India's Infosys Starts BPO Unit for Domestic Market

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Infosys Technologies, India's second largest outsourcer, has started a business process outsourcing (BPO) unit that is focused on the growing Indian market.

The company is late in getting into this market, unlike Indian competitors such as Tata Consultancy Services and some multinational services companies.

"About 12 to 13 months back we were not sure the market was ready," said Amitabh Chaudhry, CEO and managing director of Infosys BPO, speaking on Tuesday on the sidelines of a BPO industry conference.

Infosys, however, expects that its brand will help it bag business in the country, Chaudhry said.

The Indian market is now ready to pay for the services through a variety of models, including as a percentage of cost saved through the service, he added.

The addressable market for technology and business outsourcing services in India is expected to expand five-fold by 2020, to between US$90 billion and $100 billion, driven mainly by economic growth, according to a joint study by India's National Association of Software and Service Companies (Nasscom) and management consultancy firm McKinsey & Co.

Many Indian outsourcers have not focused strongly on the Indian market so far because it was small, and also because prices offered in India are lower than in other markets like the U.S.

The revenue per employee in India can be 20 to 30 percent lower than in the U.S., Chaudhry said. Pricing the service based on business outcomes such as cost saved could help the company get higher revenues in India, he added.

To reduce costs, Infosys plans to tie-up with BPO firms that have their operations in small towns. A number of small BPO companies that mainly address the domestic market have set up operations in small towns to take advantage of the lower cost of staff there.

Later, Infosys may set up its own operation in a small town if the business grows. For now it will deliver most of its work from Jaipur, a city in Rajasthan state in North India.

Infosys expects its revenue from BPO services to the domestic market to be about 2 percent to 3 percent of its total revenue from BPO services over the next two years. It has already bagged two large deals in India, including one from the country's Income Tax Department, and has some more in the pipeline, Chaudhry said.

Infosys' BPO business had revenue of $316.2 million in the Indian fiscal year to March 31, and employed 17,398 staff at the end of the fiscal year.

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