In the last three to four months, the business process outsourcing or the BPO industry has been on a shopping spree. The few deals match the $550 million purchase of the US based Headstrong by Genpact India’s largest pure play Business Process Outsourcing Company. The Genpacts whopper is just one of many big ticket acquisitions. The Britain based information technology and Business Process Outsourcing firm Serco bought Mumbai based Intelenent Global Services for $634 million, it is also a UK based Information Technology and Business Process Outsourcing firm. The US based EXL Services tuck in acquisitions over the past couple of years, the last was being the $91 million purchase of the outsource Partners International or OPI. The Business Process Industry leaders are acutely aware that the game is no longer simply about the headcount. Most of the acquisition aim to increase expertise in the certain domains. The customers are looking for the service providers who have a global scale in the certain verticals.
It has been the capital markets and the investment banking space for a while, the company’s revenues came from the banking and the financial services so that the capital market space seemed like a logical choice for the expansion. The field requires an understanding of not only products such as derivatives and the services such as the prime brokerage. One wrong transaction and the one that they can lose billion of the dollars. They can reckoned that the company could not build the capability on its own so it looked for the company that already had it. In April 2011, the two year search ended with the headstrong purchase.
At a compound annual rate of 20 percent, the $17 billion Business Process Outsourcing industry is a cusp. It has stagnated after growing for a decade at a compound annual rate of the 20 percent. Most of the Business Process Outsourcing are relatively small with the revenues below $300 million valuations that have fallen from the peaks in the 2008, this is before the financial meltdown. Most of the companies have been unable to scale up. The scaling up is a key to the success. The Genpacts purchase of Headstrong that will augment not only the Genpact’s $1.26 billion revenues, but it is also intellectual property. The OPI has beefed up the finance and the accounting stengths of the EXL,whose the revenues were $253 million in 2010. As the business models change, the Business Process Outsourcing customers demanding so-called near shore and on-shore delivery, as this is the processes in the move from the voice based services to the higher value back office services such as the accounts payable.
REFERENCE:
http://businesstoday.intoday.in/story/bpo-industry-hurtling-towards-next-phase-of-growth/1/18355.html
