| Counting on the Domestic BPO Market |
| Wednesday, 05 November 2008 | |||||||||||||
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While the offshore (international) BPO market faces pressures with economy-wide slowdown in developed markets, the domestic BPO market is getting ready to take off. The total market being catered to by third-party players is estimated at Rs. 18 b for FY08 and is expected to reach Rs. 77 b by FY12. Several service providers including Aegis BPO, Intelenet, etc are aggressively ramping up their headcount. While the existing vendors have aggressive growth plans, several large international BPOs have forayed into the domestic market. Currently, the international BPOs earn a large share of their revenues from the US market. However, with the slowdown in the US economy, BPOs are looking at alternate geographies like Europe, Australia and Asia Pacific (specifically India). Some of the recent entrants in the domestic BPO market are listed in the exhibit below.
Exhibit: Recent entrants
Over time, we expect several other international BPOs to enter and capture a larger share of the domestic BPO market. This is a positive trend for the domestic BPO industry which will see not only growth in manpower numbers but also increase in the number of contracts (and larger deals) from clients. Build scale through acquisitions Serco group plans to acquire InfoVision for Rs 2,500 m. UK-based Serco Group is in discussions to acquire InfoVision, which offers customer care and finance and accounting services to the domestic BPO market in India. The deal is expected to lie in the range of Rs 2,000 m- Rs 2,500 m. With this acquisition, Serco plans to build a stronger position in the domestic market in India. In the report "Opportunities in the Indian Domestic BPO Market" published on July 2008, ValueNotes had profiled InfoVision and identified the company as a frontrunner in the domestic BPO market. InfoVision was one of the early pioneers in the domestic BPO market. Other early entrants in the market were Andromeda, Magus, Kankei and Customer First (later acquired by Aegis BPO). These companies have built their businesses gradually over the past three years. Today, the maturity of existing vendors has increased significantly and new, international BPOs have entered the domestic market. We believe this will facilitate more outsourcing. Many domestic focused players are dependent on a few large clients or an industry vertical. Further, these have been developed over a fairly long time and have strong embedded client relationships. Moreover, additional business is expected from similar clients. As a result, we believe that acquisitions will be the most desired option for quick entry and scale. The number of prospective acquirees is also expected to stay buoyant with numerous mid-sized BPOs that may be unable to scale on their own. Small BPOs having centers in Tier II or Tier III cities with vertical specific products and strong client base will further increase the acquirer’s options. We believe that the domestic BPO vendor segment is ripe for consolidation, which will play out over the next 3-5 years. This report: "Opportunities in the Indian Domestic BPO Market " by ValueNotes provides an in-depth analysis of the buyer as well as the vendor landscape. |
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