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Vinson Kurian

THIRUVANANTHAPURAM, May 25

A NASSCOM research on joint ventures (JVs) in business process outsourcing (BPO) has affirmed that, by and large, a JV is the most widely adopted offshoring model in BPO.

According to a Nasscom spokesperson, the JV option in BPO is attractive from a customer's perspective because, although the customer has chosen to outsource its non-core functions and processes, they are quite often fundamental to the operational integrity of the organisation. Customers, therefore, feel that through their equity stake in the JV vehicle they can retain the necessary degree of control over the delivery of the outsourced services.

Until the BPO market matures and leading players are established, there are reasons why the JV option may make sense. The customer has something of real value to contribute (not just money) which the vendor needs in order to succeed in this space. This arguably gives the JV option in BPO a better chance for success than its predecessors in the IT outsourcing world.

Globally, it has been seen that customers looking to outsource commonly tend to adopt one of the following four models: outsource to BPO major with global brand, enter into joint venture/alliance with other customers or vendors, outsource to local best-of-breed vendor or offshore to captive subsidiary.

However, JVs have been found to meet with imponderables after having been formally put into operationIn the near term, BPO JVs are likely to appeal because the right market dynamics exist. It has been said that the main advantage of the BPO JV is being able to centralise business process capabilities and multiply the economies of scale of a shared service centre to provide new services to the market.

From a customer's point of view it is a relatively safe assumption that a customer, which has outsourced its non-core competency, is unlikely to want to remain in the business of delivering the related business process services in the long-term. Furthermore, it is an usual and natural dynamic that exists in customer and vendor JVs for the vendor to exert increasing influence over the JV over time. The customer, therefore, needs to take a more pragmatic view and treat the BPO JV as a transformation vehicle which provides the customer with an effective services solution and potential revenue stream in the short to medium term, but which eventually, at an appropriate time, allows the customer to `cash-out' and rely on a robust services agreement between itself and the JV entity.

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