The Hindu Business Line : Global BPO contracts begin on weak note in first quarter

Chennai May 30 There are signs of the global BPO (business process outsourcing) flattening with fewer contracts awarded in the first quarter of this calendar year, according to a global index done in April by Technology Partners International (TPI), a research firm.

In the first quarter, 20 BPO contracts worth $2.8 billion were awarded compared with around over 60 deals worth $7.7 billion during January 2006 quarter. January 2007 quarter saw the lowest number of contracts signed since January 2003 quarter and the lowest total contract value signed since third quarter of 2002. Client hesitancy to adopt BPO strategies continues to affect the global market, according to a TPI global index.

"Contrary to the very strong first quarter of 2006, we are starting 2007 with what is relatively weak first quarter. However, despite the slow start, the annualised revenue should increase modestly in 2007," the index said.

Most leading service providers are maintaining their relative share in a weaker market. The global six service providers, including IBM, had a 46.6 per cent market share of the total deal, India-based service providers 4.6 per cent, big five from Europe 13 per cent, and others had 34 per cent, the index said.

Mr Indraneel Banerjee, Project Director, TPI, addressing a seminar on `The Changing BPO Landscape: Can India Become a Knowledge Services Hub?' said that the first phase of outsourcing, which was cost-based, was over. Clients today sign up deals based on innovation that will take their business to the next level and to new markets. The Nasscom Chairman, Mr Lakshmi Narayanan, said that two models — customer driven and competency driven — are prevalent in the BPO industry. In customer driven model, the clients ask the service providers to work on a particular project or solution. In this model, the clients drive greater level of innovation.

However, in the competency led model, the service providers take the solutions to the clients based on the data available. Clients want service providers to innovate solutions for them, he said.

Quoting Infosys' 2006-07 annual report, Mr Narayanan said it saved a huge amount for a telecom client through data analysis.

The report said that data analysis alone saves $60 million for a telecom company. Telecom companies often undertake revenue assurance initiatives to identify revenue leakage.

One of Infosys' telecom clients has gone a step further. The company captured $60 million in revenue leakage by investing in information stewardship and analysis. To prevent future revenue leakage, Infosys created a dedicated team to continuously cleanse data, analyse billing and provisioning, and reconcile revenue. This team is based in India to minimise the cost.

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