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Slowdown marks major engagement, delivery, and price model changes for BPOs

January 4, 2009

Although the industry still projects 2.5 % growth for offshore BPOs, fierce competition and price pressure have begun to spoil the party for third party vendors. This calls for major shifts in engagement, price and delivery models in order to retain the same bunch of clients and acquire new ones.

Indicating this trend, US companies like Best Buy, Visa and Conseco have started negotiating rate cuts with their Indian IT outsourcing partners. The proposed rate cuts for new projects are anywhere in the range of 3-7 %. In addition, clients are seeking more value from existing projects; at times calling for a re-negotiation of existing service-level agreements (SLA).

On the delivery front, there is an increased movement beyond simple voice and customer centric processes. Clients are looking for more value from their outsourced deals. Over medium to long term this is likely to result in increased consolidation among third party vendors, wherein those with scale and footprint are likely to emerge as the winners.

Meanwhile the focus of the Indian companies has also begun to shift inwards under the Genpact-coinced new logo “India for India”.

BPO Strategy

In the past six to 12 months, companies like Infosys, Genpact and a few others have begun to evince more interest in domestic clients than they were doing earlier, perhaps realizing that given the right volume, the domestic industry can also bulwark against global slowdown. This is especially true for global players setting up their manufacturing bases in India, where they would require BPOs to offer them crucial link services.

For instance, confronted with softening demand in the US, companies like Dell and HP have begun to tap, the hitherto underserved markets, such as the SMB sectors in BRIC economies through targeted campaigns. Earlier they were only interested in serving the enterprise market in these economies.

The bottom line is that the market for BPOs is still there; it is just that the operations base has now shifted from the developed to the developing economies and the weak dollar is now demanding its pound of flesh. This is making BPOs work harder than before for the same business.

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Written by Radhika · Filed Under BPO Blogs 

Comments

2 Responses to “Slowdown marks major engagement, delivery, and price model changes for BPOs”

  1. Slowdown marks major engagement, delivery, and price model changes … on January 4th, 2009 11:32 pm

    [...] Read more from the original source: Slowdown marks major engagement, delivery, and price model changes … [...]

  2. Nan on January 9th, 2009 3:31 pm

    As recession goes deeper, there will be lot more pressure from US companies to reduce the rate and they may cut number of onsite contractors as well. I am sure outsource vendors have to reduce their rate and also layoff there employees

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