Through a string of acquisitions, the company transformed its capabilities. Now, many are following the lead
From a horizontal play in say accounting or human resources, these companies are now specializing in verticals—say end-to-end administration for the mortgage industry
In January, Genpact Ltd, the business process outsourcing (BPO) company listed on the New York Stock Exchange (NYSE), bought Milpitas, California-based data analytics firm Enquero Inc. in the 14th acquisition since N.V. ‘Tiger’ Tyagarajan became its chief executive officer (CEO) about 10 years ago.
The decade has seen Genpact, a pioneer of India’s $38-billion BPO industry, execute its transition into a digital transformation specialist.
“I don’t think we have used the word BPO for 15 years," Tyagarajan, 58, said in a virtual interview. “There are many conversations I go back to between 2005 and 2010 when people would talk to us as a BPO company, and I would respond saying that’s a very narrow definition..."
Genpact’s transition from a commoditized BPO service provider started as early as 2007 when the company’s original architect and BPO trailblazer Pramod Bhasin was still at the helm. The company set up a re-engineering and consulting business the same year, in which it also listed on the NYSE.
At the time, most BPO companies in India were still running basic data entry processes for global enterprise clients. The re-engineering and consulting business accounts for 30% of Genpact’s revenue of $3.7 billion in the financial year that ended in December 2020. The business includes digital consulting, analytics, data engineering, cloud and digital commerce.
“We got to tomorrow, yesterday," said Tyagarajan.
Handpicked by Bhasin to steer Genpact through the next phase of its evolution, Tyagarajan accelerated its pivot into high-margin digital transformation services with a string of acquisitions that have enabled the company to reinforce its technology capabilities and hold its ground alongside established information technology (IT) services providers such as Infosys Ltd, Tata Consultancy Services Ltd, Wipro Ltd, and Accenture Plc.
All of this meant that when the covid-19 pandemic arrived, creating a surge in demand for digital transformation services across sectors, the company was well positioned to harness the gains. It has won several global contracts competing with larger legacy IT services firms.
In May, Genpact won a contract from New York-based media brand Fast Company. Under the contract, Genpact will help Fast Company get a “digital makeover" to accelerate and amplify its “impact on people and communities".
Two months prior, in March, Genpact extended a strategic partnership with Envision Virgin Racing of Britain as part of which it will use advanced analytics solutions to provide the motor racing team’s engineers and drivers quick access to actionable, real-time race insights. The size of the deals were not disclosed.
Acquisitions will continue to be an important part of Genpact’s ongoing transition, according to Tyagarajan. There are three ways, he said, to build the capabilities it needs to enable it to complete the transition. “One is to build the capabilities yourself and we do a lot of that... the second is to identify partners and leverage their capabilities. The third is to buy those capabilities," he said.
The emphasis in Genpact’s 14 acquisitions so far under Tyagarajan has been on bringing on board capabilities in emerging technologies such as cloud computing, analytics, artificial intelligence (AI), data engineering and cyber security.
Its acquisition of Enquero, for instance, brought on-board capabilities in delivering data engineering and data-led digital transformation services. With strengths in industries such as high-tech and consumer goods, Enquero extends Genpact’s existing capabilities in delivering end-to-end transformation to enterprise clients.
In January 2019, Genpact acquired riskCanvas, which offers tools to fight financial crime, to expand its expertise in anti-money laundering services for banking and financial services clients and help them transform their regulatory compliance processes.
The acquisition of Boston-based Commonwealth Informatics Inc., a provider of cloud-based drug safety analytics products and services, in 2018, had been aimed at enabling life sciences companies to establish a new approach for pharmacovigilance—one which leverages data to better predict and prevent adverse effects of medicines.
Genpact’s acquisition of Endeavour Software in 2015 was aimed at augmenting its digital capabilities in mobile consulting, architecture and design, implementation, and testing. Endeavour develops mobile solutions that can be used across key industries, including financial services, insurance, healthcare, manufacturing, and high-tech.
The company’s acquisitions strategy broadly seeks to bring on board verticals, services and geographies. “Acquisitions around geographic focus are much less. We focus more on the industry and services," Tyagarajan said.
It’s a smart strategy to propel growth, said D.D. Mishra, senior director at Gartner, an IT research and advisory firm. “An inorganic growth strategy is a significant lever for market share gains for most BPOs. In addition, market consolidation is contributing to growth as well."
Genpact may be an early mover, but the shift to digital transformation services has become an industry paradigm over the past few years. The imperative of making the shift is best understood through its own history and evolution.
The seeds of the BPO industry were sown in 1997 when Bhasin and a few colleagues from General Electric (GE) started GE Capital International Services (GECIS), Genpact’s predecessor. The entity operated as a subsidiary of GE. India offered a large and low-cost base of English-speaking workers to manage the multinational’s non-IT service back-office operations.
The 100,000-strong team Genpact has across 30 countries today started with 20 people in a single room in Gurugram, which was yet to emerge as India’s BPO capital. Genpact came into existence in 2005 after Bhasin led a private equity-backed management buyout of GECIS, triggered by GE’s decision to exit the captive BPO operations in India.
By this time, the BPO industry had already become one of the largest job creators in India. Importantly, the industry had emerged as a generator of jobs and careers for scores of English-speaking middle-class Indians from non-IT and engineering backgrounds. It created a whole generation of upwardly mobile professionals and had come to account for a significant part of the overall IT and IT-enabled services industry’s revenue.
Today, the BPO sector, or the business process management (BPM) industry as the National Association of Software and Service Companies (Nasscom) started calling it in 2012, provides direct employment to about 2 million people and has created indirect employment opportunities to 8 million people. But the lines are beginning to blur between IT services and BPM.
Back in 2011 when Tyagarajan took over the reins at Genpact, BPO was already in the early stages of metamorphosis.
“Our view is, our job is not business process outsourcing, but it is to solve problems for our clients and drive value. There are various ways to do that. One is to take processes and run them. And you could call that business process and outsourcing. But the other way is to change the way people run companies," he said.
Several of Genpact’s peers have traversed a similar path. For instance, Bengaluru-based 24/7 Customer, founded in April 2000 as a voice-based services provider, has even rebranded itself as 7.ai, the domain name symbolic of its digital persona.
When the company started, it was common to visualize a BPO operation as rows of employees answering customer service calls or selling products like credit cards or serving as a helpline to fix issues. These voice-based services soon evolved to web-based services and then AI-based solutions. “Today, we see the same line of people sitting in front of computers. But instead of talking into the phone, they are studying computer screens. They are monitoring the conversations of chatbots, or what we like to call virtual agents who have now taken over the initial level of interaction with customers," said the company’s co-founder Shanmugam Nagarajan.
The traditional BPO firm has evolved from being a cost centre to improving productivity and providing an enhanced customer experience (CX), to leveraging next-generation technology which makes these centres the drivers of business.
“The BPO that was established for optimizing cost is today creating new sources of revenue for companies worldwide. The talent we employ has also evolved from being processing agents to team members with niche specializations such as data scientists, AI experts," said Nagarajan.
7.ai plans to increase its workforce by 25% in FY22. It plans to open new offices and expand at a rate of more than 20% over the previous year.
Hinduja Global Solutions (HGS), a leading BPM provider with 38,000 employees, has also kept up with the changing times with the focus on new-generation digital technologies and the 3As – automation, analytics, and AI—in a cloud-first environment. In the last couple of years, HGS has invested significantly in creating centres of excellence in automation, analytics, cloud computing and social. The centres are helping drive internal digital transformation at HGS at scale.
One could say BPM is no longer about labour arbitrage but value arbitrage. One of our USPs has always been domain expertise, especially in verticals such as healthcare, technology, consumer products, etc., built over decades of providing customer service to top global brands. What we have done in the last few years is to bring together our people and the expertise with cutting-edge technology to deliver high-impact solutions to our clients," said Partha DeSarkar, global CEO at HGS.
New York- and Mumbai-based WNS Ltd, which started as a back-office operation for British Airways in Mumbai, delivers a spectrum of BPM services in finance and accounting, procurement, customer interaction services and human resources to global clients including Coca-Cola Co., Virgin Atlantic Airways Ltd, Go First, and T-Mobile US Inc.
WNS group CEO Keshav Murugesh illustrates the scope of the work it does now through a project that the company executed for Virgin Atlantic.
The British airline faced an exponential increase in refund requests of more than 400X the normal volume during the peak of the pandemic. It was imperative for the airline to quicken the refund process to maintain customer trust and comply with regulatory requirements.
WNS deployed a solution to automate the manual activities involved in processing refunds. The solution, including customized bots, was developed and launched in less than eight weeks, with zero disruption to Virgin Atlantic’s core operations. “The new solution enabled Virgin Atlantic to work through high claim volumes while reducing backlogs and hold time, resulting in increased customer satisfaction. It has yielded about 90% automation of the ‘refund-carding’ process with 3X speed, 93% improvement in the quality of claims processing without any process re-engineering and 30% productivity benefits and higher accuracy of claim closure in ticket refunds," he said.
As Genpact and its ilk push deeper into higher-margin projects, one of the big challenges they will confront is the narrowing grey area between the nature of work done by IT services players and BPM companies.
“A challenge for BPM companies is pivoting from low-margin, legacy ‘horizontal’ strategy of focusing on finance and accounting, human resources, procurement and customer care, to a differentiated, higher-margin ‘vertical’ strategy—for instance, offering end-to-end administration services for the mortgage industry," said Nitin Bhatt, technology sector leader at the Indian unit of EY, the consulting company formerly known as Ernst & Young.
The bid to ride the digital transformation wave may prove to be more worrisome for IT services firms that are themselves in the midst of a transformation. The BPO industry has already proven its resilience through multiple recessions and market challenges and re-invented itself many times over. This may just be another beginning.
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