BPO major EXL eyes captives of MNCs

Mumbai, June 12: Nasdaq-listed BPO major EXL plans to acquire MNC-owned BPOs or captive units that are being put on the block due to rising costs.

EXL Service Holdings is looking at captives with revenues of -75 million and is ready with a war chest of million for acquisitions. "Multinationals are increasingly spinning off their captives and outsourcing work to third-party BPOs. We'd like to acquire captives with capabilities in banking, financial services and insurance (BFSI), which is EXL's forte," said EXL Service Holdings president Rohit Kapoor. Kapoor refused to comment on whether EXL has identified any targets.

EXL Service Holdings, which has BPO, research&analytics and risk advisory businesses, reported revenues of 2 million in 2006 and is targeting 0-170 million in 2007.

EXL's interest in acquisitions stems from the fact that many MNCs are planning to sell off their captives. Recently, Citigroup decided to sell a strategic stake in its BPO -- Citigroup Global Services. Apple Computer shut its captive software and back office centre last year British Airways, GE, and Phoenix Life have sold their BPO centres in the past. Ericsson and AFS (an Air France subsidiary) sold their product development and BPO facilities to TCS.

Kapoor expects more such captive sales and spin-offs. "A McKinsey study has showed that costs at captives are 28-30 pc higher than at a third-party BPO. The offshoring market, 60 pc of which is captives right now, is expected to see a shift towards third-party BPOs in future as costs and scalability remain key concerns," he said.

While MNCs are able to ensure data security through their captives, the higher-than-industry attrition rates and inability to scale up add to costs. A recent Forrester Research report pointed out that over 60% captive centres in India are struggling due to lack of management support, spiralling costs, skyrocketing attrition and a lack of integration.

The Forrester report predicts that 10 pc of captive units in India will shut down, 20 pc will adopt a hybrid approach by using third parties for less critical work and outsource strategic work to their Indian units, 10 pc will sell out and completely give out work to third parties, and almost 50 pc are likely to follow a 'termite strategy' - go slow on their plans and gradually exit.

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