Risky Game: BPO Players Put All Their Eggs In A Few Baskets
The Financial Express,  October 17, 2002

New Delhi:  The Indian IT-enabled services (BPO) industry is surely going its parent (IT) industry way. Most of the BPO players are dependent on around two to three customers for almost 80 per cent of their businesses, like IT companies in their yesteryears. This dependence might not prove healthy for BPO players as with even one of the major clients walking out, the company can suffer huge loss.

“Most of the players are dependent on two to four major customers for over 80 per cent of their business, so if a client pulls out from them it might turn disasterous for the company,” National Association of Software and Services Companies (Nasscom) vice president Sunil Mehta said.

In its initial days even the IT industry was in the same state as the BPO industry, where most of the business came from two to three major clients, he said.

Dependence on small number of customers has increased the risk for these players as is evident from the fact that several Indian call centres lost business with the downfall of Worldcom, which recently filed for Chapter 11, according to industry experts.

On an average, a large call centre with 1000 seats might land up losing revenue upto Rs 2.5 crore in case it loses one of its major clients occupying upto 300 seats, according to QAI (formerly known as Quality Assurance Institute).

“In the early IT days, 40 to 50 per cent of business came from five companies including GE and Citibank for the entire IT industry and the same is now happening in the BPO industry, where big players started with big tickets” QAI head-BPO Umesh Vyas said.

Cautioning the BPO industry, Parsec Technologies chief executive officer Prabhat Agarwal said, “Dependence on one or two clients is very high but this must gradually be brought down as call centres are direcly hit if their clients fall into trouble.” Parsec provides technical support to over 10 call centres in India.

“But we are consciously working towards reducing the dependence on any of the major client to 20 per cent in the coming years,” Mr Dutta said.

Ranked as number one business process outsourcing (BPO) player by Nasscom, EXL Service is also moving from an anchor client to two to three major clients in the coming three years. “Our anchor client is Conseco but now we are about to rope in two more major clients, who along with Conseco will equally contribute to our revenues,” EXL Service chief marketing officer Krishan Dhawan said.

IT&T, which earns revenues to the tune of $200,000 every month from its BPO operations, too is dependent on two clients for over 80 per cent of its business.

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