IT solutions for BPO companies on the move

There's a growing interest among Indian information technology and business process outsourcing firms to move up the value chain as the labour-arbitrage factor may not hold its advantage for long.

To tackle this, companies like Tata Consultancy Services (TCS), Infosys, Firstsource, Mphasis and Kale are redefining their BPO offerings and introducing innovative business models "" one such approach being that of providing platform-based solutions.

These solutions basically involve the creation of a common platform that enables multiple processes. At present, a customer tells the vendor how the company works, and what software and applications it currently runs.

These systems are then maintained by the vendor. However, when it comes to platform-based solutions, the vendor takes care of the input (software, applications, etc), output (transactions, process) and also adds services.

Sudin Apte, senior analyst and country head, Forrester Research, says: "Bigger players like Automatic Data Processing (ADP) have been doing this for quite some time. However, we feel the Indian BPO segment too will gradually shift to this model."

The process has already begun in part. Some of the platforms being churned out are for tax return preparation, insurance claim, workflow management, document archiving, loan origination, and in the healthcare segment.

The BPO arms of TCS and Infosys, for instance, are in the process of introducing their platform-based solutions for the insurance and financial services.

Amitabh Chaudhry, CEO and MD, Infosys BPO, says: "We have been working on creating a platform-based solution since the last six months. In the next 6-9 months, we will also announce our first client."

BPO firms like Firstsource, Mphasis and Kale Consultants have already started working on this model and reaping the benefits. For instance, 40 per cent of Firstsource's revenue comes from platform-based solutions. Its recent acquisition of US-based MedAssist is expected to increase this figure to 50 per cent.

Raju Venkatraman, joint MD and COO of the company, says: "Whether or not a company increases its pricing is secondary. However, this certainly increases stickiness of a client and also adds value to the company's business."

Apte feels that in the next 3-5 years, 50-60 per cent of the BPO business will come from platform-based solutions. "Whether this will allow the firms to increase their billing is difficult to say but operating margins will certainly increase," he adds.

Besides, firms in India are realising that pure vanilla-based solutions will not give them continued business and customer appreciation. Agrees Alok Misra, CFO, Mphasis.

"We have created a few standard platforms and wherever required we customise them to suit the requirements of the customer. While this might have been done in the past what the Indian players are getting on the table is the services part as well," he says. Mphasis, at present, does a business of $5 million a year, which it expects to increase soon.

Kale Consultants was perhaps the first company to introduce a solution for the travel industry five years back. Currently, the company has close to 37 clients which prefer this model.

Apte feels this approach is a direct challenge to the labour-arbitrage model and has its benefit. "The customer does not have to worry about technology upgrade, the cost of transaction is reduced, and, most importantly, the investment in technology goes down," he says.