India's Outsourcing firms hit by US financial crisis

The BPO-KPO sector in India is facing the heat of the US slowdown, particularly following recent events in the financial markets. Businesss of a host of small and mid-sized firms have taken a further hit in the industry since a major chunk of business comes from banking and financial services firms in the US.

“The slowdown is going to impact the BPO firms in India. This will eventually result in overall slowdown of the BPO industry. But now a large pool of professionals will be able to provide quality services to the Indian BPO-KPO industry at much lower prices,” says IDBI Capital Market Services research head Shahina Mukadam.

According to a report released by Nasscom, the BPO and KPO industry together generated Rs 1,160 crore revenue and provided employment to 7 lakh people in 2007-08. The share of the US in the Indian BPO-KPO export market was 61%, making it the largest contributor to exports in the segment in 2007.

Ahmedabad-based KPO, Azure Knowledge Centre, foresees a slowdown in the financial services by 25% and in the insurance services by 15% by the end of this year.

Azure Knowledge Centre director Jay Ruparel says, “The debacle in the US will create a lot of uncertainties regarding the continuity of current financial services contracts and also raise doubts as to how the future contracts are signed with the US financial companies.” So far, this company has hired four people from Lehman Brothers and Merrill Lynch.

“The employment scenario in the KPO-BPO industry is going through an extremely dull patch and this in turn will have an effect on the growth in this industry,” says Karvy Stock Broking vice-president Ambareesh Baliga.

Gurgaon-based KPO, The Smart Cube, has 130 employees at present and it is expected that the employment rate of the firm will go down by 30% till next year.

The Smart Cube managing director Sameer Walia says, “Future hiring rate of BPOs will be far worse off as compared to the KPO firms. The BPO employment rate is projected to decline by 60% within a span of one year.”

However, Exevo COO Vivek Sharma says, “I see an immediate-term negative impact, which will continue for around six to nine months. But in the long term, any other financial institution will fill up the space vacated by Lehman Brothers. We have received around 50 resumes from ex-employees of Lehman Brothers in the past two days.”