BPO business gives IT majors Infosys, Wipro and HCL tough time in Q3

BANGALORE: India’s technology majors reported a healthy set of numbers for the October-December quarter but stumbled in their BPO businesses, which stayed flat to marginally lower for three of the top five IT services firms. Back-office businesses have been growing in line with IT services in the past few quarters but in the past six months, the total value of BPO deals has been at the lowest in the past three years.

According to an analysis by auditing and advisory firm KPMG, total value of BPO deals signed globally in the October-December quarter was $7.7 billion (deals above $5 million), only a little better than the preceding quarter. In a healthy quarter, the total value of BPO deals signed would be around $10-12 billion globally. This slowdown reflected in the third quarter BPO numbers of Infosys, Wipro and HCL, which saw revenues slacken due to project delays, fewer deal signings and internal problems.

“The problems of the past are catching up with us. Our sales engine was not doing too well. But it will clean itself out. In Q1 of next fiscal, it should start seeing opportunity,” Wipro CEO TK Kurien said. Wipro’s BPO business, which contributes around 9% to the company’s total IT services revenue of over $5 billion, saw top line decline 1.2% in the October-to-December quarter compared to the previous three months.

BPOs enable IT services firms to offer a greater range of services to customers with BPO deals often getting bundled with IT services. BPOs also gain importance as they give firms sticky annuity business. Cross-town rival Infosys’ BPO business was down 1.6% in the quarter ended December which the company attributed to slower start of projects. “Customer decision making has slowed down.

In the past two quarters, the deals that we have signed may not have started because of these delays,” Infosys’ chief financial officer V Balakrishnan said. Client additions were sharply lower, it added one new customer in the quarter, apart from the 40 it got from the acquisition of Australia-based Portland in December.