|Chennai||Rs. 24470.00 (1.37%)|
|Mumbai||Rs. 24900.00 (0.97%)|
|Delhi||Rs. 24200.00 (1.26%)|
|Kolkata||Rs. 24160.00 (0%)|
|Kerala||Rs. 24000.00 (0.63%)|
|Bangalore||Rs. 23800.00 (0%)|
|Hyderabad||Rs. 24140.00 (1.17%)|
If you want to get a sense of what awaits the BPO industry in India you only have to take a look at HCL BPO's see-sawing fortunes in the last several years and how the company has re-aligned itself after swallowing some bitter medicine.
Perhaps the most vivid example of what had befallen the company was an announcement to the investor community in 2010 by Vineet Nair, CEO of HCL Technologies, the parent company, that its BPO arm had not only posted operating losses of Rs 19.5 crore in the first quarter of 2010 but that it would continue bleeding some Rs 30 crore every quarter till the end of 2011, after which it would ostensibly return to the black.
You couldn't have scripted a more bizarre scene. On one hand, you had pitched battles being fought between the leading IT companies for the choicest of deals so they could stay financially fit amidst a deteriorating macroeconomic environment, and here was a company that had actually planned on losing money for two years.
Which is why, most of the eyeballs tracking the company will be keenly watching Nair as he discloses, in a few weeks, the outfit's most recent quarterly performance, ending March 2012.
None of this was foreseeable when HCL first started its BPO operations in 2001, even before the big boys such as Wipro (Spectramind), Infosys (BPO) entered the arena. Within three years of operations in 2004-05, the company had registered $100 million in revenues and was thriving on the back of new deals.
Those were heady years for call centres, when global corporations, especially banks and credit card companies, were in a rush to outsource their low-end voice services-essentially making calls to their customers via trained operators sitting in low-cost destinations like India.
The call centre boom saw a wave of companies set up shop almost overnight-some highly respected outfits and others, fly-by-night operations-all hoping to get a slice of this burgeoning and highly competitive market.
Every wave ultimately crashes and for BPO outfits in India, this will soon become a painful ground reality. India is no longer the cut-rate destination for outsourcing that it was a decade ago. Moreover, countries like the Philippines, who enjoy similar competitive advantages that India has, like language capabilities and cost, have now become attractive destinations for global firms looking to outsource BPO-type jobs.
HCL BPO started feeling the pain from this shift in preferred destinations around 2009 when, according to Dipen Shah, senior analyst at Kotak Securities, some of the voice-based contracts of HCL's BPO arm began to incur operating losses. The simple fact was that HCL was too dependent on the voice business as their bread and butter. The time had come for tough decisions to be taken, the kind that can make or break careers.
For the turnaround job, HCL picked industry veteran Rahul Singh, a high priest of BPOs, albeit lesser known than the likes of the more media friendly Raman Roy or Pramod Bhasin. Singh came with stellar credentials-he started Citigroup's back-office operations, known as eServe International, which went public and was later delisted and sold to Tata Consultancy Services.
An immediate priority for Singh was to slice off flab and focus more on high-end, non-voice businesses. With the call center business turning highly commoditised where the lowest bidder won, Singh realised that he needed to focus on new businesses which involved something more than just making calls.
Today, the company is concentrating more on value creation for clients through higher-end services, global delivery process, new output-based commercial models and strategic partnerships, says Mehernosh Panthaki, FMCG, IT & Midcaps analyst at HDFC Securities. What Singh has done is pare HCL BPO's voice-based revenues from 60 per cent to 50 per cent. Instead, Singh has articulated platform-based offerings: While the voice business involves making calls, in a platform-based offering the service providers offer a combination of software platforms and services such as administering payroll for a client and charging the client based on transaction or outcomes.
Another key area of focus has been rationalisation of HCL BPO's work force which involves delinking revenue from headcount growth. Much like its peer group, HCL BPO was following a linear growth model where 4,000 people working on various projects mushroomed to some 13,000 in three years. "Headcount rationalisation was one of the key initiatives that the company took to turn profitable again," says Ankita Somani, research associate at Angel Broking. "HCL started focusing on business where they can do more for less. They also de-focused on business where the growth in business was dependent on the growth in headcount. The strategy paid off for the company," she added.
In order to further boost profitability, HCL Technologies had also began divesting its loss- making, back-office divisions by selling off its Telecom Expense Management (TEM) line of businesses to US-based Tangoe Inc, a provider of enterprise communications services. Earlier this year, HCL BPO said it will shut its centre in Armagh in Northern Ireland and trim the workforce at its operations in Belfast which could impact up to 425 jobs.
How much of Singh's work has paid off? You'll have tune in to the company's soon-to-be announced quarterly earnings result to draw up his report card.