Western multinationals are selling off their "captives," or wholly owned back-office operations, in India to Indian firms, and these firms are offshoring pieces of their growing workload to locations in Southeast Asia.
The call center industry in India employs more than 300,000 agents, with 130,000 of these based in captive operations. Companies are now finding they can’t scale their captives to gain advantage. Also, many companies now want to move from the fixed cost of a captive to the variable cost of outsourcing. According to a 2007 Forrester study, 40 percent to 60 percent of current captives will initiate exit strategies during the next three years.
In 2007, Intelenet Global Services, a global BPO provider based in Mumbai, acquired Travelport ISO, a captive business of Travelport Group, with 1,100 employees across two locations in India.
"With the Travelport acquisition, we expanded our travel vertical," says Manuel D’Souza, chief HR officer at Intelenet. "Companies launched captives to maintain control over intellectual property and cut costs. But third-party providers like Intelenet have grown in experience over the years and suffered through the hardships and now know how to achieve the best costs and fastest times."
Intelenet has morphed from a regional BPO firm with 25 employees in 2000 to a major global BPO player with more than 25,000 employees in 25 facilities. In 2007, Intelenet opened a new site in the Philippines with 300 employees. "The Philippines was a quick fix for us," D’Souza says.
"In the Philippines, recruitment is easy. Clients want proposals that offer standout choices, and the Philippines has strong availability of labor and strong English-language skills," he says. "The Philippines stands close to India in the quality of candidates and the scalability of labor. In India, we have to do training for culture alignment and accent adjustment, and in the Philippines we have to do slightly less. There are no extra costs or time involved."
India-based Wipro Technologies also opened a new BPO center in the Philippines in January, adding 9,000 workers near Manila to its global BPO workforce of 20,000.
In addition to substantial investments in the Philippines, Indian multinationals are now the third largest group of investors in Vietnam.
Indian acquisitions and investments in Southeast Asia are part of a broader cross-border M&A binge now under way among Indian multinationals. In 2007, Indian cross-border M&As hit $33 billion, up 85 percent from 2006.
Intelenet is part of the trend. In addition to buying the Travelport captive in 2007, Intelenet acquired a U.S.-based BPO firm with facilities in the United States, Guatemala and Panama and a delivery center with 700 seats in Mauritius. The acquisition immediately added Spanish and French to Intelenet’s language portfolio and expanded its reach to two new continents.
Despite wage inflation averaging 15 percent across India, labor costs are a secondary factor in Intelenet’s expansion abroad.
"Costs are not a primary concern in India," D’Souza says. "We contain our wage cost increases through our employer-of-choice status."
Instead, the primary reason is developing global solutions with onshore and near-shore capabilities for clients worldwide.
"We are constantly looking at other locations for building our global footprint and our language capabilities," D’Souza says. "Customers want to spread risk."
Workforce Management, April 21, 2008, p. 23 -- Subscribe Now!