The current BPO age is addressed as ‘version 3.1’ and it has come a long way from the initial allure of reducing costs, primarily from labor arbitraging. Today, buyers are looking for value beyond cost arbitrage and efficiency gains. In order to provide focused and better services vendors need specialization. Thus, companies armed with deep vertical expertize will benefit.
In an interaction with Global Services, Partha De Sarkar, chief executive officer, Hinduja Global Solutions spoke about what the coming year embraces for the BPO industry.
Partha De Sarkar, CEO, Hinduja Global Solutions
GS In what areas would you expect budgetary cuts in 2012? How would these cuts impact BPO activity? Or is there a scope for increased spends? Where and why?
PS: We aren’t expecting major budgetary cuts in any vertical. At the beginning of the downturn, many organizations had put new projects on hold; now most of them are looking at a long-term outsourcing strategy. This will translate into a bigger average contract size in the coming years. Driven by the imperatives of the austerity measures, there may be a significant increase in outsourcing spends by government bodies in Europe. Recently, HGS has won a big public sector contract in the UK. As of today, in HGS, the contracts are expanding to include more service lines. And this is a trend we are witnessing across geographies. The focus is not as much on decreasing costs as it is on increasing efficiency.
GS: What are some of the shifts in the dynamics of global services (include global sourcing of services, outsourcing, offshoring, IT services, BPO) you would expect in 2012?
PS: There is a trend towards near-shoring of services, driven by the demands of geographical proximity, similar time zones and identical cultural settings. From the providers’ point of view, the focus is on geographical and vertical diversification. The opportunities are springing up in hitherto untapped pockets and we need to be prepared to capitalize on all of them. It is for the same reason that HGS has now strengthened its presence in Europe (through Careline) and Canada (through OLS). We are also exploring expansion opportunities in Latin America and China, both green-field and inorganic. The industry is also seeing consolidation, with growing demand for new capabilities and new geographies.
GS: How have your customer’s expectations of you changed?
PS: As mentioned before, the trend is towards increased focus on quality even as the contract sizes are expanding. The provider base is witnessing consolidation so that the buyers can forge long term relationships with the providers. This has been working in our favor, since we already have many long term relationships with our clients.
GS: What are the new drivers and outlook for HRO in 2012? Are there any observable shifts in the nature of BPO work being outsourced?
PS: HR outsourcing is an emerging segment for us with potential to grow manifold in the future. We have recently acquired HCCA, a Mumbai based HRO provider, to provide us a strategic entry into this domain. HGS will use its bandwidth to up-sell and cross-sell HRO to its existing clientele. Also, the ongoing automation and standardization phase within the banking and financial services industry will lead to more opportunities in this sector. It should be business as usual for the regular contact center services.
GS: Which are some of the most promising verticals in BPO for 2012?
PS: For BPO, BFS and Telecom remain the promising verticals while HRO should be a fast growing horizontal.
GS:. If you were to give three pointers for ITO/ BPO in 2012, what would they be? How should service providers align themselves to these? How would enterprise buyers of services align themselves to these?
PS: For providers:
Move towards op-ex model (from cap-ex)
Diversify to increase reach and expand portfolio
Look at long term engagements
Have a streamlined internal process to define the outsourcing needs and vet a prospective provider
Use outsourcing to not just reduce costs, but to increase value
Look at long term engagements
For both: What is needed is an integrated relationship between the client and the provider whereby each has a vested interest in the other. The two parties must act as one in a business association that goes beyond a cost reduction exercise to function as a true partnership.
GS: Any specific comments on specific emerging areas, geos, practices, etc. related to outsourcing in 2012?
PS: 2012 will not be much different from 2011. We should be looking at the next five years rather than a particular year and on that scale, we will see increased demands from newer geographies, augmented portfolios from established providers, strengthened competition (for Indian players) from newer destinations, bigger sizes of offered contracts, and greater adoption of best practices to cater to stringent demands on quality.