The Indian BPO industry, once a sunrise industry, has begun to warm up again.

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After almost a year filled with uncertainty over order bookings, anti-outsourcing wave and slashed customer spends, the $14 billion industry is seeing better tidings. Experts predict that the industry would grow by 10 per cent this year. The banking, financial services and insurance (BFSI) vertical is witnessing better traction of late and most BPO majors are back to chasing multiple deals worth over $50 million.

BPO firms Firstsource, Wipro BPO, Quattro, TCS BPO and Hinduja Global agreed that the demand for BPO services has picked up and that verticals such as retail and energy too were witnessing larger number of deals. According to research firm Everest Group, the April-June period has been better with the second quarter (April-June) registering 130 deals in the BPO space globally against the previous quarter when total deals stood at 110. Indian providers account for 20 per cent of total BPO deals. These figures are the very latest, and specially furnished to FC. In Q4 of 2008, 148 BPO deals were sewed up globally.

Wipro BPO’s BFSI head Ramit Sethi said that there is remarkable difference in the business environment. “The deal flow is more encouraging. However, it’s not yet time to rejoice. But it’s a great sign to find that there are more customer walk-ins happening. There is a kind of upswing in the mortgage and collections space in the US, and that’s helping. There are several deals worth over $50 million that companies are chasing now.” In line with this, Wipro BPO is expanding operations in China and the Philippines by opening two more centres by the end of this year. While it plans to open a 500-seat centre in Chengdu (China), it intends to have a 1,000-seat centre in Manila. It is also adding about 1,000 people to its Hyderabad centre in six months.

The improvement in business fortune is best judged by the number of high profile deals and by revenue figures. Genpact’s revenues during April-June quarter swelled to $272.9 million, up by 8 per cent from the corresponding period in 2008. Attrition fell to 22 per cent from 25 per cent. WNS’ revenues were up by 11 per cent to 136.7 million from the previous year. The previous quarter (January-March) its revenues stood at $132 million. Firstsource’s Q1 revenues were Rs 484.5 crore, showing a sequential growth of 2.6 per cent and a year-on-year growth of 18.8 per cent. TCS BPO recorded revenue of Rs 822 crore in Q1. It is now hoping to make its BPO operations touch $3 billion in five years.

TCS BPO is also planning to add 1,500-2,000more people this year to meet the surge in demand. Abid Ali Z Neemuchwala, global head (BPO Services) of TCS BPO said, “We are seeing decision making resuming for a lot of our customers in this quarter. BFSI should see a lot of action from now on.”

In August, Infosys BPO won a new deal with T-Mobile. In the April-June period, Firstsource had won a contract from Idea Cellular and Infy BPO had won another deal from Microsoft. Wipro walked away with an Oracle contract. BPO firms do not reveal the size of the deals won for competitive reasons. Partha De Sarkar, CEO of Hinduja Global Solutions (HGSL), said he began the year with a good pipeline and those orders are now kicking in. This conversion of back-ended orders has seen the firm win two new clients from the US in the April-June period. The company was also able to migrate one client to the ‘over $15 million’ category during the quarter, he said.

Firstsource CEO Ananda Mukerji felt the market has stabilised this quarter. “There is momentum in our telecom business largely due to vendor consolidation where we are gaining volumes while in healthcare we are seeing a good pipeline due to greater investment made in sales and marketing. The key markets of the US and the UK have shown stabilisation.

Nikhil Rajpal, principal (global services), Everest Group, said the situation has improved. “The slowdown happened in last quarter of 2008, and the Jan-March quarter was very tight for the BPO sector since key decision-makers were changing because of consolidation and deal cycles became longer (3-6 months). As volumes for clients have tapered off, work in India had gone down,” he said.

“Also, despite succeeding in winning new business, several BPOs in India have seen their work from established clients going down. For instance, Genpact, which saw 30 per cent growth in new business, saw significant drop in work from GE. But since April-June it has got better,” Rajpal added. “I see more improvement in late Q3 and Q4 of 2009, with the industry growing by 10 per cent and there should be almost complete recovery in 2010,” he added.

Raman Roy, chairman and managing director. Quatrro BPO said, “We are definitely seeing higher level of engagement now. This is an early sign of revival for the industry. Offshore is a key element for every industry, and India will be a part of the solution.”

Firstsource’s Mukerji, however, warned that significant uncertainty still remains on the time of actual recovery on the ground when customers start taking more strategic outsourcing decisions. “We expect some quarter-on-quarter volatility to continue because I think at this time volume fluctuations are higher than normal because of the economic environment.” Nasscom last year had predicted that the BPO industry would finish FY09 with revenues of over $16 billion, but it ended up with $14 billion.

(With inputs from Bhaskar Hazarika in New Delhi)