BPO/IT Companies

 

The Indian ITES and BPO Sector has been much on the lime light over the course of years compared to the other cities of the world. One of the key reasons being the Expanse of real estate and the available at competitive rates in International Standard IT Parks and coupled with SEZ benefits in today’s date and time make the business far more lucrative. Of course, we are very proud that, We Indians are very enterprising and till 10 years back there was no sign of the ITes and BPO sector in India and now we are high in global ranking with our captive business in the IT and ITes and BPO sector.  

 

The real estate market in Mumbai is very conducive and the finest companies are present here and the most important locations for setting up the IT/ITes and BPO’s are Goregaon West, Malad West, Goregaon East, Malad East, Powai, Andheri East (Seepz), Airoli, Vashi, Vikhroli, Kanjur Marg and Thane. Thane is coming up very well and in the next 1 year by 2010, Thane should have more than 30 lacs sq.ft of good quality commercial space available in short span.

 

Here is an excerpt of a report by NASSCOM highlighting the Indian ITES – BPO Sector.

 

Global Scenario

 

Worldwide spending on Business Process Outsourcing (ITES-BPO) services totaled approximately US$ 712 billion in 2001. IDC projects that by 2006, the potential ITES-BPO market may increase to US$ 1.2 trillion, with an overall compounded annual growth rate (CAGR) of 11 percent. While traditionally the key driver for ITES-BPO activities has been cost reduction, companies are increasing viewing these services as strategic and essential elements for organic growth.

The Indian ITES-BPO Scenario

 

According to NASSCOM, the Indian ITES-BPO industry registered a growth of 59% and clocked export revenues of Rs. 11,300 crores (US$2.3 billion) up from Rs. 7,100 crores, (US$ 1.5 billion) in 2001-02.

 

The industry is projected to register a growth of 54% to clock revenues of US$ 3.6 billion in 2003-04.

 

India is a popular choice for customers seeking outsourced services because it is able to offer a 24X7 service and reduction in Indian ITES-BPO Industry turnaround times by leveraging time zone differences.

 

In certain Remote Services categories, Indian players have achieved high productivity levels with the emergence of BPO vendors with deep process skills and the ability to offer integrated outsourcing solutions. At the core of India’s great attraction as the outsourcing destination is its unbeatable value proposition – PQR (Productivity, Quality and Rate) factor.

 

India has emerged as the most preferred destination for ITES & BPO with revenues growing well above industry average at a rate of 59% this year contributing about 25% to the total software and service exports.

 

• Captive ITES-BPO players have almost doubled their share, growing by a phenomenal 90%. Captive units grew from US$ 710 million to US$ 1350 million

• Third Party Vendors have increased their presence from US$ 769 million in 2001-02 to US$ 985 million

• Absolute growth in the ITES-BPO segment increased from US$ 549 million in 2001-02 to US$ 856 million

 

Growth by Service lines – a snapshot

 

Within the ITES-BPO segment, Customer Care continues to be the dominant segment with both revenues and employment growing by more than double in 2002-03 over 2001-02.

 

Other areas that witnessed significant growth were Administration and Finance registering revenue growth of 67% and 70% respectively over 2001-02. Segments such as Payment services and HR too have registered a considerable growth in revenues at 90% and 50% respectively in 2002-03 over 2001-02. In terms of manpower, Customer care employs the largest number of people followed by Content development, Administration and Finance. The number of employees in the Administration and Finance segment has grown by 78% and 60% in 2002-03 over 2001-02.

 

The key trends witnessed in the Indian ITES-BPO market in 2002 were:

Ø   Significant increase in capacity: The quantum of new investment in the industry increased by around US$ 300 million to reach US$ 800 million by the end of 2002.

 

Ø  The increase in capacity was equally divided between captive centers (subsidiaries of multinationals ñ such as HSBC, Standard Chartered, AOL, Dell, Hewlett Packard) and Indian third party providers such as Daksh, Wipro Spectramind, EXL, Msource, among others.

 

ITES-BPO Growth by Service Lines

Indian ITES-BPO Industry

• Continued focus on Customer Care and Administration: According to preliminary estimates made by NASSCOM, customer care and administration were the fastest growing segments in the ITES-BPO space, with a projected growth of over 75 percent in 2002- 03. The high growth rate can be attributed to the presence of experienced third party vendors (who scaled up operations) and entry of captive players. In addition, the availability of a fairly large talent pool also attracted investors and customers alike to this segment.

 

• Continued dominance of US and UK markets: NASSCOM’s preliminary estimates suggest that the English speaking geographies dominated export revenues of the Indian ITES industry accounting for over 90 percent of the industry total.

 

• Enormous interest by potential customers: Not only did existing customers scale up business (in terms of number of processes offshored or seats utilized or expansion by captives); the sheer cost and roductivity gains realized by them generated tremendous interest among almost every significant Fortune 100 company to explore offshore ITES-BPO from India.

 

• Rapid maturity of third party vendors: Most leading third party vendors further consolidated their leadership position by investing in infrastructure, quality standards, employee training and re-skilling, expanding service line/process offerings, investing in marketing front-ends and personnel with domain and process skills.

 

• Increased presence of IT services companies: A large number of IT service companies expanded their offerings to include ITES-BPO by creating their own capacities (Infosys, Patni, Satyam, HCL, Cognizant, Syntel) or by acquiring ITES-BPO players (Wipro deal with Spectramind).

 

• Emergence of several under-the-radar opportunities: The industry expanded its radar of opportunities to new service lines such as package software implementation, System Integration, R&D engineering and new management as new horizon for robust growth

 

• Geographical diversification of capacity: A number of players set up additional centers in new cities drawn by attractive incentives offered by many state governments, and in an attempt to diversify risk of running a single location center and to take advantage of lower labour costs in other cities

 

• The average no. of employees in the ITES-BPO sector is 190 but the range is huge and varies from as low as 4 people to as many as 16,000 people

 

• The encouraging trend in this area is the presence of MNC Captive units that account for 45% of the industry and are a vital determinant of the long term competitiveness of India in this sector

 

Changes in ownership structure:

Ø   Two MNCs have divested part of their stake in their captive units, British Airways in WNS and Conseco in EXL. They have capitalized on the market value of their firm by bringing in a strategic investor(s). The unit then competes with third party vendors, claiming domain expertise as a differentiator while targeting new customers

Ø   Venture capital funds such as Oakhill, General Atlantic Partners, West bridge

Ø  Capital, Warburg Pincus, among others are reported to have invested close to US$ 300 million in ITES-BPO companies in 2002

Ø   M&A transactions are on the rise and some IT service companies choosing to buy rather than build in order to rapidly scale up

Changing customer behavior:

 

A number of large customers prefer to outsource business to multiple vendors and also set up a captive unit on their own. In some cases, they are asking the vendor to build a center on a build-operate-transfer model, in which case the vendor would grow the center to a certain size and then hand it over to the customer at the end of the pre-determined period Critical Success Factors in the ITES-BPO Business are:

 

The key sub-segments in the Indian ITES-BPO industry are:

 

Customer care: including database marketing, customer analytics, telesales/telemarketing, inbound call center, web sales and marketing, sales and marketing administration

 

Finance: including billing services, accounting transactions, tax consulting and compliance, risk management, financial reporting, financial analysis

 

Human Resources: including benefits administration, education and training, recruiting and staffing, payroll services, hiring administration, records management

 

Payment services: credit/debit card services, cheque processing and transaction processing

 

Administration: including tax processing, claims processing, asset management, document management, transcription and translation

 

Content development: including engineering, design, animation, network consultancy and management, biotech research.

 

Off-shoring to India has three advantages - significant cost savings, major productivity gains and dramatic improvements in quality

 

• The primary driver of cost savings is labour cost arbitrage. The differential in wages between the parent location in the US or UK and India is more than 70- 80 percent for off-shorable processes.

 

However, interaction costs increase by 10-20 percent because India is a remote location, resulting in net savings of 40- 60 percent for the off-shored processes

 

• Significant potential exists for cost savings through off-shoring across industry verticals. Hence, customer interest in off-shoring will not be limited to just a few verticals, but be much more widespread. Insurance and retail banking generate the bulk of savings because of the high proportion of processes that they can offshore. As a result, companies in these two verticals are taking the lead in sourcing ITES from India and rapidly growing in scale. For instance:

 

GE has the largest ITES operation in India with more than 12,000 employees and is growing at the rate of more than 700 people per month.

HSBC, which started offshore operations about two years ago, currently employs over 1,000 people and plans to double that number in less than a year

 

Conseco (now EXL eServices) acquired a 350 agent company and has grown the facility to more than 1700 people in a year

 

• Off-shoring opportunities vary from standardized corporate center activities such as accounting, payroll, etc. to more niche and vertical specific opportunities such as clinical trials support for pharmaceutical companies, claims processing for the insurance sector, account opening support for the banking sector, etc

 

• The ITES industry in India attracts people who are more skilled and qualified than those who work for BUs or shared services centres in the parent location. Further, the ITES set-ups serve a multitude of divisions/BUs within the company (in case of in house providers) and across companies (in case of third party providers) facilitating transfer of best practices across all. Consequently, the offshore centers in India have been able to make dramatic improvements in process quality and productivity as compared to those in the parent location.

 

 

if you have any further queries and you need information on the properties available in Mumbai/Navi Mumbai and Thane and a lot more insight in setting up your operations then please write to us  ssadh@realestatemumbai.com and we shall connect asap.