The Hindu Business Line : BPOs likely to face more short-term pains

What lies ahead
Mr Raman Roy, CEO, Quatrro: There would be a lot of re-balancing of work at the company level and some vendors could lose business.
Mr Sandeep Aggarwal, Executive V-P, Intelenet Global: The volume of business would get impacted and there could be pricing pressure also.
Mr Glen Serrao, Engagement Manager, Zinnov Consulting: The US cos would want to rather increase their business than save some money by offshoring.
Mr Viswanath Rao, Executive V-P, HTMT Global: BPOs with exposure to the financial sector would get affected.

Shamik Paul

Bangalore, Oct. 5 The Indian BPO industry, hurt by a slowing business environment due to the sub-prime crisis in the US, expects further pain in the short-term due to the recent shotgun mergers of large US investment banks.The industry also expects pricing pressure and reduction in the volume of work in the near future. The last month saw the collapse of banks such as Lehman Brothers Holdings Inc, Merrill Lynch & Co and Wachovia Corp. The Indian IT and BPO industry gets about 30 to 40 per cent of its business from the BFSI sector.

Rebalancing of work

In the short-term, the situation would be very, very painful, said Mr Raman Roy, Chief Executive, Quatrro. “There would be a lot of re-balancing of work at the company level and some vendors could lose business,” he added. Mr Roy said companies such as Bank of America, which have their own captive centres in India, might offshore more work to the captives rather than to a third party vendor.

In such a situation, the vendor working for Merrill Lynch would lose business. Bank of America has agreed to buy Merrill Lynch. The meltdown will further extend the decision making cycle and delay new business proposals.

“People are nervous and there is anxiety in the environment,” said Mr Sandeep Aggarwal, Executive Vice-President, Sales, Solutions, Transition, Intelenet Global Services. He said because of shrinkage of business for some of the US banks, the volume of business for the BPO companies would get impacted. “In a situation like this, it is logical to have pricing pressure as well,” he added.

HTMT Global said BPOs with exposure to the financial sector would get affected. “The effect could amount to reduction in the number of seats, or there could be re-alignment in the areas of work,” said Mr Viswanath Rao, Executive Vice-President, Operations.On being asked how long the lean period would continue, Mr Raman Roy said, “It depends. We are in a continuum. It’s a mess in the US.” It is not a matter of weeks, but months and years, he added.

In the next one and a half years, the companies in the US would be more focused on growing their topline, said Mr Glen Serrao, Engagement Manager, Zinnov Consulting. They would concentrate on increasing their business rather than saving some money by offshoring, he added.

However, the Indian BPO industry expects offshoring to increase after the US companies have taken stock of the situation. Mr Roy said in the medium to long-term, countries such as India and Philippines would gain.

The weakening rupee would offset the slowdown in the business to an extent in the short-term, Mr Aggarwal said.