Since the late 1990s a range of Indian-based suppliers have been winning significant tranches of offshore outsourcing business. Names including Genpact, ICICI OneSource, Infosys, TCS, Wipro, WNS and others have made strong in-roads in these areas, using their Indian heartland as a base for providing skilled, low-cost resources to deliver services to Western corporations. Traditionally however these services have been in three areas:

• Applications Management, utilising skilled technical resources
• Customer Services, providing the voice-based services which attract so much media attention and often negative public perception
• Transaction processing, including mortgage applications, insurance claims and other relatively simple rules-based processes

In the last year or so however they have entered the more high-value world of complex BPO, previously the exclusive domain of the global consulting and integration giants such as Accenture, Capgemini and IBM. The entry vehicle has mainly been Finance & Accounting services, the largest and fastest growing sector in the complex BPO market. Genpact, TCS and WNS amongst others have all won significant deals in the last year – why are they winning and what does this mean for the market and the established players?

They are winning for one major reason – price. Unencumbered by the added costs of inherited corporate overhead and cultural pressure to deliver some services onshore which the western BPO suppliers have to contend with, the Indian suppliers have been able to price their offerings significantly more competitively – in some cases 30% lower than the western suppliers are used to offering.

But its not just price – for all clients low-risk delivery capability is the first hurdle: without that capability, it doesn’t matter how low the price. And this is where the Indian suppliers have changed – many are now able to demonstrate capability in delivering complex processes which they couldn’t prove before. Whereas 2-3 years ago the market lacked confidence in their generic ability to deliver, that confidence is now there. Clients are now saying if they can deliver and they are cheaper, then why not use them?

The third factor underpinning their success is commercial flexibility – complex BPO contracts have traditionally been difficult and adversarial to negotiate, with suppliers reluctant to take on real delivery risk (despite the sales pitches), but the Indian suppliers are typically gaining an reputation as easy to do business with.

So will the Indian suppliers run away with the complex BPO market. Not necessarily, as despite the advantages they have in cost and flexibility over the traditional BPO leaders, they also have some challenges. Firstly, they don’t have the profile or brand which helps to win the confidence of CXOs of major organisations – the old “nobody ever got fired for buying IBM” syndrome. Secondly, they don’t have the consulting heritage or the skilled onshore resources of the traditional players and therefore may struggle to manage complex transitions or transformation programmes. And lastly their low prices and commercial flexibility may not be sustainable – they may be investing in entering the market, and find it difficult to maintain this going forward.

Despite these challenges the Indians are here to stay. The traditional players will need to adapt to deal with them, partly by demonstrating to clients that their higher prices actually deliver more value, and partly by restructuring their businesses so that they can deliver comparable pricing. The ensuing battle for this multi-billion dollar market should be interesting.