Infosys says BPO hit the most by job losses in the US

High unemployment rate in the US is threatening to hit BPO services of domestic information technology (IT) companies the most as American outsourcers cringe from shipping jobs offshore in the face of rising job losses in their country.

Kris Gopalakrishnan, CEO of Infosys Technologies, told DNA this was one service that was witnessing weakness as US continued to reel under double digit unemployment rates.

“Generally, we are seeing our customers spending on all services but there is some weakening (in spending) in BPO segment. Of late, we are not seeing that many BPO projects because of rising job losses (in the US). It is only a conjecture at this point in time,” said the Infosys chief.

Ashutosh Vaidya, senior vice-president of Wipro BPO Solution, said his company was keeping conversations with BPO customers alive by offering higher level skills and quality in voice and non-voice services.

“Yes, there is the issue of unemployment in various geographies but I’m not really seeing a decline in the BPO deals. There is enough headroom for us to grow deals in this service segment,” he said.

Vaidya said BPO deals generally have longer sales cycle as they take a long time to fructify. “In a BPO deal, the customer is handing over a running operation to us (vendors) and therefore they do rigorous due diligence, reference check and other such investigations before closing the deal,” he said.

Ganesh Natarajan, former Nasscom chairman and CEO of Zensar Technologies, said Gopalakrishnan could be talking about weakness in the voice-based BPO services, where there has been a downhill trend for some time now.

“If you look at the trend BPO segment then there is growth in platform-based services, transaction-based services are stable and voice-based services are declining. The rising unemployment (in the US) could have quickened the pace of this drop,” he said.

An analyst with a foreign broking house, who did not want to be named, believes the local tech services companies must be seeing fewer deals because of BPO clients holding back till employment scenario in the US improved.

“The potential delay in BPO deals, which anyway have longer sales cycle, could be happening because customers must be waiting for better employment data to emerge before outsourcing work,” he said.

A recent Gartner report has predicted the Indian BPO revenue to grow to $1.6 bilion by 2014 from $521 million in 2009. It said BPO income would touch $683 million this year.