Infy sets up domestic BPO operation

India’s second-largest IT services firm, Infosys Technologies, has set up a separate unit within its business process outsourcing arm (Infosys BPO) to concentrate solely on the domestic BPO market.

The unit has already bagged a Rs 250 crore deal to set up a BPO for the income tax department and the company is soon going to sign a Letter of Intent (LOI) for yet another government deal. Infosys is a laggard in the domestic market compared to other IT majors like IBM, Tata Consultancy Services (TCS) and Wipro. To rectify that, the company had set up an India-dedicated unit last October. Currently, India contributes only about 1.3 per cent of the revenue.

However, this unit “was focused on the IT services part. But after being in the market for some time, we think it’s a good time to launch your BPO services as well. We are also confident we will continue to make margins even from the domestic market,” Amitabh Chaudhry, CEO and Managing Director, Infosys BPO, told Business Standard. “This year, it (revenue) will be small. It will be only after a year that the real impact will be seen,” he added. The company is targeting verticals like the government, BFSI (banking, financial services and insurance) and the public sector banks.

Infosys BPO reported a revenue of $279.5 million (around Rs 1,300 cr) for the year ended March 31, 2009 and has a net income of $40.7 mn (around Rs 190 cr). It has four platforms - hire-to-retire, source-to-pay, order-to-cash and newspaper in a box. Other than looking at a shared-services model for the domestic market. The company is also tying up with rural BPOs. Chaudhry believes this will also reduce cost for the company. “We are working with one rural BPO and are in talks with three-four others. We have done the due diligence in terms of delivery capability of these firms,” added Chaudhry.

When asked if Infosys BPO has been slow in entering the domestic market, Chaudhry disagrees: “The maturity in the BPO market has just come in. Besides, we started our BPO operations about nine-eight months back and also have clients. There is a huge opportunity in this segment.” The domestic BPO market, with a growth rate of 50 per cent over the past five years, grew faster than the exports market and is expected to touch $1.6 billion for the financial year 2008, according to an estimate by Ernst & Young.

Analysts said Infosys’ move to enter the BPO market was a result of the demand in the market. “Indian customers want an end-to-end services provider. Even in the government segment they look for vendors who can provide IT as well as a BPO offering,” said an analyst tracking the firm.