| Outsourcing in 2006: India moves up-market |
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| Saturday, 06 January 2007 | |
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Offshore outsourcing continued its momentum in 2006, as evidenced in the successful listing of BPO companies WNS (NYSE: WNS) and EXL Service (NYSE: EXLS), and above-average performance of Indian IT majors Infosys (NASDAQ: INFY), Wipro (NASDAQ: WIT) and Satyam (NYSE: SAY). Indian companies on the global map Indian IT companies have been around for a while, but it was the turn of some BPO companies to enter this league in 2006. The two recent listings of leading Indian BPO companies WNS and EXL Service have created quite a bang. With both, customers as well as investors located abroad, it has generated optimism among other Indian BPO vendors who hope to take the same route in due course. Signaling an increase in activity were acquisitions by the large and small outsourcing vendors alike. The acquisition targets in most cases were specialized outsourcing companies, with niche services. Client acquisition, greater domain expertise and a front-end presence seemed to be the motives for acquisition. Some examples:
Besides, buyers of outsourcing services all over the world displayed rising confidence in Indian vendors, with increase in the size as well as complexity of outsourcing deals. While British Telecom awarded a $1 billion outsourcing contract to Indian IT services provider Tech Mahindra, Indian vendor Zavata bagged $80 million revenue cycle management contract from hospitals in West Virginia, Illinois, California and Missouri. This deal signals a new era as players in the healthcare industry, especially hospitals, have so far been more apprehensive about outsourcing to Indian vendors. Another large IT outsourcing contract by auto major General Motors to multiple vendors, saw Wipro on the same level playing field as EDS, HP and IBM. The outlook for 2007 Talent and infrastructure challenges in India along with client demands for risk diversification, are forcing the larger Indian vendors to globalize. This entails creating a greater onshore presence as well as setting up centers at other offshore locations across the globe, and several Indian companies have preferred to acquire rather than build from scratch. This will be expected to continue in 2007, as the pace of growth as well as competition accelerates. Meanwhile, setting the agenda for competition in India itself are best-in-class global outsourcing companies, which are feverishly creating and expanding their presence in India. The likes of IBM, Accenture, Dell, EDS, Cap Gemini, JP Morgan Chase, etc are already counting on an India base as a key ingredient in their global growth strategies – both for the lower cost and for the qualified talent pool. ValueNotes Outsourcing Watch: Insights for Investors is a unique news and analysis service from the ValueNotes Outsourcing Practice, focused entirely on outsourcing; This weekly publication analyses events in outsourcing, outsourcing companies, trends in the sector, impact of global competition from offshoring to established US companies, and emerging investment opportunities. No responsibility is accepted for errors of fact or opinion. Neither the analyst nor ValueNotes has a position in the stocks covered above, or has received any payment in any form for this report. ValueNotes does not own or trade in the stocks of companies under coverage. ValueNotes does not provide investment banking services or investor relations' services to preserve the independence of its research. Neither ValueNotes nor the analyst incurs any liability arising out of use of the above information/ report. Reproduction in whole or in part without written permission is prohibited. ValueNotes Outsourcing Watch articles are distributed through FinancialWire, an independent, proprietary news service of Investrend Information, www.investrend.com Related Items: |
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Outsourcing revenues from the Indian banking industry are estimated at Rs. 4 b for FY08