“The Best Years of Outsourcing Are Ahead of Us”

Despite the current challenges, the best years of outsourcing are ahead of us, according to speakers at “IT Services & BPO Connect ‘08”, a conference focused on the road ahead and investment opportunities in these sectors. The event was organized by my firm Venture Intelligence last month at Mumba. Here are a couple of extracts from the post event newsletter:

Srinath Batni, Executive Board Member at Infosys Technologies, was categorical in stating that the outsourcing industry had “a long way to go and there is still a lot of juice to be extracted”. The current challenges are not so much on the demand side, but on the supply side. “The fundamental drivers of outsourcing are not going to change overnight,” he averred. On the cost escalation front, Batni pointed how salary increases as a percentage of revenues for Indian companies have risen less than 5% over the last 10 years. Plus, wage costs in the client markets are also increasing and the number of students going in for technical education in those countries is decreasing. The differential is still attractive enough to drive outsourcing to destinations like India. On other parameters like quality and scalability too, the Indian outsourcing industry has built a strong foundation for itself. “Also, the requirement for customers to keep pace with technology – which is becoming more and more heterogeneous – for competitive advantage will continue. Customers will need technology-related support regardless of state of the economy.”

…Abhay Havaldar, Managing Director of Private Equity firm General Atlantic, emphasized the need for striking the right balance between scale and innovation. His firm was more interested in investing into companies that attacked the operating expenses of businesses rather than the SG&A budgets. The challenge for such vendors is that it requires customers to re-engineer their processes – kind of like changing the wheels while you are still moving.

Other speakers at the conference included Aparup Sengupta, CEO, Aegis BPO; Nitin Shah, CMD, Allied Digital; Subbu Subramaniam, Partner, Baring Private Equity; Partha De Sarkar, CEO, HTMT Global; Shailesh Shah, Chief Strategy Officer, Satyam; Ranjan Bandyopadhayay, Global Head of HR & Strategic Initiatives, TCS; Dev Raman, Principal, Tricolor India; Sunil Kolangara, Director-Private Equity, UTI Ventures and Ashutosh Vaidya, CEO, Wipro BPO.

Any VW members who would like a copy of the full post event newsletter, can email info@ventureintelligence.in.