Q&A: N V Tyagarajan, COO, Genpact

'US, European clients delaying transitions'

The country’s largest business process outsourcing (BPO) company, Genpact, yesterday lowered its full-year revenue growth guidance, despite reporting handsome growth in net income and revenue. Chief Operating Officer N V Tyagarajan explains Kirtika Suneja the rationale behind narrowing the revenue growth outlook. Edited excerpts:

Why did you lower the revenue growth forecast to 12-13 per cent from 14-17 per cent?
The environment is uncertain and clients are worried about spending cash and incurring costs. In BPO, a lot of costs need to be incurred upfront, but now, there are delays in transitions to next year. There was a cutback in project management staff, and clients are prioritising their work. The clients in the US and Europe are also delaying the transition, while the customers in India and China are doing well and not expected to delay the work.

 

How many of these clients are delaying transitions and what has been the revenue loss till now?
There are about eight to 10 clients, each worth $2-3 million. The total delay is worth $40 million because the European information technology business has not kicked in. The cost impact of this is almost $25 million and hence, our gross profits are also down. Despite the fact that the pipeline is strong and eight per cent more than last year, the revenue cycle is slow and has become longer.

You said the clients in India and China were doing well…
Yes, our India clients are doing very well and giving us interesting deals, as they are aware of what they want. For instance, in the government space, we have redesigned three government hospitals in the way they work. However, we are still waiting for a big break in the government sector. China, on the other hand, is tough and slower than India, but the relationships there are big.

Is attrition back?
Attrition was expected to be higher than last year and it now stands at 28 per cent for Genpact. It was 23 per cent for the same period in 2009. We expect it to reach 2007 levels, but our attrition is still lower than our competitors.

Overall, how is the environment looking for the BPO industry and where is it heading?
The environment is still uncertain for customers, as they are still concerned about their cash and investment, especially which has a longer payback. Customers like fast payback transitions and though a lot of them are interested, they are taking a longer period to decide. As we go into the next year, we expect the run rate to be higher.