2010 Predictions - What did we get wrong?!

Rakesh Sangani

Onshore Services and the Public Sector (Predictions 1 and 5)

We predicted that in 2010, there would be an increasing demand for onshore services from clients, either due to the perception of offshore outsourcing or due to the client considering the outsourcing of more complex activities. As a result, we would see more of the current outsourcing providers purchase or develop onshore capability in the US, Japanese and European Markets to serve these clients.We further predicted that in providing onshore capability, we would see the Indian Providers foray into the public sector.

Did it come true?

Well, from discussions with the leading BPO providers and advisors, there has definitely been an increase in onshore service demand in the US and Europe. This has also been evidenced not just by the leading providers hiring extensively in US and Europe, but also from the next wave of (Mid-Tier) providers eyeing and acquiring US and European capability including Patni, Arvato, Hexaware, Aditya Birla Minacs and Aegis.

In Europe, this has been evidenced through the acquisition of Compass BPO, Careline Services, and Credit Solutions, and the onshore deals won by TCS with Personal Accounts Delivery Authority (£600m), Cardiff Council (£150m) and UK’s Child Maintenance and Enforcement Commission (£55m). Overall, given that Japan has not seen the traction we expected, we would say that our crystal ball prediction achieved an "almost true".

Shared Service Centre acquisitions (Prediction 2)

We predicted there would be at least one significant shared services centre acquired, with services then provided back to the seller of the services.

Did it come true?

There was indeed one significant shared service centre acquisition in the year, and that was the 600 FTE acquisition of the Minneapolis based grocery retailer SuperValu Inc by Tata Consultancy Services. This expanded TCS capacity in Bangalore and brought with it a great client reference. In addition to this, there was the acquisition by Aegis, of the customer contact centre of Sallie Mae in the US.

Here, we are pleased to say our prediction for the year was wholly accurate!

UK & US Acquisitions by Indian Companies (Prediction 3)

We predicted that as top tier Indian providers search for new capabilities, and the mid-market BPO providers attempt to grow at a pace to catch up with the leading players, we would see more US and UK companies being linked and then eventually acquired by the BPO players.

Did it come true?

It did indeed. This year, there was a spate of acquisitions of UK and US companies including Compass BPO being acquired by Aditya Birla Minacs, Credit Solutions acquired by Arvato, Careline Services acquired by HGSL and the Sallie Mae Customer Contact acquired by Aegis.

Custom BPO (Prediction 4)

We predicted that clients would demand more specific solutions, and therefore an increase in the number of providers supplying solutions relevant to industry needs. This will include industry focused analytics and the growth of Custom BPO, where providers will move up the value chain to "middle-office" processes within industry verticals. This would be prevalent in existing contracts where buyers have that initial comfort from BPO.

Did it come true?

Whilst the growth of Custom BPO has not been as emphatic as we expected, there has certainly been an increase in activity over the last 12 months. The Heads of BPO in leading organisations (including Anoop Sagoo from Accenture) will tell you that they have seen more traction with moving up the value chain to industry specific solutions. In particular, Insurance specific solutions and Pharma specific solutions that move up from "back-office" to "middle-office" are becoming more popular.

Unsurprisingly, there has been a clear trend of organisations that have migrated transactional processes as part of a phase 1 of activity, pushing the boat out and increasing scope to analytical and certain judgement based processes as part of phase 2.

Rural Outsourcing (Prediction 6)

We predicted that in the search of further cost reduction BPO providers would develop capability in lower cost regions in India, and begin moving to rural areas.

Did it come true?

I will let you decide for yourselves. This year, Genpact has set up operations in lower cost regions in India (Pathankot in Punjab, and Alwar in Rajasthan) and is investigating ways of working in rural areas. WNS announced that Tier III locations and rural areas will be a key part of their strategy, and Xchanging have set up in Shimoga in Southern India.

On top of this, rural BPOs in India such as 'Rural Shores' are having more and more success as customers and providers seek lower costs.

BPO Acquisition (Prediction 7)

And finally, we did predict that either the HP BPO division or Genpact would be acquired in 2010. Sadly for us, and maybe for Cognizant, this was one prediction that turned out not to be correct... Well, not yet!

What did we get wrong – in summary, not a lot ;)