The Hindu Business Line : BPO players likely to merge: Forrester<br>To take on growing threat from IBM, Accenture

INDIAN Business Process Outsourcing (BPO) suppliers with complementary skills are likely to battle head-to-head but subsequently combine forces through mergers and acquisitions to meet mounting competition from global players like Accenture and IBM, according to global research firm Forrester Research.

"After Indian BPO suppliers with complementary capabilities struggle head-to-head, they will likely seek to combine their strengths against the steadily mounting threats from Accenture, IBM, and other global players. High valuations for Indian BPO companies are slowing consolidation, but mergers between existing offshore BPO players, and transactions involving Indian offshore BPO players and global majors, are increasingly likely scenarios," a recent report by Forrester Research said.

During a recent visit to India, Forrester found that offshore Indian BPO market was seeking profitable and scalable business models with high `customer stickiness.' "As supplier attention turns to transaction-processing and knowledge processing opportunities, concerns abound about the health of the call centre industry, which is plagued by high attrition rates and concerns about commodity services. Amidst continuing growth, threat from other geographies and global services firms like IBM and Accenture is looming large," it said.

Elaborating on the market trends, it said limits of labour arbitrage were becoming apparent. In addition, the existing BPO units of leading offshore firms — including Wipro, Tata Consultancy Services and Infosys Technologies — were emphasising integrated solutions, combining their IT capabilities and domain expertise, while seeking to leverage their existing base of IT customers for BPO opportunities.

On the other hand, emerging BPO heavyweights like Genpact (formerly Gecis Global) and WNS Global Services lack broad-based IT capability; but are emphasising their growing scale in transaction processing, voice, and knowledge-processing services and enjoying the benefit of substantial work streams from their prior captive parents, it said. A number of knowledge-based specialist providers have also emerged, including OfficeTiger and Evaluserve.

The report sought to allay fears on competition from other geographies, saying, "truly competitive companies could take years to emerge from locations like China." More imminent is the threat from global majors like Accenture and IBM, who are not only expanding their Indian footprint substantially but also boast substantial presence globally, it added.

"The spectre of IBM and Accenture loom large. The significant increases in local Indian staff made by IBM and Accenture have not gone unnoticed by Indian BPO players, despite the fact that these global majors pose a very different competitive profile, preferring to sell comprehensive solutions from the top down as compared to the Indian BPO suppliers' tendency to sell from the bottom up. Indian BPO players are bracing for more direct competition as the global majors accede to customer demand for narrower, more focused BPO services," Forrester pointed out.

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