BPO players in consolidation mode
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BPO players in consolidation mode

By agencies   |   Friday, 27 January 2006, 08:00 Hrs
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NEW DELHI: Recognizing the need for broader geographic footprint for enhanced client comfort, Indian offshore business process outsourcing (BPO) players, including Tata Consultancy Services (TCS) and Genpact, are going aggressive on initiatives including geographic expansion, acquisitions, outsourcing contracts, and partnerships to evolve into consolidated offshore-onshore players.

According to the latest report by global research firm Forrester, “Offshore providers BPO services have benefited from their ability to start small and build relationships from the bottom up. In the context of finance and accounting, offshore BPO players can start with image capture and reconciliation, moving up the value chain toward more strategic offerings. However, offshore BPO players are recognizing that without a broader geographic footprint, they face a ‘ceiling’, above which their customers will not feel comfortable engaging with them.”

With perception of operational risk acting as one of the principal barriers to offshore BPO, the providers in many cases were being limited to relatively low-level BPO engagements where labor arbitrage became a key ingredient. Now as the limits to pure labor arbitrage became visible, these offshore providers are seeking a broader geographic footprint with which to offer higher levels of service with lower perceived risk.

"Offshore BPO providers are expanding their capabilities in different geographies using a variety of mechanisms, including direct captive centers, partnerships, and outsourcing transactions,” it said.

It is a general notion that alternative geographies represent a substantial threat to the Indian offshore suppliers, but they are moving aggressively toward mastery of these geographies themselves. This transition is well under way, with suppliers like Genpact having already established capability in China, Hungary, Mexico, and Romania. While India is renowned for its strength in English, it is not as strong in languages such as Spanish or German, Forrester said.

This has prompted Wipro's recently announced move into Romania, where European language skills are plentiful and where other suppliers, such as Genpact, are already present. Other suppliers such as TCS are also moving aggressively to expand their global reach. Moreover, companies have embarked on acquisition as a strategy to extend their BPO capabilities. KPO specialist OfficeTiger acquired MortgageRamp from General Motors Acceptance Corporation to broaden its capabilities in the U.S. mortgage processing market.

TCS also acquired Comicrom, a BPO provider based in Santiago, Chile, which provides services to banks, insurance companies, pension funds, and other companies and government agencies. The report noted that the offshore BPO players were addressing their structural challenges. "With the desire for international presence growing, offshore suppliers are becoming more willing to transfer employees like the multinational suppliers have always done (and as TCS has done in the Pearl deal),” Forrester said.

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