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Top Indian firms eye emerging markets
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Top Indian firms eye emerging markets
Outsourcers, who get a large portion of their revenue from the hard-hit United States, are planning either to enter the Middle East market or expand there to reduce their dependence on the U.S. market.
Wipro, which counts India and Middle East as its fastest growing markets, said the Middle East will continue to see higher growth than developed economies. “You can’t not be in an emerging economy and still be a large player in 2015 or 2020,” Wipro Chief Financial Officer Suresh Senapaty said at the Reuters India Investment Summit.
However, he added that given the current economic turmoil, expecting a doubledigit growth from the Middle East would be a stretch.
Genpact also plans to cash in on the growth in the Middle East. The company said it has started bidding for a “little bit of business” in the Middle East market and expects to begin operations over the next three to four months. “We are just finalising our plans in the Middle East. There is a lot of money there and I think there is a lot of appetite for this kind of work,” Genpact Chief Executive Pramod Bhasin said at the summit.
The size of the Middle East business will be “tiny initially” and the addition to revenue will be small during the first year of operations, Bhasin, who established Genpact in 1997, said.
However, Avinash Vashistha, chief executive of outsourcing consultancy Tholons, said although the Middle East is an attractive destination for outsourcing companies amid an infrastructure boom, its shine has been significantly reduced by the global market meltdown. “I don`t see them focusing heavily on the Middle East as they were planning to do before,” he said. Cheaper wages in India have helped attract out sourcing from Western firms such as Citigroup, Goldman Sachs and Airbus. However, the economic slowdown in the United States, which accounts for more than half of the outsourcing sector`s export revenue, has hindered its scorching pace of growth.
Genpact and Wipro have seen their shares drop significantly this year amid concerns that a U.S. recession will slash demand for information technology services, especially from the battered financial sector — a key market.
For outsourcing companies, there is more to look forward to in emerging markets than just striking big deals. Wipro, which has 75 percent of its resources in India, plans to expand its presence in China. “I would say in the next three years, we’ll have India, China responsible for 75 percent and maybe in the next 10 years we’ll have India, China and Russia,” said Wipro’s Senapaty, who also sees a substantial rise in headcount in China over the next five years.
Apart from India, countries like the Philippines and Vietnam are the other favored destinations of outsourcing companies.
“Vendors are not looking at emerging markets just as a destination to offset the problems in the U.S.,” said Chaitanya Ramalingegow da, director advisory services, Zinnov Management Consulting Pvt Ltd. Earlier this year, Wipro opened a business process outsourcing center in Cebu, the Philippines. Recently, it also said its BPO arm was setting up a shared services center in Brazil for AmBev, the largest brewery company in Latin America.
“The Philippines as a destination for customer servic es is now a must,” Tholons’ Vashistha said. The Philippines’ population is 1/13th that of India and yet it generates half as much revenue from business process outsourcing operations as India, Vashistha noted.
Similarly, opening offices in Eastern European countries give outsourcing companies bigger access to European markets.
