BPO sector blues: Growth declines from 40% to 15% – Financial Chronicle
SOURCE: Financial Chronicle
DATE: March 16th, 2009
Mohit Soapbox:
The #’s going down from 40% to 15% do look fairly steep and no one would have projected a steep fall vs a gradual decline as the industry matures. Nevertheless number of the Indian firms are learning to accept the reality of the slowdown in growth and the larger ones are working to meet these lowered down expectations with their employees and analyst community. Another factor in addition to the slowdown is the rate slide which is now expected by a number of clients with their existing vendors. Companies are getting the vendors back to the drawing table and asking them to reduce pricing structures to deal with limited budgets of their own. We see a number of firms out in the market continuing to evaluate and explore opportunities to outsource but are not willing to pull the trigger on the execution. Well looks like the industry has to learn to grow up in a hurry and manage the new realities in the marketplace. A number of smaller players have been unprepared or unwilling to believe that the slowdown will affect them so quickly and drastically and these are the players who may not survive.
Corrystone Global Partners is an outsourcing consulting firm providing benchmarking, operational risk compliance, operational audit and transition management services to companies with operations in US and India. We work with firms which are exploring India or low cost US locations for IT, Business Process work and or have established IT/operations in India and US and are looking at ways to further optimize cost and manage operational risk.
ARTICLE
The Indian business process outsourcing (BPO) sector has hit a rough patch this quarter with business growth sliding from 40 per cent to around 15 per cent. The BFSI vertical, which contributes nearly one-third of the revenues in most BPO firms, has not responded as expected since the commencement of the slowdown, bringing down the industry a notch or two.
Several BPO companies have revised or lowered their growth forecast for the coming months. For instance, Genpact said it expected calendar year 2009 revenue growth of 10-15 per cent, down from 26 per cent in 2008; EXLService anticipated growth between 5-8 per cent for 2009 from last year’s 19.5 per cent, while Firstsource revised its business forecast to 21 per cent in dollar terms.
Quattro BPO chairman Raman Roy said the industry had been witnessing muted growth. “The industry was growing at a rate of 40 per cent till last year, but the slowdown has ensured that growth has fallen to around 15 per cent,” he said.
Another worrying aspect is that no new deals seem to be getting sewn up. “Most BPOs have not been been able to sign new customers in the past few months,” said Raman Roy.
Founder of Bangalore-based BPO firm 24/7 Customer S Nagarajan said business volumes in the industry had tumbled by over 25-30 per cent and recovery was nowhere in the vicinity. “We have experienced unprecedented slowdown. And we are yet to see if the US President’s anti-outsourcing stand will create further damage. No one is looking at a growth rate of more than 15-20 per cent,” he said. “This is largely because the BFSI vertical has not recovered after the Wall Street crisis.”
Ganesh Natarajan, chairman, Nasscom and global CEO, Zensar Technologies, said that the global markets reeling under slowdown had an impact on the IT-BPO industry. “In the next 12 months, the industry is likely to witness slow growth. The dependence on the BFSI vertical has its impact on the companies. The growth is likely to pick up with the revival of the global markets,” Natarajan said. Harit Shah, IT analyst from Angel Broking said that there was a possibility of further contraction of business in the sector. According to him, while BPO work was core and couldn’t be done away with, there was significant impact on services catering to segments such as BFSI, financial services and capital markets.
Genpact’s CEO Pramod Bhasin had recently said the industry’s growth rate would drop by half in the recession as customers curb spending on technology and software services. Anup Gupta, COO of WNS Global Services said, “We believe, as the global economy faces challenges, clients see BPO as a survival tool. While there will be longer sales cycles, it is clear that the BPO industry is highly under penetrated.’’
No relate
You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
