BPO industry unlikely to grow in double digits for at least next two years: Mohit Thukral

Q&A with senior vice-president, Genpact

Though the IT industry body NASSCOM has given a robust outlook for the Indian IT-BPO industry for the next fiscal, Mohit Thukral, Senior Vice President at Genpact does not see the overall BPO industry grow in double digits for at least the next two years. In an interview with Surabhi Agarwal and Aditi Divekar, Thukral talks about why the company's profitability has dipped in the last quarter, the business from its largest client (General Electric) and about the company's investment in automation.

Edited excerpts:

What has led to the drop in profits in the last quarter?
There has been no drop, it is due to the investments we are making in line with our startegy for 2017 which involves focusing and building certain verticals whether it is capital markets, healthcare, banking or pharmaceuticals and insurance. We will also focus on building technology solutions for some of the verticals using analytical engine and grew up in it.

We also need to hire someone domain expertise onshore, hire people who can help us build new products in different geographies whether it is in North America, Europe, Australia or Japan. So we will make some massive investments in sales, solutions, subject matter experts and product managers.

What is your overall sense of how do you see the growth environment?
We definitely see a lot of activity. We see some large deals in the pipeline getting robust and better. And we truly believe that the investment we are making, strategy we are adopting that will really change the game for us. NASSCOM is talking about growth of 13-15% right. But it is more IT. If you talk to some of my peers in other BPM companies, I don’t think the BPO industry will see a growth rate of 13-15%. We have been asking NASSCOM to have the IT and BPO separately.

But why is BPO lagging IT growth?
IT was less 2-3 years ago and BPO was more. Its about the timing. IT spending had stopped 2-3 years back. The global companies were not putting in money. So IT growth rates had gone down as spending was low. Suddenly there is a resurgence of innovation, digitalisation and platform development and all that so IT has been getting huge amount of business. Whenever IT changes happen, process takes a backseat. It is a cycle.

What about integrated IT and BPO. Do you see that happening more and more?
If there are 10 deals in the market not all are IT-BPO. It is about 20%. I don’t see that change for sometime because platform based BPM has not been too successful. Customers want you to bring someone who are experts to understand their domain, processes, who can help give them customer experience. They already have underlined technology. They are not going to change the whole technology platform and pay million and million of dollars, wait for four years for this mega change. You want to drive change fast.

So were you wrong on acquiring HeadStrong?
No, we were infact right on Headstrong. But Headstrong we didn’t buy because we wanted to grow on capital market in technology. We bought headstrong as it is in capital market to build our BPO business and you see today we are growing our BPO business from capital market.

We didn’t go wrong but what happened was the time lag difference. You know how capital market was badly impacted in last few years and so the timing of what we want to do just shifted by a year maybe.

Why is the GE business depressed?

GE is a large business for us. It is about 25% of our revenue. I think for us to constantly grow it is very important. Atleast make GE flat to positive and grow others at a rate of 15% average or so over the year. So nothing has gone wrong with GE as such. The only case in GE it has shrunk its books, it has divested some businesses, acquired some businesses. Its all getting tranformated. We see momentum in GE in FY14-15.

How much robotics is actually being deployed by you?
The client needs productivity. So you decide how you want to do it. The customers ask over 5 years for 25-30% productivity and we give it and if we don’t deliver we have to write the cheque for them. So very clearly we have to ways to do it. A lot of transactions are in robotics. Our penetration is increasing. We are targeting about 50%… We believe as we bring more and more robotics it will give us the high element of efficiency.

So hiring will go down right if  you are doing 40-50% robotics.
Obviously but I don’t know the number because we have just started to deploy.