With robust results, BPO unit shows Infosys the way

At $470 mn in annual revenue, Infy's BPO division has grown at a faster pace than its parent, made a number of acquisitions.

BANGALORE: At $470 million (Rs 2,560 crore) in annual revenue, it's a fraction of its parent's size, but in the past four quarters, the business process outsourcing division of Infosys has grown at a faster pace than its parent.

Unlike Infosys, it has also made a number of acquisitions. Can 
Infosys BPO continue its performance under a new chief executive?Gautam Thakkar, who took over from Swaminathan D, on April 1 as CEO and managing director, said he intends to continue with the same philosophy — making acquisitions that give access to a new business segment or help the company consolidate.

Thakkar and chief financial officer Abraham Thomas are evaluating opportunities in sourcing and procurement, mortgage processing and healthcare. Infosys BPO acquired the Australiabased 
Portland Group in end-2011. The acquisition gave it capabilities in sourcing and procurement and the company now wants to consolidate its position in this segment.

As large global firms look to reduce their billion dollar sourcing and procurement bills, they are turning to providers such as Infosys BPO to cut costs and become more efficient. "We are using Portland to go to different geographies. Clients will never ask me how many people will I use or how much money it will take, they would ask if I can save costs substantially," said Thakkar.

Mortgage processing is another area in which Infosys BPO is keen on making acquisitions. "Mortgage is another area because the housing market and economy are picking up in the United States. Banks have started giving financing to people. These are the areas where we see growth," said Thakkar. Rival 
Cognizant expanded its mortgage services portfolio by acquiring 

CoreLogic

 

 in 2011.

Thakkar, Infosys BPO's fourth employee, had overall responsibility for service lines, such as finance and accounting, sourcing and procurement, and customer services — together accounting for about 70% of the BPO firm's revenues — before he took over the CEO's role. He also led the mergers and acquisitions function earlier.

"What we used to do then and now are dramatically different," said Thakkar. Infosys BPO's first acquisition was of the shared services centres of 

Royal Philips Electronics

 

, giving it diverse language capabilities and expanding its finance and accounting practice.

"What is the value that you're putting on table and how it helps a client reduce cost in terms of millions of dollars is what matter today. We work with Philips, and there the conversation is about how we can improve their top line rather than just looking at their sales and marketing expense," he added.

Nearly 40% of Infosys BPO's revenues come from onsite locations as opposed to a largely offshore centric model in the past. Of the 23 centres it has, only six are located in India. Most of the overseas centres bring different language capabilities or value that can be created only from an onsite location. This helps to maintain margins even if work is done onsite, according to Thakkar.

 

"Infosys BPO has seen success from non-voice based services, other value-added services and the acquisitions they made," said Sanjay Dhawan, technology leader, Pricewaterhouse Coopers.

The BPO provider is now eyeing the opportunity from a large number of legacy deals that are coming up for renewal over the next five-seven years. Thakkar expects companies to parcel out the contracts to multiple vendors and de-risk from a single vendor strategy when they come up for re-bidding.