Diverting calls

BPO companies are increasingly expanding their footprint overseas.

After acquiring a New York-based company last week, ICICI OneSource, the business process outsourcing (BPO) arm of ICICI Bank, is on the prowl again.

This time, it wants to open offices in other parts of the world. Now, it is eyeing the Asia-Pacific region to set up operations there, particularly Singapore, Hong Kong and Philippines.

Earlier this year, a good three months before it was acquired by the global information technology major IBM, BPO company Daksh eServices set up a centre in the Philippines.

Its aim is to become the biggest player in this domain in the Asia Pacific region and among the top 15 BPO companies in the world by next year.

Very soon, Wipro Spectramind, the call centre business of Bangalore-based Wipro Technologies, will look beyond India. And the destination? The Philippines.

Having made an acquisition in the US last November, Godrej Upstream, the Rs 2,000-crore Godrej group's BPO outfit, is talking about travelling to the European and Asian markets in future.

These are not the only ones. Almost every other BPO outfit in the country is scouting for a global footprint. And almost every one is eastward bound.

Apart from acquisitions to build capabilities, why are the BPO companies on an expansion mode overseas? "Full-fledged opportunity companies will look at vendors who are capable of delivering from multiple places," says Ananda Mukerji, managing director & chief executive officer (CEO) of ICICI OneSource.

Industry experts believe that the trigger to move to multiple geographies has largely come from American clients. "Clients are forcing their service providers to set up back-up operations as a safety measure. They are only hedging their risks," explains a senior manager at IBM.

He points out, that even as American companies hail India's low cost advantages and the prevalent high skill sets, they are wary of natural calamities and India's political scenario which could affect their back-office work. According to him, they've reached a stage where they don't want to put all their eggs in the Indian BPO basket.

Also, BPO needs the world over are increasing. So there is also a belief that while India will cater to the US markets, the Philippines will service the Chinese and English speaking areas in the Asia-Pacific region.

As Raman Roy, CEO, Wipro Spectramind says, that for his company, the move to start operations elsewhere is largely customer driven. "Our customers are telling us that they want us to expand our footprint to mitigate geopolitical risk."

He says that clients have certain limits on what they can invest in India. For instance, while some clients are allowed 40 per cent exposure to India, for others, it could be 30 per cent. "They are fast reaching that limit, hence the need to expand. They say that if we are in other locations, they will continue to do business with us," he adds.

It also comes at a time, when after much ambiguities, the finance minister P Chidambaram has readied a final draft of taxation for the BPO industry.

Even as the Central Board of Direct Taxes (CBDT) has withdrawn the difference between core and incidental activities, tax will be levied on any foreign company with an operating BPO arm in India, which according to it, qualifies as a permanent establishment.

Also, according to a Gartner Inc study, India's pre-eminence in the BPO market is likely to diminish. It predicts that over the next three years, with players moving to newer locations in Europe and Asia Pacific, India's 80 per cent BPO market share will shrink to half.

No wonder then, companies are pouncing on every single opportunity to stretch their reach beyond India. At the same time, many US companies like ICT Group gave India a complete go by as it flew straight to the Philippines.

It is believed to be finalising plans to set up its third call centre in that country. Its other existing locations include Australia, Ireland, Mexico and Canada.

Then there are those who have already pitched their tents in India but continue to be bullish on the Philippines. Already, the Cincinnati-headquartered Convergys Corp which has nine call centres in India, has opened five centres in the Philippines in recent times.

But the big question is: why the Philippines? There are a myriad reasons.

"India and the Philippines complement each other," says a software professional. The English-speaking population, essential to meet the demands of the BPO industry, in both the countries is vast. Like India, the Philippines too boasts of educated and skilled manpower.

Early this year, Daksh CEO Sanjeev Agarwal had put the figure at 35 million skilled workers, 3,80,000 graduates annually and an almost 94 per cent literacy rate in the Philippines.

"It also has the largest population of US GAAP-certified professionals outside of the US, therefore offering tremendous potential for outsourcing of financial services," he had said.

What's more, despite its low-cost workforce, the country also boasts of attractive government incentives and a progressive business environment.

But many of the US companies are believed to have cited the high 40 per cent attrition rates amongst the Indian call centres as a cause for potential headaches. They believe that being a new industry, and with fewer software professionals, call centres employees could be held on for much longer in the Philippines.

That is why call centre operators are trying out every trick in the book to hold on to their staff. From offering on-premise management courses, some are even paying employees to go out and study, while there are others who are charting out career paths for its staff.

Even so, the first to get off the mark in January was Daksh, the first independent BPO outfit to start operations in Manila. By the end of this fiscal, it will have hired around 1,000 people, taking its total headcount to 10,000.

Its Filipino call centre offers customer service, technical support and back office transaction processing services.

Wipro Spectramind also plans to hire nearly 1,000 people and open a call centre in the Philippines. It domestic operations include centres in Delhi, Mumbai, Navi Mumbai, Pune, Belapur, Kolkata and Chennai with a total headcount of 13,013.

Roy says, that it is still considering whether it should grow organically or through acquisitions in the Philippines.

The Godrej group plans to invest $5 million in Godrej Upstream to scale up its domestic operations. Godrej's BPO "" Lawkim Upstream Contact Management acquired Upstream, an US-based call centre company last year.

ICICI's Mukerji says that its new opportunities in Europe have triggered the acquisitions at ICICI OneSource.

In August this year, Singapore's Temasek Holdings decided to invest $30 million in the BPO company. Now Mukerji wants to leverage that in the Asia Pacific region. As Mukerji puts it: "The reality is that this is a global business."