Xchanging, a U.K-based BPO service provider, which started off pretty much at the same time that many offshore services firms in India did, and has maintained a growth rate, if not margin rate, that is comparable to many large Indian BPO firms, has decided to list on the London Stock Exchange, and probably would have completed the process by the time this magazine reaches you. Xchanging, a firm that manages HR, procurement, insurance back office and financial-services back-offices functions for its clients, recorded revenues close to $800m last year — and all of that from BPO or products supporting BPO.
Back in India, Genpact, the GE captive, which has graduated to be a thriving third-party service provider with revenues in excess of $600m, has already hired financial advisers for a U.S. listing. It is likely to happen in the first half of this year. WNS, the British Airways subsidiary, and EXL Service, the Conseco subsidiary, listed at NYSE and NASDAQ respectively, in the second half of 2006.
What is common to all these companies? Xchanging, Genpact, WNS, and EXL Service are all examples of what the industry calls pure-play BPO service providers. They make all their money selling business services, in contrast to many others who also provide IT services.
The fact that so may of them have decided to list in a span of less than twelve months says something about the validity of the model. Not long back, many openly questioned whether a strategy to offer business services without offering IT services is sustainable. In the U.S., many IT services firms were entering this lucrative opportunity, whereas in India, where the industry was nascent — it started practically in 1999-2000 — the best of the pure-play BPO firms were being taken over by the large IT services firms.
And not because they thought it was the next big thing. On the contrary, many of them (IT services firms) thought that this high-growth, "low-value" business was a short-term remedy to counter the slowdown in IT services market. That attitude gave some good euphemisms to BPO, the most prevalent being Indian IT industry's description — IT Enabled Services (ITES). Thankfully, the phrase is dying a natural death. The four companies cited above are just the new set of companies that have established themselves to well-established multiservices new generations BPO companies.
A few of the older single-services firms are also transforming fast. Convergys, which started as a telecom billing software maker and transformed to a call-center service provider, is today becoming a multiservice BPO firm with strong clientele in F&A and HR services. Hewitt, though largely into HR, has also transformed itself from an HR consultant and recruitment firm to a full services HRO provider. A few other forms like collection services firm NCO and call-center services firm, Sitel, are now consolidating before transforming to be new-generation BPO service providers.