Bangalore: Genpact Ltd, the New York Stock Exchange-listed business process outsourcing and information technology (IT) services firm, has laid out a road map to expand the annual revenue of its analytics and research practice, which is within what the company calls its smart decision services (SDS) division, to $1 billion in three to five years.
The revenue expansion will come as a result of organic growth as well as acquisitions, said Pankaj Kulshreshtha, business leader, analytics and research, in an interview.
The SDS division made up about 20% of its $1.6 billion in total revenue for fiscal 2012.
Kulshreshtha declined to specify exactly how much of the division’s revenue was contributed by analytics and research, but said it was currently around the $250 million mark the company aimed at when he took charge of the practice four years ago. “We then revised that aspiration to a $0.5 billion plan, which is the growth playbook we are operating on currently. Now we are looking at designing a billion dollar road map as we go forward. Since ‘Tiger’ (N.V. Tyagarajan, the chief executive officer) came on board a year ago, with his understanding of the space, and his allocation of resources to develop it, the practice is doing very well.”
Charting growth: Genpact chief executive officer N.V. Tyagarajan. Photo: Aniruddha Chowdhury/Mint
The CEO, in fact, believes there is no reason why the share of SDS should not double to 40% of revenue over the next few years, he added.
While there is a hype component to the buzz around analytics, all IT services firms, from large multinationals such as International Business Machines Corp. (IBM) to Indian tier-i firms such as Wipro Ltd, claim rapid growth in their analytics practices. New firms such as Mu Sigma and Manthan are also receiving client and investor interest. Wipro, like Genpact, says analytics is its fastest growing offering, and it recently acquired an Australian analytics firm.
“There is no doubt that analytics is a big opportunity,” said Dipen Shah, senior vice-president, private client group research, Kotak Securities Ltd. “Firms are focusing on analytics to track risks, investments, get better ROI (return on investment) on their spends, and better cost efficiencies. The practice should do well.”
Kulshreshtha said Genpact has about 5,000 people in its analytics practice, largely out of Bangalore, where he is based. It has hired about 600 people this year, and might add another 500 by December, he said.
Acquisitions are a key component in the expansion plan, and the target firms will most likely be those with high-end capabilities in the US and/or Europe, he said. In India, over the last year, Genpact has already acquired Symphony Marketing Services for its capability in retail CPG (consumer packaged goods) and Empower Research for its social media capability.
“We are very aggressively looking at acquisitions, not for scale, but capability, particular in new verticals. A lot of what we have looked at recently is in Europe. We are also very interested in high-end capabilities onshore in the US, where we think we need more legs,” Kulshreshtha said.
The firms Genpact was targeting in Europe and the US may have price multiples on the higher side, “which we will have to watch out for and get right, but it is not as if we can’t bite it, as they are in the $10-50 million revenue range,” he said.
Genpact is also building an analytics delivery centre in China, which is still in the small double digits in terms of people employed. However, he said that it is on the threshold of a couple of “big deals” that might push up the numbers.
“The deals are in the manufacturing, inventory optimization space and one is with a large information intermediary in the CPG space. They are likely to happen,” he said.
With the analytics space developing fast, “the geeks are out of the basement”, he said. He himself has a Ph.D in quantitative methods and information sciences from the Indian Institute of Management-Bangalore.
There is also an emerging talent issue in the space, he said, as it looks for inter-disciplinary capabilities in statistics and other quantitative methods, business, technology and behavioural and information sciences.