Big bang may be ahead of domestic BPO

The domestic BPO market, currently estimated at Rs 600 crore, is growing steadily. But this can turn into a big bang as large public sector companies became aware of the need to improve customer service and go in for outsourced call handling services.

State Bank of India has already floated a request for the proposal, the Railways will float a tender and Indian Airlines and BSNL are actively looking at the idea of outsourcing, says Sandip Sen, CEO of Customer First, the largest domestic BPO company (likely 2004-05 turnover Rs 18 crore), with 70 per cent of its business coming from within the country.

The domestic market is currently polarised between large captive players and many small third party providers. Sen expects consolidation as clients' requirement for quality service from large vendors grows.

Other than large public sector companies, the volume growth will also come from large private companies outsourcing more of their work which had hitherto gone to their captives.

As with the global call centres business, the Indian part of it has also witnessed margin pressure over the last couple of years.

"Clients want the best service but are unwilling to pay more," Sen observes somewhat ruefully.

Staff costs have gone up by 20 per cent over the last two years but billing rates have not kept pace. Hence the premium on being big enough to attract large volumes and spread overheads better.

As having deep pockets to grow fast is an issue, "the challenge is in managing investment," says Sen.

For Customer First, "all options are open; going to market as well as finding a strategic investor. (The promoters) have no dogma about retaining control, theoretically nothing including existing, is ruled out. But the price has to be right."

In the present growth scenario, Customer First plans to expand by building the business at current locations which include Bangalore, Hyderabad, Chennai, Kochi, Pune, Coimbatore and Kolkata. The last has expanded rapidly lately and is now "quite large".

If you do the business well, your customers become sticky. "We have not lost any customers," asserts Sen. A key customer now is Tata Teleservices, which accounts for 400 of the company's current stock of 1,560 agents.

The company's bread and butter remains telecom and financial services. One of its early clients which it still retains is Air Deccan.

The newest client is the Apollo Group, indicating the company's aim to branch out into new verticals like healthcare and travel and tourism, other than government or public sector of course, which represents the single biggest opportunity.

Turnover has gone up from Rs 7.2 crore in 2002-03 to Rs 18 crore in 2004-05 (projected) and Rs 25 crore is targetted for 2005-06.

Cash profit has been slow to grow from Rs 1 crore in 2002-03 to Rs 1.8 crore in 2004-05 (projected). Net profit is likely to go up to Rs 60-65 lakh in 2004-05 from Rs 45 lakh in 2002-03.