Ongoing and expected future development trends

The most notable ongoing development trends in the Indian IT and BPO service sectors are the move towards ‘total solutions’, intensified marketing of BPO services in Continental Europe, investments in better transition and process management, continuing growth and restructuring in the domestic ITES/BPO market, and the development of more localised content and software for the domestic market.

Move towards total solutions

Key trends in the market indicate a steady movement towards comprehensive service offerings. Many companies in India and abroad are looking forward to having more tangible and measurable benefits from their IT-spends. In addition, rather than purchasing piecemeal solutions from various IT vendors, an increasing number of companies prefer to purchase complete solutions from capable service providers. As a result, all major Indian IT service providers have been expanding and developing their service portfolios with a view to offering one-stop-shopping opportunities for their present and prospective customers. It remains to be seen whether this trend also translates into a greater reliance on partners. At least for the time being, the major IT companies in India have preferred to source their projects from inside the company.

Marketing of BPO services in Continental Europe

Europe can offer great opportunities for BPO service providers, as the market is currently mostly untapped. Traditionally, Indian BPO companies have found it difficult to enter the Continental European (i.e. non-English speaking) market because of obvious reasons: different languages as well as many socio-political reasons (e.g. greater resistance to free trade and competition than in the Anglo-American culture). To circumvent this challenge, the current focus has been on exploring new possibilities in language-independent and knowledge-intensive services, e.g. in business analytics. Some of the Indian BPO companies have opted for the ‘near-shore’ delivery model to cater for the European market, thus following the example of the major Indian IT service companies. For example, HCL Technologies has set up BPO units in Ireland to cover the UK and Continental European markets with the requisite language skills. Similar centres are planned to be established in the Eastern European countries in the coming years. With the integration of Romania and Bulgaria into the extended EU family, further possibilities for near shore operations are opening up. In addition, some Indian players are facilitating knowledge transfer by relocating expatriates to their locations in India.

Investments in transition and process management

A typical offshoring project takes about three months. Simpler processes take less time, while complex ones require much more. The most critical aspect of migration is knowledge transfer, which can take up to two-thirds of the total time. In the case of a complex process, knowledge transfer is often takes 19–20 weeks (BPO Industry Report 2006). KPO processes like data analysis and modelling or health claims adjudication would take longer to migrate because of the underlying complexities. Most of the leading ITES/BPO organisations are currently employing dedicated teams with process management expertise (e.g. 6-sigma) to create operational service level agreements (SLAs) with their customers. SLAs also form the basis for value-based pricing − an area that is receiving an increasing amount of attention among the leading IT and ITES/BPO service providers.

Growth and restructuring in the domestic ITES/BPO market

The domestic ITES/BPO market is currently in an adoption mode and, owing to the current low levels of penetration, the market is expected to continue its steep growth. Pantaloons, the retail chain, and Pizza Hut are quite positive about telemarketing opportunities and are actively scouting for staff in this area. Bharti Airtel has recently signed up four international BPO companies for five years to manage call centre operations. The deal was worth Rs. 1000 Crore (around EUR 175 million). Indian Railways is also considering building call centres across the country that would handle

inbound calls to its single 3-digit number (139). These initiatives indicate that there is a greater awareness and willingness to adopt ITES among Indian companies. While customer care is still expected to remain the largest segment, some companies are expected to move towards outsourcing a wider range of services in the coming years. There will be shift from captive BPO units (providing services mostly for their own parent companies) towards third-party BPO entities. The emergence of GE from a captive BPO unit into GENPACT, a large third-party BPO service provider, Sequoia Capital’s investment of USD 22 million in 24/7 Customer, and Warburg Pincus’ investment in WNS are indicators of recent market shifts. Venture capitalists, private equity funds and larger Indian corporations will play a leading role in the shaping of the mergers and acquisitions in this industry. Already some of the prominent private equity funds have played an important role in leveraged buyouts of US-based operations on behalf of smaller Indian companies.

More localised content and software for the domestic market

To encourage IT usage among customers and to improve penetration in the market, software majors are planning to bring in localised and lower-priced versions of their products. Some of these majors are also working with domestic companies to offer solutions in local languages. The same development trend is visible in telecoms and online media (see Chapter 4 for more details).