The business process outsourcing (BPO) industry in India is — to use that tired but apt cliché — at some sort of inflection point. The main market segments — verticals, in industry parlance — that provided much of growth for the BPO industry in the past decade have started slowing. A number of new verticals promising high growth have also cropped up, but to tap these, new skills have to be developed. Leadership positions have been taken in the industry, and there is some sort of consolidation taking place, leading to a lot of merger and acquisition activity. The M&A game has been accelerated by the fact that private equity players, who have a lot of stake in the bigger BPO firms, now are trying to exit their investments.
Meanwhile, there is a bit of a tussle going on between pure play BPO players — those who offer nothing but BPO services — and integrated IT-ITES players such as Wipro, Infosys or Cognizant, all of whom bundle BPO services along with normal IT services. The recession has also taken a toll on fresh business acquisition — closing a deal with a new client today takes almost twice as long as it did a few years ago.
Our cover story this issue on Genpact (page 40), and the companion piece on WNS (page 34), take a very close look at an industry in ferment. Genpact is the country’s biggest pure play BPO firm. The firm today dominates the segments it is in and has collected a pile of cash for acquisition purposes. CEO Pramod Bhasin’s big challenge currently is how to deploy the cash correctly and pick the most suitable acquisition targets to keep growing at the same pace that it is used to. Bhasin has tried to make a couple of big ticket acquisitions in the past, but both fizzled out at the penultimate stage. While Bhasin says that it is better to wait and pick the right target at the right price, he is acutely aware that time is ticking away.
WNS, the second biggest player, is facing its own set of challenges. Its founder-CEO has just left the company, and the private equity firm having the biggest chunk of the company is looking at exiting at some point. WNS can either try to follow the Genpact strategy — acquire a new firm to get into new markets and become even bigger. Or it can try to get taken over itself by another firm.
(This story was published in Businessworld Issue Dated 15-02-2010)