Tata Consultancy Services set to replace Genpact as top BPO

BANGALORE: The BPO unit of Tata Consultancy Services (TCS) is set to take the No. 1 slot in the business category in India, replacing long-time leader Genpact. The change in BPO market ranking could happen either in the just-concluded December quarter or the ongoing January-March quarter.

TCS has been fast narrowing the BPO revenue differential between the two companies, and there was just a $3.8-million gap between the two in the September quarter. In the December quarter, TCS's BPO revenues rose 13.8%, to $416 million, compared to the year-ago period. Genpact is due to announce its results for the quarter on February 6. It would be able to hold on to its lead if it has a year-on-year growth of 6.7% in its BPO business. In the September quarter, that business grew by just 6.86%, compared to TCS's 10.45%.

Any which way, Genpact looks set to lose its leadership by the end of the ongoing quarter, given TCS's significantly faster growth. Genpact was founded in 1997 as a business unit within General Electric (GE), with most of its workforce in India. It was spun off from GE in 2005 and went public on the NYSE in 2007.

In the IT space, the TCS juggernaut has left all Indian rivals way behind, and with customers increasingly preferring vendors who can offer both IT and BPO in an integrated way, TCS's BPO division has benefited immensely.

Generally, BPO units of top-tier IT companies have grown faster than revenues of pure-play BPO firms like Genpact, EXL and WNS. In November, the pressure seemed to show when Genpact lowered its revenue guidance for 2013. The company has moved into the IT space in recent times to address the new customer preferences, but that journey is just beginning to take off.

TCS offers BPO services for the banking, financial and insurance sector, retail and consumer packaged goods, drug development, telecom, media and manufacturing. It has invested in building domain expertise and made acquisitions to fill gaps in their portfolio. TCS bought the captive BPO arm of Citigroup for $505 million in October 2008, one of the largest acquisitions in the IT-BPO space till then.

IDC analysts Mukesh Dialani, Lisa Rowan and Melissa O'Brien, in a report last year — titled 'TCS business process outsourcing services: In pursuit of excellence' — said TCS had made occasional acquisitions to plug in the expertise gaps, combined its domain expertise with analytics skills to provide business insights to customers seeking agility and risk management, and created platforms on which it could build and deliver business process as a service (BPaaS) solutions, thereby assisting customers with pre-configured industry-standard processes.

Increasing adoption of platform-based services to mine existing and new clients through a consulting-led approach has given integrated IT-BPO providers an edge over standalone BPO players.

TCS, for instance, uses Oracle's platform to offer finance and accounting solutions for enterprise finance operations. It uses its own BaNCS insurance platform to offer core insurance, reinsurance, and accounting functionalities. "Today, BPO offerings are focused on selling a service based on a platform to reduce operational expenses. TCS has built vertical-led capabilities and domain expertise both organically and inorganically," said Siddharth Pai, president in outsourcing advisory firm ISG's Asia Pacific region. He, however, said rankings of BPO businesses could be misleading, given the lack of clarity in how revenues are being apportioned between IT and BPO by companies that have both.

Vipul Khanna, senior VP of Cognizant's business process services, said business and IT leaders in today's market know they need to balance efficiency with innovation. "Industry-aligned services that weave together consulting, enabling technologies, process work, automation, and business analytics capabilities can help companies drive more meaningful business outcomes," he said. Cognizant's BPO business has been growing faster than the company average growth, which itself has been one of the fastest in the industry.