IT ROMANCES THE BPO SECTOR TO BEAT RECESSION BLUES

Couple of years ago, before the global economy took a down turn, IT industry reigned supreme and was well on its way to becoming the uncrowned king across sectors having flourished on contracts from international clients, cheaper wages, and some low-priced yet distinguished talent in the form of an able local workforce. The dream gallop began to turn into an unsteady trot with the US economy clearly going downhill. The profit-minting partnership of several years accounted for more than half of the IT sector’s export revenue. IT offshore business having taken a severe beating in the recession, it is but natural for IT services to peg their innings to areas that have shown steady progress despite the slowdown in the economy.

BPO Sector – Racing against the Tide

BPO Sector has had its share of hiccups due to the recession but it has experienced a speedy recovery in the form of quick revival in mortgage financing, claims processing, and insurance. In the present day, BPO companies boast good valuations as pure play BPO are quite a few in numbers. In fact, there are very few IT service companies that enjoy a major share in pure play BPO companies. BPO has been projected as a $360 billion market opportunity by 2020 in a recent Nasscom-McKenzie report.
All these good tidings have worked in its favor, as there are several IT companies ready to plunge into BPO business to offset the negative impact of the global meltdown.

Takeover Talks – Play for a Pure-play BPO

As early as 2004, World’s largest IT service companies such as IBM and Accenture have ventured into BPO services with IBM acquiring Daksh giving birth to one of India’s largest BPO firm. India’s top IT companies such as Infosys Technologies and Wipro have already forayed into BPO business. Last week saw the merger of Philippines-based BPO firm eTelecare Global Solutions Inc and Boston-based Stream Global Services Inc setting a precedent for future takeovers establishing global strongholds.

WNS Holdings and EXLService Holdings, two of the pure-play BPO firms that are majorly into insurance claim processing, customer management, and payroll management, are considered possible targets for takeover. The grapevine has it that the private equity firm Warburg Pincus was trying to offload 50.12 percent of its stake in WNS holdings. This move would call for a change in control at the India based call-center operator. WNS enjoys good standing in the BPO industry due to its impressive quarterly performance, attractive client base and recurring revenues.

Several companies including Sykes Enterprises Inc, ICT Group, and Genpact Ltd are said to be vying for a stake in WNS. Genpact is pitted against global private equity (PE) investors for 50% stake in WNS Global Services. Merrill Lynch is believed to be acting as an advisory to Warburg Pincus regarding matters relating to the sale. WNS enjoys a strong foothold in the BPO industry making it a worthy takeover target for the country’s largest pure-play BPO, Genpact, to stay a step ahead of competition.

Niyamath Parveez