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Vendors find Indias BPO market attractive
June, 12th 2008

Firms are gravitating towards the country because of rapid growth in its domestic market, a strong rupee

The opportunities of business expansion in the domestic market have even made US-listed Indian firms such as Genpact Ltd and EXL Service Holdings Inc.that presently cater mainly to the US marketdevise aggressive strategies to enter and expand the presence in the country.

Genpactlisted on the New York Stock Exchangehas signed four customers among Indian financial services firms and banks in the past three months, its president and chief operating officer (CEO) Pramod Bhasin said.

Declining to spell out his firms local strategy, Bhasin said Genpact might scale up to 500-600 people by the end of this year from 20-odd now servicing these customers. It expects revenues to flow from the domestic market from the next quarter.

The Nasdaq-listed EXL Service, on the other hand, is scouting for local buyouts. We are looking for buyouts in the range of $50-100 million, said its president and CEO Rohit Kapoor, without elaborating. He, however, said the domestic market looks attractive because of its rapid growth and also as a natural hedge against volatile currencies. With competition increasing in established markets such as US and the UK, they (BPO firms) cannot afford to ignore emerging markets such as India and China, said Avinash Vashistha, CEO of Tholons Inc., an advisory firm. Indias domestic outsourcing market could emerge as significant as China, he said.

Demand for business process outsourcing, or BPO, services is rising in the country as domestic telecom, banking, aviation and hospitality companies, among others, try to differentiate themselves with sophisticated customer interactions.

The Indian BPO industry, which already employs 7,00,000, generated revenues worth $11 billion in the financial year to March, of which $1.5 billion came from the local market, according to software lobby group National Association of Software and Services Companies, or Nasscom.

A study by Nasscom and advisory firm Everest Group has projected a five-fold growth potential to $60 billion by 2012 for the Indian BPO sector.

The domestic market has already attracted local exporters such as Firstsource Solutions Ltd and HTMT Global Solutions Ltd as it hedges against currency volatility and uncertainties in the global market. Even the BPO arms of large IT exporters such as Infosys Technologies Ltd and Wipro Ltd are eyeing local openings to provide bundled offerings with IT services.

Genpacts Bhasin said International Business Machines Corp.s success in India prompted it to look seriously at the markets in India and China, where it has some 3,000 employees servicing customers in Japan. If IBM can do it in India, why cant we?

Bhasin denies that the current slowdown in the US market had forced the company to look at other markets. You cannot start a new business because of one event, he said.

Even global players such as Convergys Corp. are exploring options in Indias call centre business, and use revenue from local customers as a hedge against the weakening dollar. Convergys has one sixth of its global delivery staff located in India, where a strong rupee has seen the companys operational costs grow as much as 11-12% in the past one year.

While third-party vendors are eyeing opportunities in India, the captive unit of the Anil Dhirubhai Ambani Group, Reliance BPO Pvt. Ltd, is seeking business from the US, the worlds largest IT?market, while also planning to diversify locally. Reliance BPO currently serves it parent groups customers in telecom, insurance, mutual funds and energy businesses. We want to leverage our expertise to service customers in the US, especially in areas of telecom, financial services and utilities, said Rajnish Virmani, president and CEO of Reliance BPO. The company is also eyeing business from third party customers in India, he said.

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