term problems, says Forrester

Bangalore March 22 Tremors of the US mortgage meltdown is beginning to impact the Indian IT and BPO industry.

Technology vendors are bearing the heat of the meltdown. Business process outsourcing firms offering mortgage-processing services have turned cautious and are closely monitoring the situation.

"I think in the near-term the problems in the sub-prime market will hurt the Indian BPO players," said Mr John McCarthy, Vice-President at Forrester Research. "Many of the firms that have made the transition to transaction processing from call centre work have mortgage processing clients in the sub-prime market. As a result, as the sub-prime firms go into bankruptcy the contracts they have may be cancelled," Mr McCarthy said.

Vendors like Tavant Technologies, which sells its mortgage platform and develops applications around it are the worst affected. Tavant's largest client Ameriquest Mortgage Company downsized its operations.

"Revenues from Ameriquest are affected," said Mr Sarvesh Mahesh, CEO, Tavant Technologies. "Ameriquest will not be our largest client next year," he added. Ameriquest accounts for close to one-fourth of privately held Tavant's revenues.

BPO firms WNS, FirstsourcE, Equinox and iGATE Global among others maintained that they remained unaffected. "There is no direct impact on us, we are watching what's happening in the US," said Mr Mohan Sekhar, Chief Delivery Officer, iGATE Global Solutions Ltd.

Showing optimism

Instead vendors showed optimism. "There is no let-up in the number of prospects. We are in talks with about three to four clients for new deals," Mr Mohan Sekhar said. "If one correlates the developments of 2001, when offshoring/outsourcing picked up about three to four months after the economic slowdown had set in the US, one could now anticipate a similar situation. This crisis could probably lead to increased outsourcing going forward as mortgage firms would look to cut loan-origination costs," Mr Mohan Sekhar said.

Echoing similar views, Mr McCarthy said, "In the long-term, the surviving firms will look to cut costs and offshore BPO is the logical place to look for help. So it could drive more BPO business when the dust settles in 12-18 months."

Mr Don Ganguly, CEO of Equinox, the BPO outfit of i-flex, said while the market conditions were likely to get tougher, from an outsourcing stand point things are likely to be better as the focus is going to be on costs going forward. "Equinox, which also offers services on the collection side of the business, has seen some increase in both outbound and inbound calls," he said.

More Stories on : Housing Finance | Outsourcing

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