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Indian IT BPO Industry Market Watch The Indian market continues to be attractive…
The Indian government received over 70 new plans for setting up ITES-BPO operations in India in the last 12 to 18 months. The ITES-BPO sector generated export revenues of $6.1 billion in 2005-06, almost four times the revenue generated in 2001-02. The BPO industry today employs close to 5,000,000 people. Industry analysts have projected the global IT and ITES market to reach $3,400 billion by 2012. Companies like Nokia, Flextronics, Ericsson, Motorola, Dell, Genpact, HP, IBM, Microsoft, Intel, and Cisco have announced significant investments in India in the last few months with most of them setting up manufacturing/ development units. The Indian IT Minister, Mr. Dayanidhi Maran attended the recent inauguration of Dell’s fourth BPO centre in Gurgaon. Dell’s captive BPO centers in India employ about 13,000 employees, which is the largest workforce Dell has outside US.
… but has a long way to go
1. Investments
· Corporate capex recovery is aided by high capacity utilization levels and free cash flows
· Infrastructure Investments are supported by government policies and private-public initiatives
2. Consumption
· Strong growth in urban areas due to the services boom and outsourcing opportunities
· Retail lending still at a nascent stage
· Trickle-down impact is also coming into play
3. Outsourcing
· Business Process Outsourcing in IT-ITES and pharma is now well-established
· Further inroads to Knowledge Process Outsourcing, or outsourcing of skilled and high-ended functions in finance and biotechnology
The Indian market is overpriced…but still pouring in
Private equity firms like Texas Pacific Group Ventures (TPGV), which has a $17 billion corpus, have found that Indian company valuations are too high to invest in and would rather wait for the right opportunities before putting money into this emerging market. "The physical manifestations of the economic growth of India look very good. However, on the financial front the descriptions are completely different. At present in India the valuations are high," Texas Pacific Group Ventures Managing Director Vivek Paul said. Citing the example of Vietnam, where the fund had recently invested in a few companies, he said, "The valuations are eight times higher than last year's earnings there. But in India it is 25 times higher," Paul said.
However, Bangalore-based venture capital firm Helion Ventures is close to finalizing six deals worth $50 million over the next two months. While two deals will be made in the space of legal processing outsourcing, two will be as seed funding for first-time entrepreneurs and two in the wireless domain. The cumulative deal size of $50 million will be significant for the VC space this year. Though a number of VC funds have been set up in the last six-eight months, the number of deals has not been that many.
Large Indian players continue to dominate the consumer acquisition space As a rule of thumb, large players have continued to dominate the customer acquisition in both the IT and BPO space. TCS, Wipro, Infosys, i-Gate, Patni and many leading IT/BPO companies have at least added 60 customers during last quarter.
Happenings in India…
In Hyderabad, the State of Andhra Pradesh: Last month, InfoDev, a World Bank affiliated body organized its annual ICT Incubators annual conference in Hyderabad, India. The highlight of the event was participation from 73 countries in various panel discussions and networking events. Speaking at the event, Mr. Kiran Karnik, President, NASSCOM urged private players to design business models to generate employment for the rural population. Various business papers were presented on how to work with socially deprived communities. Hewitt Associates, the leasing HR consulting organization has committed to provide free consulting services to executives and entrepreneurs who can design a successful business model benefiting the “bottom of pyramid” rural population.
In Ahmedabad, the State of Gujarat: Early December, the Gujarat State Government announced its IT policy at an investor’s forum organized by NASSCOM and Government of Gujarat. There were at least 20 MoU’s signed with state government and various investors. The total valuation of these MoU’s is worth more than US$2200 million. This will also help create employment in the excess of 350,000 in the state.
Indian BPO Company’s interest in Philippines: After a successful Indian trade delegation in Philippines, seven Indian BPO companies have confirmed their plans to open BPO service delivery centers in India.
The business process outsourcing industry in India has grown rapidly when compared with 1996 when this Industry started inroads into the United States with Outbound Telemarketing campaigns. There is no doubt the Indian BPO industry remains on a growth path, emerging as one of the key investment markets in the country.
You can reach the author at mdshahab@nasscom.org. Md. Shahabuddin is Assistant Vice President at NASSCOM and is responsible for managing the new initiates in the HR and Information Security space. The views expressed here are his personal views. Nasscom is the premier organization that represents and sets the tone for public policy for the Indian software industry.
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