There Will Be No Compelling Alternatives To India As An Outsourcing Destination In The Near Future !

This week BPOVoice talked to Mr. S Vijayakumar , Global Head – Marketing of HCL Technologies Ltd. – BPO Services, on some of the interesting topics including HCL BPO’s recent acquisition moves and their roadmap for 2010. Mr. S Vijayakumar is responsible for global marketing function across all industry verticals and geographies of HCL’s BPO organization. Below are the excerpts:

Do you somewhere feel that 2010 could be one of the best years for the Indian outsourcing industry or the market would still take some more time to bounce back?
2010 could be a good year for Indian outsourcing, and this is a strong feeling. Amidst signs of recovery from the impact of the slowdown, in its yearly (2009-2010) performance report Nasscom has said the IT-BPO industry would see its exports reach $50 billion in the current financial year, registering a growth of over 5 percent. Similarly, export revenues are likely to grow at 13-15 percent next fiscal to cross $57 billion.

The Nasscom McKinsey 2020 Vision says that growth over the past 10 years (1998-2008) was unparallel – from $2 billion to $47 billion (includes domestic $10 billion); by 2010 exports are expected to grow to $175 billion, (domestic to $50 billion).

According to the report demographic shift fuels growth of new sectors, new markets and new services, and 80% of incremental growth will be driven by opportunities outside core markets, verticals and segments, and this incremental growth cannot be captured solely through the current low cost model; new models will emerge. Business Services will account for 60% of total market in 2020.

Also, According to Nasscom, the performance of the Indian IT-BPO industry this year is far stronger than what is reflected through the growth numbers. The industry has reinvented itself by increasing its cost efficiencies, utilization rates, diversification into new verticals and creating new business and pricing models, which is going to help industry in the long run and improve its margins.

What are your views on the predictions that the Indian BPO industry could be under pressure from the emerging locations like eastern and central Europe in 2010?

The Indian BPO industry is not under pressure from the emerging locations like eastern and central Europe. The focus of the industry has always been on moving up the value chain, on performance, and on delivering value to customers. Infact, HCL pioneered the blended off-shore near-shore model; we adopted this global delivery model to further expand our delivery footprint to offer near-shore, off-shore options to our customers, and also to minimize risks from currency fluctuations, and country specific risks.

Over the past decade India has clearly emerged as a country-wide outsourcing success story. Other developing countries witness what outsourcing has done for the Indian economy, such as creating millions of jobs, and want to replicate that success. India continues to retain its top position as the sought-after destination for companies globally, owing to its unique combination of high people skills, favorable business environment and low cost.

According to a recent Gartner report ‘Analysis of India as an Offshore Services Location’, a number of countries are becoming increasingly competitive in various niche IT services. However, for broad-based, large-scale, quality-focused transactional services, such as BPO and application development, there will be no compelling alternatives to India as the primary source of offshore services in the near to midterm (i.e., the next three years).

Let’s talk about the client and vendor relationship. What do you think an ideal relationship is and could there be a partnership of equality in the future where in both the players; share the risk and the rewards accordingly?

The client-vendor relationship will always be a hot topic as would be the definitions for the ideal relationship between the two.

The ideal client-vendor relationship lies in the degree of congruence between the client’s objectives and values and those of its service providers in terms of its capabilities, processes, technology, coordination and control systems. A clear governance and escalation system holds the key to a successful client-vendor relationship.

A partnership of equality between the client and the vendor is as much in the present as it would be in the future. With regards to the IT industry, it is evident that BPO and IT services are merging and customers are increasingly seeking integrated solutions. Further, as the Cloud (Cloud Computing) becomes more accepted and available the lines between services will blur further. HCL shares a partnership of equality with its customers, and through its integrated approach to service delivery across BPO, IT and Infrastructure, HCL provides its customers with the benefits of having a single vendor, a single master service level agreement and single-point pricing which could be output or outcome based.

Coming back to HCL BPO, What is your roadmap for 2010 in terms of increasing the headcount and revenue targets?

HCL’s conscious strategy to move away from linear monotonic growth and to delink growth in revenue from growth in headcount, while increasing employee realization (revenue per employee) forms the basis of our BPO roadmap for 2010. While we will continue our focus to grow ahead of industry standards, in terms of increasing the headcount, HCL follows the policy of ‘just in time’ hiring.

Recently there were reports that HCL BPO is eyeing acquisitions in the media houses in UK and US. The timing might be right (from the cost point of view) however do you really expect a turnaround even though the media industry (specially the publishing sector) is reeling under its worst ever crisis in the west? Can you throw some light on the strategy behind?

HCL is constantly looking to make appropriate acquisitions that fit our business strategy. According to the Nasscom McKinsey 2020 Vision, 80% of incremental growth will be driven by opportunities outside core markets, verticals and segments. Media is one of the new verticals that will contribute to this growth.

We have Valuenotes corroborate the same view. According to Valuenotes, the strategy or trend to outsource media work to India has been on the rise over the last few years and has witnessed an increase in volume from USD 450 million (Rs 2048 crore) in 2006 to around USD 1 billion (Rs 4551 crore) in 2009 and the publishing market is set to grow by 15-20% to $ 1.2 billion by 2012.

Also, the timing is still right for acquisitions, and we are optimistic with our strategies and propositions to address the new industry verticals, which includes Media.

HCL’s Media and Publishing practice has over 3,500 technology and domain consultants with over 16,000 person years of MPE experience. We service four of the top five publishing companies worldwide. We provide end-to-end pre-media services to Ireland’s largest newspaper group. The strategy for MPE is to offer integrated solutions and service across BPO, Applications and Infrastructure while keeping the focus on business transformation, technology platforms and tools, and strategic partnerships.

There were also some reports that – HCL BPO is consciously moving from voice-based services to transaction-based services to knowledge-based service. How far has been the transition and is there any time frame set up for the same?

HCL will constantly enhance its industry specific wing-to-wing business services offerings across voice, transaction and knowledge based services. This is a continuous drive. As a strategy, HCL will leverage its capabilities in both the front-office, voice intensive services and the back-office knowledge based services.